FA Educational Seminar: Structured Products
It would be fair to say that structured products have grabbed the headlines over the years – and often not for the right reasons.
But almost four years after the collapse of Lehman Brothers and the fallout from its backed structured products, the often controversial investment has been put back under the microscope.
To do so, a panel of advocates for structured products and an audience of finance professionals gathered at the Financial Adviser offices to discuss the merits and pitfalls of structured products and to try and put some of the “myths” to bed.
The conversation kicked off getting right to the heart of the debate about structured products – that they can be seen as controversial.
But the panel was quick to defend the product and dispel any notion that they are anything but a solid investment.
“It is quite easy headline-grabbing stuff to encourage this controversy and division,” said Chris Taylor, founder and managing director of The Investment Bridge.
Mr Taylor added: “But the dissent and critical comments tend to be a little bit loud and get a lot of time in the press, and the people that are using structured products just get on with it quietly. The market has moved on a long way in the last two to four years in terms of education, and knowledge levels are so advanced since pre-Lehman days. The right products are being used in the right way by many advisers in the right circumstances, making the issues of the past now firmly in the past.”
Ian Lowes, managing director of Lowes Financial Management and founder of Structuredproductreview.com, admitted that the controversy around structured products correctly relates to precipice bonds 2000/2003 and the Lehman’s issues, but that these are events of the past.
Mr Lowes said he was confident however in the level of education that has taken place over the years helping to “dispel a lot of the myths”, to such a point that he considers the sector now poised for growth.
Peter Beavis, sales director for Cater Allen agreed with Mr Lowes that this is a growth market, citing recent figures that he has seen suggesting £14bn of sales – something which he said was “staggering” when looked at overall in terms of the amount that is invested in the UK.
But David Stuff, managing director of Meteor Investment Solutions, seemed frustrated that the UK market for structured products is relatively small compared to other European markets.
He added that the controversy therefore does not lie in the structured products in and of themselves, but in the fact that so many advisers and portfolio managers do not use them: “They have been one of the best performing assets and they form an important part of the portfolio. The controversy is quite frankly caused by ill informed people with prejudiced views. It is up to the industry to demonstrate that it has delivered good returns, and that is probably something that we haven’t done in the past.”
- Regulatory sympathy
- FSA suggests structured product beta testing
- Jamie Smith to head UK Structured Products Association