Structured product experts hit back

Experts have hit back at the bad press thatt structured products have received as a result of the Which? article Danger Money in the latest edition of Which? Quarterly.

In the article, Which? brands structured products "confusing, complex and costly" and not always as safe as they seem, it uses the collapse of Lehman Brothers as an example of why investors should not go for structured products, and suggests ISAs as an alternative.

But experts argue the piece was far too crude about structured products and confusing in the way it suggested ISAs as an alternative.

The UK Structured Products Association says it is "genuinely concerned that any investment product should be compared to a tax wrapper as this is confusing.

"ISAs are a tax wrapper, so you don’t invest ‘in’ an ISA, what you are invested in is ‘wrapped-up’ in an ISA. We’re rather disappointed that Which? would confuse products and wrappers in this way," said a spokesman.

Julie Smith, head of structured product research at Fair Investment Company agrees, saying "To suggest ISAs as an alternative to structured products makes no sense," she said.

"ISAs are a tax efficient wrapper, and there are many different types of investment products that can be held in an ISA, including structured products. You cannot suggest a tax efficient wrapper as an alternative to an investment product, it is not comparing like for like."

The UK Structured Products Association also feels it is unfair to use the Lehman Brothers example as a reason to steer clear of structured products while not mentioning any of the other investments that were affected:

"When Lehman’s collapsed most investors were affected – stock markets fell, banks were in trouble and the credit crunch took hold. Some structured products were also affected but of the top 20 complaints to Financial Ombudsman Service, structured products are not even on the list."

While the UK Structured Products Association and Ms Smith are not suggesting that all investors should be investing in structured products, both argue that it is unfair to blacklist structures based on one bad example without looking at any of the success stories.

"Across the board it is essential to understand the inherent risk with any type of investment; and with structures, whether its capital protected or capital at risk, one of the first things to look at is who is backing the plan, i.e., the counterparty," explains Ms Smith.

"Knowing the financial strength of any counterparty is one way of assessing the risk of default; the higher the financial strength of the counterparty, (in the main) the less chance of default. Some providers are even offering their products with a choice of counterparty to give that extra choice for this very reason."

She concludes, "everyone is entitled to their opinion and it goes without saying that structures are not for everyone; however, the actual danger here is that a balanced argument is not being given and the focus is primarily on the risks associated with some products and not all."

©Fair Investment Company Ltd

 

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Investing For Income

	Product Name	ISA Option	Maximum Potential Return	Term	More Info
	FTSE 100 Enhanced Kick Out Plan Investec Version		13.50% per annum	Up to 5 years	More Info >
	Structured investment plan with the potential to mature after years 1, 2, 3 and 4. If the plan matures early it will return 13.5% times the number of years the plan has been in force. Also available for Stocks & Shares ISA and ISA transfer.
	FTSE Bonus Growth Plan		12.50% per annum	Up to 6 years	More Info >
	6 year structured investment plan with the potential to mature early, returning the greater of 12.5% for each year the plan is in place, or the highest return from the FTSE, measured daily. Also available for Stocks & Shares ISA and ISA transfer
	Early Bonus Plan		11.00% per annum	Up to 6 years	More Info >
	A 6 year structured investment plan with the potential to mature early, paying 11% for every year the plan is active. Also available for Stocks & Shares ISA and ISA transfer.
	FTSE 5 Quarterly Defensive Plan		4.25% per quarter	5 Years	More Info >
	A 5 year structured investment plan with the potential to return 4.25% x the number of quarters the Plan has been active.
	FTSE Booster Plan		60%	6 years	More Info >
	6 year structured investment plan that offers a fixed growth return of 60% even if the FTSE 100 falls. Also available for Stocks & Shares ISA and ISA transfer.
	FTSE 100 Geared Returns Plan		80%	5 years	More Info >
	5 year structured investment plan with the potential to receive a defined return of 80%. Also available for Stocks & Shares ISA and ISA transfer.
	Growth Plan		60%	5 years	More Info >
	A 5 year structured investment plan which aims to provide a defined return of 60% at maturity. Also available for Stocks & Shares ISA and ISA transfer.
	FTSE 100 Accelerated Growth Plan		No limit	5 years	More Info >
	5 year structured investment plan with the potential to return 2.2 x any growth in the FTSE 100 Index after 5 years. Also available for Stocks & Shares ISA and ISA transfer.
	FTSE Protected Growth Plan		35%	6 years	More Info >
	A 6 year capital protected structured investment plan that offers a potential early exit return of 35%. Also available for Stocks & Shares ISA and ISA transfer.
	Inflation Protected Deposit Bond		RPI Tracker	5 years	More Info >
	5 year capital protected structured deposit plan offering 100% of any growth in the Retail Prices Index with no cap (minimum return of 16%). Also available for Cash ISA and Cash ISA transfer.
	FTSE 100 3 Year Deposit Plan		19%	3 years	More Info >
	3 year capital protected deposit plan with the potential to receive a defined return of 19%. Also available for Cash ISA and Cash ISA transfer.
	FTSE 100 Deposit Growth Plan		No limit	5 years	More Info >
	5 year capital protected structured deposit plan which aims to return 1.0 x any FTSE 100 growth. Also available for Cash ISA and Cash ISA transfer.
	Enhanced Growth Plan		40%	6 years	More Info >
	6 year capital protected structured deposit plan which aims to return 5 x any FTSE 100 growth capped at 40%. Also available for Cash ISA and Cash ISA transfer.
	Growth Deposit Bond		50%	6 years	More Info >
	6 year capital protected structured deposit plan which returns the greater of 8.00% or 1 x any FTSE 100 growth, capped at 50%. Also available for Cash ISA and Cash ISA transfer.
	Annual Locked-In Return Plan		36%	6 years	More Info >
	6 year capital protected structured deposit plan which aims to return 6% annual growth capped at 36%. Also available for Cash ISA and Cash ISA transfer.
	FTSE 100 Kick Out Deposit Plan - Option 1		6.00% per annum	Up to 5 years	More Info >
	Capital protected structured deposit plan with the potential to mature after years 1, 2, 3, and 4. If the plan matures early it will return 6% times the number of years the plan has been in force. Also available for Cash ISA and Cash ISA transfer.
	FTSE 100 Kick Out Deposit Plan - Option 2		6.25% per annum	Up to 5 years	More Info >
	Capital protected deposit plan with the potential to mature after years 2, 3, 4 and 5. If the plan matures early it will return 6.25% times the number of years the plan has been in force. Also available for Cash ISA and Cash ISA transfer.
	Moneybuilder		5.75% per annum	6 years	More Info >
	A 6 Year capital protected structured deposit growth plan with the potential to pay 5.75% pa, up to a maximum of 34.5% over 6 years at maturity. Also available for Cash ISA and ISA Transfer.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below. 

	Product Name	ISA Option	Income Yield	More Info
	FTSE 100 Bonus Income Plan		7.50% per annum	More Info >
	5 year structured investment plan paying an income of 7.50% annually, including a potential annual bonus of 0.5%. Also available as a monthly income option, Stocks & Shares ISA investment and ISA transfer.
	Income Builder		7.50% per annum	More Info >
	A 5 years and 3 weeks structured investment plan paying a potential maximum quarterly income of 1.875% (equivalent to 7.50% per year). Also available for Stocks & Shares ISA and ISA transfer.
	FTSE Income Deposit Plan		7.25% per annum	More Info >
	A 6 year capital protected structured deposit plan with the potential to pay 7.25% annual income. Backed by the Royal Bank of Scotland. Also available as a cash ISA and for ISA transfer.
	FTSE Income Plan		5.80% per annum	More Info >
	3 year structured income plan with a fixed quarterly income return of 1.45% gross. Equivalent to 5.80% gross per year. Not available for ISA investment.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.