WOOLWICH PLAN MANAGERS
Capital Growth Plan 8
Type: Guaranteed equity bond
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: 4,000-500,000, Isa 7,000
Term: Five years
Return: 120% of the rise in the index at the end of the term or 20% of original investment after two years and six months if index rises by at least 20 per cent
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: June 27, 2005, June 13, 2005 for Pep/Isa transfers
Commission: Initial 3%
Hargreaves Lansdown senior analyst Meera Patel generally finds there are more cons than pros to structured products and suggests IFAs should look under the bonnet of each product before recommending them to investors.
Patel says: “On the first impressions, the literature seems clear and highlights the risks of the product.” She feels the early maturity option offers flexibility but this only applies if the necessary conditions are met. The 100 per cent capital protection is regarded by Patel as an advantage as it does not matter if the index rises or falls.
However, she feels investors having to tie their money up for five years to get the protection is a potential drawback. She also complains that it is not made clear that capital is not guaranteed and some investors could see the term protection as a guarantee. “Capital is still at risk if one of the financial institutions used by Woolwich fail to honour their commitments. It is also not clear what type of investments are purchased from these institutions. Growth on these could be higher than the performance of the FTSE 100 at maturity, so investors can potentially lose out,” she says.
Companies such as Premier, Abbey and Britannia are cited by Patel as possible competitors. She concludes: “Structured products need to be treated with caution as many are not as transparent as they are made out to be. So many structured products have failed to live up to their promises so I would tread carefully with any product of this type, even where there is a protection or guarantee.”
Suitability to market: Poor
Investment strategy: Poor
Adviser remuneration: Poor