Turning point for struc prods in 08

Why? Well, there are a few reasons, but I will concentrate on two. First, sales hit record highs across the industry, as investors sought protection during unprecedented market volatility. Regrettably, many acted too late to arrest the precipitous decline in the value of their portfolios, but it is clear that protected investments have now usurped cash as the logical entry point into riskier investments such as funds.

This is real progress, no doubt, but to consolidate our lofty new position - and, ultimately, to compete on a level playing field with the conventional fund market - protected investment providers must recognise how funds came to dominance in the first place: visibility, performance, ease of dealing, connectivity into platforms, collateral support, and so on. As an industry, we are not there yet.

The second major feature of the protected landscape in the second half of the year was the shift towards fixed rate returns, either with full or partial capital protection. What made these structures so popular? In truth, it was probably two things: the high 'hygiene factor' - i.e. a lack of 'smoke and mirrors' - and simplicity. Shocked by the performance of their unprotected investments, investors moved towards more straightforward propositions - put crudely, 'the index does this, and I get that' investments. These continue to sell extremely strongly and I think that will be a major theme during 2009.

Are the high rates commonly offered with these products 'too good to be true', as more than one adviser has asked me? The short answer is no - there is no financial trickery here. High payoffs are a function of market volatility: investors are simply seeing a lot of value for accepting a degree of risk to their capital. Some advisers say they do not support capital at risk products such as this because they fear they will awaken one day to discover their client has lost a sizable chunk of their capital. But this surely looks at the proposition from the wrong end of the risk spectrum.

Investors are more risk averse than they previously were, but they still want exposure to equity performance. Protected investments offer this equity exposure but with an element of protection more commensurate with a lower tolerance to risk. Maybe it does sound too good to be true, but investors really can have it both ways.

IFAonline

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• Barclays Wealth