FSA warns on structured product “mismatches”
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FSA director of conduct risk Dan Waters has warned that there remains a “significant risk of profound mismatches” between retail structured products produced and the needs of consumers who invest in them.
In a speech at the McKinsey asset management conference earlier this week, Waters noted the funds sector had outsold the structured products industry last year but the latter had still performed well despite the fallout from Lehman Brothers.
He said: “Our work on structured products, both in reviewing disclosure documentation and the quality of advice around sales of Lehman-backed products, yielded some interesting and troubling results, which we have detailed on our website.
“It is quite clear from our work that there remains a significant risk of profound mismatches between retail products produced through the investment value chain and the needs of consumers who end up owning them. This is not just an issue for structured products.”
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Readers' comments (7)
Anonymous | 27 Jan 2010 2:28 pm
I still fail to see how any 'structured product' manufactured since the mid to late nineties has any place in the advice process!
Or 'offshore bonds', or any portfolio containing say 15, 20, 30 different funds held within a bond, a unit trust, a wrap, a platform, a pension...
When will the FSA do something about the smoke and mirrors?
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Anonymous | 27 Jan 2010 4:42 pm
Dan the FSA man says: "...the quality of advice around sales of Lehman-backed products, yielded some interesting and troubling results",
Well I'm also troubled by a useless regulator that failed to regulate the very banks that defaulted on the structured products! I'm also troubled by the same useless regulator that now wants to retrospectivley blame the poor IFA at the coal face that sold the structured product in the misguided belief that the regulators had in face been regulating their chums back at the banks!
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Skeptic Cynic | 27 Jan 2010 4:55 pm
Is it just me or has everybody at the FSA taken to playing ' Buzz Word Bingo'?
Every speech / press release is couched in gobbledygook terms like 'profound mismatches between retail products produced through the investment value chain' - what a load of cock!
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Anonymous | 28 Jan 2010 8:58 am
I love how IFAs, at the first sign of trouble, stick their head in the sand and refuse to deal with a specific asset class - something like an ostrich. By the end of each IFAs career it seems that they have become so averse to any type of risk that they won't give any advice at all. Lost money in equities - stay out of the market. Lost money in TEPs - stay out of the market. Lost money in structures - stay out of the market. When will people learn that investments are ALL about risk/reward and that they should look at them accordingly. To close your eyes to one kind of investment purely because you've been burned once and lost money just reeks of ignorance.
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Anonymous | 28 Jan 2010 12:15 pm
The person who says they fail to see how "any structured product...has any place in the advice process" is obviously too lazy to evaluate structured products properly or doesn't understand them. They aren't suitable for everyone but they do have their place and should be considered by any adviser wanting to retain the "independent" label. A good quality structured product has just as much validity in a portfolio as a mutual fund. If someone needs an income and wants to protect their capital, then unfortunately deposit accounts aren't going to cut it at the moment with interest rates as low as they are and if they are willing to assume slightly more risk, then structured products may be suitable. Don't be so lazy!
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Anonymous | 28 Jan 2010 3:29 pm
So Anon at 12:15 thinks there is a place for Structured Products in the advice process?
I have irrefutable evidence that a number of IFA's have little or no understanding of these products and yet they sell them as hard as possible.
Reputable advisers will not touch such products where the conterparty is not clear.
What I am concerned about is that some settlements have been made regards Lehman backed Structured Product on the condition that confidentiality agreements are entered in to.
I have yet to see the FSA take action against companies who have been judged by the FOS to have mis-sold products.
On a lighter note I know of one IFA who has seen the light and abandoned the financial world to become a vicar.
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Chris Wickham (doesn't anybody leave their name?) | 29 Jan 2010 5:21 pm
I see no reason why Structured Products should not form part of a balanced portfolio as an asset with a risk between cash and equities These plans do not fully reward strong stock market increases as the gains are often capped, but this can be rightly seen as a fair trade for the protection that the plans offer.
There are many products where the plan managers and the counterparties are the same providers we use daily as IFA's. Stick to these, explain the risks before the sale and in the Suitability Letter, and I see no reason why any IFA should shy away from using them in the right circumstances.
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