It’s a story as old as time – you start off with such high hopes of making a useful contribution to the general fabric of life and for a while you genuinely do. Then, through a combination of bad luck and falling in among some bad company, your fortunes start to unravel and you find yourself stuck bet-ween extended warranties and payment protection insurance on a list of the 10 most useless financial products.
Oh, structured products, where did it all go wrong? No, that was a rhetorical question – I am fairly up to speed on when and where they fell among some bad company (companies?) , thank you for caring – but the next couple are not. Are we talking nature or nurture here? Are struc-tured products inherently evil or can they be rehabilitated as useful members of society?
Now, I am rarely mistaken for a bleeding-heart liberal and it is very much not my default setting to see the good in everyone and everything but I do have this vague half-memory there may have been a time many, many – maybe even a dozen – years ago, before they got too clever (and by extension stupid) for their own good, when structured products performed some sort of useful function. Perhaps they even made one or two people some money.
Do they not therefore deserve a second chance? Well, taking the view that no, they very much do not would appear to be Which? Money Quarterly, the creator of the aforementioned list, which also flags up assorted other consumer champion™ favourites as mobile phone insurance and store cards as well as, oh how the mighty have fallen, with-profits.
Joining the magazine in the “throw-away-the-key” camp is, well, seemingly just about every national newspaper’s website and not a few financial bloggers to boot. Indeed, if imitation is the sincerest form of flattery, the good, good people of Which? Money Quarterly must be feeling deeply loved, for their press release of the list has been copied word for word.
Literally. Look, I’m not completely unfamiliar with a spot of cutting and pasting myself but I can’t recall ever seeing such a widespread and wholesale outbreak of this ancient journalistic art by Her Majesty’s press – from the advice from the magazine’s editor, a former reporter of this parish no less, to shop around and seek independent financial advice, to the sugges-tion that punters invest in an Isa rather than buy a structured product.
Naughty press release. This all too common error of mistaking an Isa for a financial product in its own right rather than “simply” a tax wrapper was seized upon, reasonably enough, as the leading quibble in the swift response from the UK Structured Products Association, an organisation that, it may fairly be assumed, does have something of an interest in the rehabilitation of the structured product.
Something tells me this response may not gain quite the level of coverage as the release that prompted it so, in the spirit of fair play, I will flag up a couple of points. In answer to Which? Money Quarterly’s point that “around 6,000 people with a ’structured product’ were left with nothing when Lehman Brothers collapsed in 2008”, the association notes: “When Lehman’s collapsed, most investors were affected – stockmarkets fell, banks were in trouble and the credit crunch took hold.”
Then, doing its own bit of cutting and pasting, it goes on to offer tables of recent complaints made to the FOS. Surprisingly, structured products don’t come close to making that top 10 – payment protection insurance, at 30 per cent of all new complaints in the last year, is double its nearest rival, current accounts.
Furthermore, by my maths – if not the association’s – structured products have made up just less than 4 per cent of all investment-linked product complaints over the last two years. The association concludes … excuse me, Control + C, Control + V … “Providers are not in the business of making investors unhappy and in the majority of cases structured products achieve the returns investors expect from the investment and contribute effectively to the performance of a diver-sified portfolio.” If structured products can stay out of trouble for a few years, maybe even the press will start believing that again.
Julian Marr is editorial director of www.marketing-hub.co.uk and www. thoughtleadershiplive.com