Investec  

Fears as structured products make a comeback

The regulator has not indicated any current interest in advisers' seeming return to structured products.

However finalised guidance on the sector from 2012 pointed out that: "Strong sales should not be seen necessarily as a positive measure of treating customers fairly."

It added: "Higher than expected sales might in fact be an indication that a product is not reaching only the target market envisaged for it. Firms should assess unexpected spikes in sales, analyse the reasons for this, and take this information into account in future product design."

Ian Lowes, a financial adviser in Newcastle and also owner of comparestructuredproducts, a business that sells those products, pointed to positive performance from the previoulsy maligned sector as the reason for its resurgence. 

According to his research, over the past year 48 of the 2,396 products that reached maturity returned a loss for investors, and none of those products were linked solely to the performance of the FTSE 100.

He added 1,061 of the products which matured during that time had a performance linked solely to the FTSE 100, and none, according to Mr Lowes, citing data seen by FTAdviser, returned a loss for investors.

Minesh Patel, a chartered financial planner at EA Solutions in Finchley, London, said he invests in structured products that offer downside protection as a way to smooth out the returns when conventional funds are enduring a period of tough performance.

Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, said he does not invest in structured products because if he is keen on an asset class he buys it and doesn’t seek downside protection, while if he is not keen on an asset class he simply does not buy it.

Alistair Cunningham, director of Wingate Financial Planning in Caterham, Surrey, said he doesn’t presently invest client capital into structured products, but wouldn’t rule out so doing in future.

Paul Stocks, financial services director at Dobson and Hodge in Doncaster, said he hasn’t used structured products in portfolios for about eight years.

He said he sees the worth of such strategies, but feels running a diversified portfolio mitigates the need for “manufactured solutions”.  

david.thorpe@ft.com