Question: Why are Structured Products selling so well?
Ian Lowes - Lowes Financial
I believe what we are witnessing is the evolution of Structured Products as a mainstream investment vehicle, and I expect their use by advisers and investors to increase significantly over the coming years. Whilst they are never going to replace mutual funds, they are increasingly being used as a complement in portfolios.
None of the issues that have affected the sector in the last decade have ever meant that all Structured Products were bad, and when compared to their nearest mutual fund equivalents, many outperformed whilst providing valuable capital protection. An increasing number of advisers recognise this fact and many who have availed themselves of the requisite knowledge and advised appropriately have, in the main, done well for their clients. The result has been that both supply and demand have increased.
In a consultation paper last year the FSA stated that they would expect that, if a Structured Product would best meet a client's needs and risk profile, then an Independent Financial Adviser should have sufficient knowledge of these products to be able to recognise this and make a recommendation to buy that product. There are vast arrays of different structures regularly on offer with most having clearly defined terms and risks. By comparing those on offer with their peers and other investment opportunities, it is not too difficult to establish clear relationships between risks and rewards, and I believe that an increasing number of advisers are doing just that. The result is that they are identifying potentially attractive investment opportunities for their clients, which in turn has meant that sales of Structured Products are increasing.
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