Structured product use set to grow in 2012
Money Management research shows lack of education still hinders structured products market, but advisers plan to use them more
Advisers expect to do more structured product business next year as investors look to boost returns in a low-interest-rate environment.
Research carried out by Money Management with 166 respondents showed advisers that use structured products expect to put more client money in them in the next 12 months.
Almost a third of advisers who responded said thy do not use the products at all and expect this to stay the same in the coming year. Conversely, 23% of advisers expect to put between 11% and 40% of client money in structured products in the next 12 months, compared to just 14% this year.
Use of structured products has already been predicted to grow this year as low interest rates encourage investors to take on more risk in the search of better returns and volatile equity markets have improved the pricing offered on the products.
However,lack of education is still a concern in the sector as 81% of respondents either strongly agreed or somewhat agreed that ‘the average investors does not understand structured products’.
But inroads are being made in this area as 79% of IFAs think knowledge among advisers has improved in the past 12 months.
One respondent said, “If advisers don’t have a full understanding of these products, clients will also be equally unaware of what exactly they are buying into.”
Another respondent felt that once the education hurdle has been overcome, the products can be used effectively, “Provided clients understand the risk there is no reason why they can’t be part of a portfolio,” the IFA said.
In the past structured product providers have faced criticism for supplying unclear marketing literature. But just 16% now disagree or strongly disagree with the statement that ‘the marketing material on structured products has improved’.
The full research will be available in the June issue of Money Management.