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A case of misflogging?

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 and www.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. The Structured Products Association’s complaint figures are misleading. The FOS stopped accepting complaints about the Lehman-backed structured products from DRL, NDFA and ARC last year when those companies were closed down. They handed the baton over to FSCS who budgeted 22m GBP to compensate 1300 of the estimated 4500 savers with lehman-backed products from those three companies. More than 3000 are still waiting for news, and neither FOS or FSCS are dealing with their complaints at this stage. The Lehman investors action group is pressing FSCS for a decision. These are ordinary UK savers, and the brochures promised FSCS cover. If complaints from these people were to show up in the FOS data, the story might be different.

  2. I concur 100% with Londoners comments. It should also be noted that the FSCS has failed to provide a quarterly update on their investigation in to the majority of Lehman backed products. The update was due on 11/06/2010.
    Also it should be noted that all investors and savers are being mislead by the regulatory bodies. (Mainly the FSA & FSCS). If one reads carefully any reference to FSCS compensation cover in for any financial product one quickly realises that there is no guaranteed cover and therefore no safety net.
    The wording used usually states “you may be eligible for compensation” or “you could be eligible for compensation”.
    In other words there is no actual safety net.
    Financial bodies carefully word reference to the FSCS to give the casual reader the impression that their money is safe.
    This practice should be immediately stopped by the FSA.

  3. Sorry, my machete got a bit blunt hacking through the verbiage of that piece.
    Having said that, agree with previous comments.

  4. It is absolutely scandalous that so many of us who were conned out of our life savings by the lehmans debacle are still waiting to hear from the FSCS as to whether we will receive compensation or not…we were MISSOLD and CONNED out of our savings and yet we are treated like criminals

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