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Assessing suitability of structured products

This article is part of
Guide to Structured Products

There are a large number of structured products available to retail investors and it is important that the selected product is appropriate.

According to Graham Devile, managing director of Meteor Asset Management, whether or not a product is suitable depends on:

1) an investor’s needs and circumstances, including savings which can be easily accessed in an emergency.

2) the level of risk an investor would be exposed to and whether this risk would be appropriate in light of the composition of their portfolio and their individual risk appetite.

3) the tax position of the investor.

Structured products can be used as an effective part of a balanced portfolio, he adds.

Defensive structures can generate returns where other avenues of investment might suffer a reduction in value.

Mr Devile says: “They can be used to hedge against long only funds and may also be appropriate for those seeking a way to invest in a particular underlying while mitigating their capacity for capital loss.

“For this reason, structured products can be particularly useful when combined with more volatile underlyings such as shares.”

Structured products will not be for everyone, according to Ian Lowes, founder of StructuredProductReview.com.

But Mr Lowes says he firmly believes structured products can be useful additions to investment portfolios, sitting alongside other investments such as mutual funds and deposits, to help balance and diversify an investor’s investment profile.

He says: “We would urge any adviser to look at structured products with those goals in mind.”

When attempting to pick the best deal for your client, Mr Lowes says there are various elements to bear in mind.

He says one of the best ways to research structured products is to have side-by-side on screen comparison facility.