Structured products – you either ‘love them or hate them’

Daniel Liberto

It is no secret that a considerable percentage of financial advisers are not keen on structured products. A large number have complained that they are too “complex” and “risky” for retail investors, with these interpretations also echoed on the Money Advice Service website.

Naturally, these opinions were met with very angry responses from their advocates and summarised by the managing director of Meteor Asset Management, Graham Devile, as representative of their “marmite” status. Mr Devile accepted that structured products, like other investments, were not suited to everyone, but voiced his frustration at those advisers who “threw up any old excuse not to use them”.

One adviser who regularly used structured products was Ian Lowes, who has grown so irritated by some of his peers’ tendency to shun them that he questioned their desire to learn and ultimately provide the best possible solution for clients. Mr Lowes has regularly spoken to the press in support of structured products, and on this occasion claimed that those who did not consider them, particularly after recent impressive returns, had “not done enough research to retain an independent title”.

Past memories have probably not helped the reputation of structured products, yet most industry figures from the acceptance camp claimed that they had come a long way since the collapse of Lehman Brothers. The global investment bank’s bankruptcy caused hundreds of millions of these investment products to default, though this low point was said to have created more transparency in the sector.

What happened at Keydata also left a bitter taste, with its demise often associated with the structured products market. However, according to the managing director of the Investment Bridge, Christopher Taylor, Keydata had “nothing to do with structured products” and actually helped them by showing that even when the provider falls investors are exposed to a more secure underlying counterparty.

But for all this positive rhetoric, and apparent evolution, many financial advisers have yet to change their stance on these divisive investment products. While it is perfectly acceptable for advisers to have their opinions on what type of investment works best for each type of objective, it is a concern that so many independent advisers are yet to fully understand every product in the market.

Structured products will often not be the answer to a client’as investment needs, but to completely dismiss them based on a lack of awareness is something that absolutely must be addressed.