One of the key strengths of structured products in the UK is that the terms are almost always shown net of all charges - what you see is what you get.
So, if a product pays 7.5 per cent p.a. income, someone investing £10,000 will get £750 each year and 100 per cent return of capital will deliver £10,000 back. “But I can get a yield of 8 per cent on the XYZ high income fund,” says the adviser, completely ignoring the effect of charges. “Indeed,” say I (trying not to break my personal cynicism reduction goals) “but there’s a 5 per cent bid/offer spread and a TER of 1.75 per cent p.a., so the £10,000 investor only has £9,500 invested, on which they’ll receive income of 6.75 per cent or about £595. So their 8 per cent yield has turned in...
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