Type: Structured deposit
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: £3,000-no maximum, Isa £5,640
Term: Three years and nine months
Return: 17% growth plus original capital provided the index is at it above its initial value at the end of the term, otherwise 2% minimum return plus original capital
Protection: Original capital returned in full at the end of the term regardless of the performance of the index, with 2% minimum growth if index falls below its initial value
Closing date: May 11, 2012, May 4, 2012 for Isa transfers
Commission: Initial 2.25%
Tel: 020 7425 9000
Morgan Stanley IQ is keeping it simple with this shorter-term structured deposit plan. The plan is linked to the performance of the FTSE 100 index for three years and nine months, after which it has the potential to pay 17 per cent growth. If the index has fallen from its initial value by the end of the term, the plan will return investors’ capital along with a 2 per cent minimum growth payment.
Discussing the merits of this plan, Baronworth Investment Services director Colin Jackson says: “This is a very straightforward product. It runs for three years and nine months, with capital protection at maturity, subject to the counterparty. Any growth is linked to the FTSE 100 index.”
Describing how the plan works, Jackson notes that the plan pays a fixed return of 17 per cent if the final index level is at or above the initial index Level. “If the final index level is below the initial index level, it pays a return of 2 per cent.”
Jackson adds that the counterparty is Lloyds TSB Bank, which is rated A by Standard & Poors. “Any returns are taxed as income although there is the facility to invest within an Isa wrapper. The literature is well written and easy to understand, while adviser remuneration of initial 2.25 per cent is in line with the market for a shorter term product,” says Jackson.
In Jackson’s view, the product is suitable for those investors who do not want to put their capital at risk at maturity, subject to counterparty risk, and are looking for a potential return in excess of what they would be able to get in a deposit account.”
Turning to the potential drawbacks of the plan Jackson says: “Any growth is taxed as income rather than as a capital gain.”
Considering the main competition the plan is likely to face, Jackson says: “From time to time we see products similar to this on the market. As theyare so straightforward in the structured products market, there is very little to choose between them except for the level of the potential return,how the return is taxed and the strength of the counterparty.”
Jackson concludes that the Morgan Stanley offering is a straightforward product that should be well received by investors who err on the side of caution.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good