Advisers whose clients were in the majority of structured product plans will have seen three-to-five-year returns well above the average global equity fund, Ian Lowes has said.
Figures from Mr Lowes, the managing director of Newcastle-based Lowes Financial Management and founder of StructuredProductReview, said: “There is a lot of negativity about old structured plans that were pushed years ago by some advisers, which were all about commissions.
“But if you look at the majority of structured products maturing over the first six months of this year, even the worst performers have far outstripped other investments, while the average total return, net of all fees, has been in double-digit territory.”
The average total return from the FTSE World index over the first six months to 30 June 2014, according to FTSE, percentage change, was 6.6 per cent. By contrast, the average total return for capital protected products over six months was 26.4 per cent.
Mr Lowes added: “Some people think it is a bad time to invest in structured products now because the markets are high, but this is ridiculous. Investing now in something that can cap losses on the downside unless a major bank goes bust or the FTSE 100 drops to 4000 by the end of the term - well I know what I would do. There may be a cap on the rise but the protection is worth it.”
Ashley France, adviser for Stalybridge Ark Financial Planning, said: “We have spent a lot of time trying to get to the bottom of structured products but the clients cannot always truly understand how the investment works because sometimes the structure is too complicated.
“We like to use plain and simple investments that our clients can understand when we look under the bonnet. I think there should be more transparency in the documentation provided about the potential pitfalls and how these plans are structured, which I think would open the market up much more.”
Table: Maturities of all IFA-distributed UK retail structured products Jan-June 2014. Source: StructuredProductReview
|Capital at risk||Capital protected||Deposit based|
|No. of products||142||49||29|
|Average total return %||34.83||26.4||23.81|
|Average term (years)||3.43||5.14||4.25|