Question: Pricing Transparency - Is there a uniform standard of pricing your structured products?
I believe the answer is no, making it harder to compare the net-of-pricing attractiveness of alternative structured product offerings. Is there a flip side to this transparency?
Gary Dale - Investec
There is no uniform standard of pricing Structured Products. However there are some general points that are similar for each provider such as the cost of any capital protection, the prices of the financial instruments used and fixed costs such as Intermediary commissions.
Structured Product pricing is heavily exposed to the financial elements and product design is largely determined by prevailing interest rates and equity market volatility however there are many different ways to shape a product and advisers should be aware of what to look for.
• Participation rates can be manipulated and geared but may have a cap on the maximum return.
• Averaging periods could be lengthened or has been the case recently, applied throughout a plans full term.
• A plans risk profile could be increased for example by adding more than one underlying or possibly reducing the soft protection.
• Adding more indices can have the effect of making a plan's return profile look more attractive so advisers should understand what index measurements are used and how they are applied to the pay-off.
The above is not an exhaustive list but simply highlights that there are a large number of variables in play across a wide variety of products in issuance at any one time. Advisers are able to access relative mathematical measures on value and probability from industry websites such as www.futurevc.co.uk and comparison sites such as www.Structuredproductreview.com however care should be given to using the information in any comparisons. Structured products are rarely designed in the same way with many providers employing subtle differences in design and shape so advisers should thoroughly research the pay-off profiles needed for any given level of risk before utilising specific plans within a client's portfolio.
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