Structured products education to dispel ‘smoke and mirrors’
More education is needed around structured products because many advisers feel the products are too complicated for clients, Ian Lowes has claimed.
Speaking at a Financial Adviser educational seminar on 18 July, the founder of Structured Product Review and managing director of Newcastle-based Lowes Financial Services, said a series of educational events on structured products would be held across the UK from the autumn.
He said he was well aware there were many ongoing concerns from IFAs over the products, which were perceived as controversial and complicated.
Duncan Glassey, a partner at Edinburgh-based Wealthflow, said there is too much “smoke and mirrors” surrounding structured products and that any driver in education should be to provide clients with information about risk overall – not just on structured products.
He said: “What clients should be taught about is diversified risk. Many people who advocate these products are old school; frankly, they are just salesmen who have created a product to sell.”
Mr Glassey said he would be “disappointed if our profession were seen as promoting these”, adding: “There are some complicated underlying products that are used and there are some clients who are analytical and they want to know how the underlying structure works.”
He said it would be useful for structured product providers to provide IFAs - even though it might be complicated - with a detailed analysis of how the products work, so the IFA can sift through the information and pass it on to the clients as and when required.
Another criticism raised by the seminar audience was that “if it seems too good to be true, it probably is”.
Chris Taylor, founder and managing director of the Investment Bridge Limited, agreed that all providers should be able to give an “under the bonnet” explanation of what is going on and exactly how it works, but argued that the products are not complicated.
“The ‘too good to be true’ mantra is a favourite criticism. It sounds like such a truism that it seems difficult to argue against.
“But structured investments can do things that suggest investors can have their cake and eat it. These products can remove market risk, they can provide returns in flat or falling markets - and those features can sound too good to be true.”
To read more, see next week’s features section for a detailed account of the seminar