How Structured Products Fit Into A Client Portfolio
Deposit Plans are designed as alternatives to traditional cash products. They feature the same mechanics that clients require from their cash holdings (capital protection and FSCS coverage) as well as the flexibility to be held within a variety of tax efficient wrappers (ISAs, SIPP/SSAS and Offshore Bonds). What sets our Deposit Plans apart is the return potential that they offer – particularly to the £270bn currently sitting in cash ISA accounts. The best 3 year cash ISA deposit rates are currently topping out at 1.70% per annum, yet UK inflation is running at 1.5% per annum. Our Deposit Plans offer a much-needed alternative to clients that want to do more than just protect the value of their cash in real terms.
Investment Plans are designed as lower-risk alternatives to traditional equity investments such as funds. Whilst the return of an Investment Plan may not keep up with a fund in a strong bull market, its ability to generate growth in flat or even falling markets will help to smooth the return profile of a portfolio. This is particularly the case for “defensive” Investment Plans, which pay equitylike returns even if the underlying asset falls by up to 35%. Furthermore, the partial capital protection offered by Investment Plans, whereby capital is only lost if the underlying asset falls by a certain amount (usually 40% or more), means that they can be efficiently used to de-risk client portfolios.
We have seen an ever-growing number of advisers embracing structured products over the last 5 years. This has been aided by regulatory reform such as the FCA’s thematic review, PRIIPs and MIFIDII, which has significantly improved the transparency of structured product design and marketing, and dispelled many of the negative preconceptions which have surrounded structured products in the past. Structured products are best suited to flat and uncertain markets, where their defined return profile and downside protection can offer peace of mind to investors who are looking for a high certainty of achieving growth over the medium term, irrespective of market movements. With uncertainty returning to markets amidst the backdrop of geopolitical tensions and global growth concerns, we expect structured products to become a more mainstream asset class for advisers in future.
To find out more about the Investec Structured Products range, visit www.investec.com/structured-products
About Michael Last
Michael has been at Investec Structured Products for over 10 years. Having joined the team as a structurer, Michael now heads up the structuring and design of Investec’s range as well as writing its client and adviserfacing literature and marketing materials.
Important information:
Past performance is not a guide to future performance. This communication is intended for financial advisers only. Performance figures correct as at 31/12/2019 relate to Investec Structured Products, which is a trading name of Investec Bank plc. The product terms referred to are available until 31/01/2020. Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
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