how to maintain growth of past three years

Ian Lowes asks why more intermediaries do not take advantage of products that are structured in such a way as to have returned 33% in the past three years when we are in a 'lower for longer' investment environment.

how to maintain growth of past three years


However, those advisers who have followed their instincts as wealth managers and taken a proper look at the products have often been surprised by the range of opportunities they offer and more importantly, what they are achieving for investors.

Knowledge required

Next year is likely to see continued growth as regulation, RDR and the increased accessibility of structured products via platforms all look set to raise the profile of the investments and make life a lot easier for advisers and their clients to access, view and report on the structured products in their portfolios.

A catalyst for financial advisers to get to grips with the structured products market came in the FSA’s guidance to its proposed draft rule (COB6.2.A10 G) for testing whether an adviser’s status in a “relevant market” is “restricted” or “independent”.

The FSA said: “One of the challenges for independent advisers will be to ensure they have sufficient knowledge of all types of products which could give a suitable outcome for their clients. The rules do not mean that we expect to see all advisers recommending products such as structured investment products, for example, as a matter of course.

“But we would expect that if a structured product would best meet the client’s needs and risk profile, then an independent adviser should have sufficient knowledge of these products to be able to recognise this and make a recommendation to buy this product.”

This reference has had a positive impact on the structured products market as it brought them on to the radar of advisers that previously had not considered them or had simply believed the misconceptions and myths about these versatile investments that had been printed in the media.

A growing number of advisers have found that such products have a useful place in client portfolios. Not only can they deliver cash-plus returns – and often significantly outperform their underlying indices – but also they can do so while protecting capital against market volatility in all but the most extreme of conditions.

A repeatably good run

An example of the kind of returns that are exciting advisers and their clients can be seen in two recent maturities from the Barclays stable.

The Barclays Three-year FTSE SuperTracker (September 2009 edition) offered three times the rise in the FTSE 100 subject to a maximum return of 33% and protected the original capital unless Barclays Bank Plc defaulted or the FTSE 100 had fallen by more than 50% from its level at the start of the investment on any day during the three-year period.

Against FTSE growth of nearly 15% in those three years, the plan matured on 29 October 2012 returning the original capital plus the maximum gain of 33%.

The Barclays Defined Returns Plan (Annual Kick Out) August 2011 edition was a six-year autocall that matured after one year. It delivered 8.25% return against FTSE performance over the same period of 1.6% growth at 30 October 2012. Capital was protected unless Barclays Bank Plc defaulted or the FTSE 100 was down by more than 50% on the final day of the six-year period.

It is hard to conceive of any investors who would object to receiving 33% return on a three-year investment in the current environment of low interest rates and slow stock market growth, while also benefiting from considerable protection against the volatility that markets have been exhibiting over the past few years.

In addition to these elements, we have the new regulatory regime emphasising the need for ever more efficient advisory business models. Holding structured products on a wrap platform greatly facilitates the purchase, monitoring and reporting on these investments. New functionality coming to market, built specifically for the structured product market and complementing standard wrap models, provides all the tools necessary to effectively integrate the management of structured products into advisory businesses.

This includes notification of events, counterparty analysis, barrier levels, maturity notices and tax planning aids and a lot more. This kind of information will make it far easier for advisers to keep track of client investments and flag upcoming events in advance, and making structured products a far more effectively managed tool when creating financial plans for clients.    

All these elements would suggest 2103 is going to be a growth year for structured products, bringing them ever further into the mainstream investment market.


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