Barclays Wealth's fears over a backlash against structured products in the wake of Lehman Brothers' collapse have proved unfounded, with the company posting record sales in September.
With stock markets in sharp freefall last month, a surge of investment in protected plans saw the group reach sales of £40m, about 25% up on levels earlier in the year.
The increase came at a time when investors were faced with the potential loss of all their money in Lehman Brothers-backed vehicles, bought either through the bank’s own subsidiaries or local packagers. Barclays Wealth's own products are backed by Barclays securities.
“I had genuine concerns on how the Lehman collapse, along with the negative press from the IMA, would impact on investors,” Barclays Wealth director Colin Dickie says.
“To be honest I felt a lot of the concerns surrounding structured products after Lehman’s fall were probably overplayed in parts.
“But as the markets started falling, investors were increasingly interested in these products and I would say they are looking to us in a flight to quality.”
Dickie says demand has continued to beat expectations, with September’s record level accelerating in October.
At the height of the market turmoil earlier this month, Financial Escape IFA Phil Castle advised clients to buy into structured products.
“The only thing guaranteed in this life is death. But as long as clients know what the counterparty risk is, there are no problems at all with structured products,” he says.
“It is a good time to buy. For a client to lose their money the FTSE would have to go down to something like 2,000 – a highly unlikely scenario.
“I don’t bet, not even on the lottery, but this looks like a pretty good bet.”
Barclays Wealth expects further growth next year, with Dickie citing additional links to wraps and platforms to be at the forefront of expansion. The company is currently working with Cofunds to develop a process to add structured products to the platform.
“We are really at the bottom of the potential right now, we have great expectations in this space,” Dickie says.
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