Structured product plans ‘are dead’ – Meteor
Market expected to shift to direct investment in securities issued by banks, expert says
Conventional structured product plans will not last more than six months, with the purchasing of securities direct from banks becoming much more commonplace, Meteor’s David Stuff has said.
Stuff, who is managing director of investment solutions at the structured products promoter company, predicted that more advisers and investors will directly buy the securities from the banks unerpinning structured products, rather than the packaged plans themselves.
He added that Meteor is launching a securities brokerage service to serve this market, allowing investors to have one account from which they can purchase a number of plans and securities.
In what seems an unusual move, advisers and investors can purchase securities not promoted by Meteor through the service and can also buy Meteor-promoted securities through other brokers.
An explicit brokerage fee will be charged for each purchase, determined by the length of the term and will cover the cost of the initial trade and the ongoing administration and custody.
Longer-term, Stuff hopes to get the service on platforms and is currently in discussions with those that do not already have a link-up to a broker service.
“I think that 90 per cent of structured product business will be on wraps in a year’s time. Those that get in early will get the bulk of the business,” Stuff said.
However, he warned there are issues when moving to the wrap market, adding that they need to ensure the promotional material is right for a wrap distribution.
Stuff said that many advisers will come to understand structured products and the underlying securities as well as they do funds, but added there is a hurdle to overcome before that is the case.
But with RDR bringing a a ban on commission, many feel now is the time for structured products to come to the fore, having traditionally been a product that has not offered commission.