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Gilliat moves to diversity

Gilliat Financial Solutions – Diverse Deposit April 2011

Gilliat Financial Solutions – Diverse Deposit April 2011

Type: Capital-protected bond

Aim: Growth linked to the performance of investor’s choice of UK equities, commodities or Bric economies through one index from the following: RBS UK Balanced Sector Index, RBS Volatility Controlled Commodity Index or RBS Volatility Controlled Bric Index

Minimum-maximum investment: £3,000-no maximum

Term: Five years and 14 days

Return: 110% of the growth in the RBS UK Balanced Sector Index, 85% of the growth in the RBS Volatility Controlled Commodity Index or 80% of the growth in the RBS Volatility Controlled Bric Index

Protection: Original capital returned in full at the end of the term regardless of the performance of the index

Closing date: April 15, 2011 for electronic transfers, April 14, 2011 for cheques, March 22, 2011 for Isa transfers

Commission: Initial 3%

Tel: 020 7012 2809

This structured product from Gilliat aims for growth linked to the performance of one of three indices over a term of five years and 14 days. Investors can link the product to UK equities through the RBS UK Balanced Sector index, commodities through the RBS Volatility Controlled Commodity index or the emerging economies of Brazil, Russia, India and China through the RBS Volatility Controlled Bric Index. The original capital will be returned at the end of the term regardless of index performance for all three options.

Considering how this product could be good for IFAs and their clients, Baronworth Investment Services director Jackson says: “This is a five years and two week product offering investors the choice of linking returns to the RBS UK Balanced Sector Index or the RBS Volatility Controlled Commodity Strategy Index or the RBS Volatility Controlled BRIC Index.

“The product offers uncapped returns dependent upon the growth of the index.  The returns vary dependent upon the index selected – 110 per cent, 85 per cent or 80 per cent respectively.”

Jackson notes that the counterparty, Royal Bank of Scotland, is rated A by Standard & Poor’s.  “The potential return is very attractive subject, of course, to the index selected and its performance. The literature is also well presented and easy to understand and the adviser remuneration of 3 per cent initial is in line with the market.”

Jackson adds that a very important aspect is that at the end of the term, come what may, the investor’s original investment is returned in full.  “This is particularly important in these uncertain times.  Also, there is no cap on returns offering investors the potential of high returns with no risk as to capital, subject to counterparty risk,” he says.
Turning to the potential drawbacks of the plan, Jackson says: “This is a growth product but returns are taxed as income so those investors who are taxpayers but do not use their CGT exemption would still be liable to pay tax on their returns unless they utilise their Isa allowance.  Also, investors would probably not be familiar with the three indices and may find it difficult to make the choice as to which index to link to,” he says.

Discussing the main competitors, Jackson says: “There are, currently, no other products that offer these indices.” He adds that it may be difficult to achieve a substantial level of investments on this particular product due to the relatively unknown indices and the way the returns are taxed.


Suitability to market: Good

Investment strategy: Good

Adviser remuneration: Good

Overall 8/10


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