Facts must replace structured product dogma, says Incapital

Incapital Europe, the structured product provider, has dismissed adviser “misconceptions” about the sector during an industry debate held yesterday in London.

The debate was hosted by Chris Taylor, the managing director of Incapital Europe, at London’s Athenaeum Hotel and included Which? principal policy adviser for financial services Dominic Lindley, IFP chief executive Nick Cann and assembled IFAs.

Taylor spoke out to dismiss what he believes is a misconception amongst advisers that it is impossible for a product to deliver equity returns without equity risks. He said in structured products equity risk is substituted for counterparty risk.

He urged IFAs to recognise that not all structured products are the same, saying while most criticisms can be valid for some products none are valid for all.

He said: “There are some deeply entrenched views, but we suggest that some of the views are a little bit instinct-based. We wanted to replace these views with facts not dogma or misinformation.” (article continues below)

Which?’s Lindley spoke just a few weeks after the consumer advice group labelled structured products as one of the ten worst financial products consumers can buy.

He said: “Consumers by and large do not really understand investment, they do not really understand risk, but they do not want to lose their capital. I struggle to think that they would want to take on a risk that if the FTSE falls below a certain value then they will just get their original value back.”

“Consumers by and large do not really understand investment, they do not really understand risk, but they do not want to lose their capital”

Lindley added that structured products should never be sold without the advice of an intermediary, hitting out at the various high street banks that sell ‘guaranteed deposit’ type investments.

IFP’s Cann said knowledge of structured products will be vital for IFAs under the retail distribution review.

He said: “If you are going to be an independent financial adviser, whatever that might look like in 2013, you will need a proper understanding of the assets in different asset classes to their use them or not use them. They will have to be able to explain to clients why not if they choose not to use them.”

Dennis Hall, a director at Yellowtail Financial Planning, added he had visited an Incapital structured product masterclass but, while open-minded, remained unconvinced.

He said: “I am still not ready to put my clients in there but I am a lot closer. I do not think that there is enough information out there to educate me enough.”