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Nev Godley on improving the reputation of structured products

“Compliance wanted me to go and work for them but regulation is not a certificate you would frame on your wall”

If Nev Godley had followed his childhood ambitions, he would more likely be looking into the structure of organised crime than running the structured products division of Morgan Stanley.

His childhood ambition to join the police was triggered by watching episodes of Juliet Bravo and The Bill but career advice from the real thing led him towards a different type of uniform.

He says: “A policeman came to visit my primary school and he said never join the police straight from school, get some life experience first. A lot of policemen are ex-army, so I joined the army.”

Five years on, Godley left the army and finally applied to join the police but did not meet their eyesight requirements.

“After I left the army I bumped into an old friend who was working in the City. We had a chat and I contacted a recruitment agency, then began working at Gartmore soon after.”

From January 2000, Godley spent almost seven years in network and IFA sales at Gartmore. He then moved to Dawnay Day Quantum before joining Morgan Stanley in 2009 to focus on structured products, where he attained 100 per cent in the Chartered Institute of Securities and Investments Financial Regulations exam. This was the highest mark in the UK but Godley plays down this achievement. “Compliance wanted me to go and work for them but regulation is not a certificate you would frame on your wall and brag about.”

Godley’s current role as vice-president for UK retail structured products at Morgan Stanley spans the whole process for structured products, from origination and product development through to pricing, educating IFAs about the products and drawing everything together before distribution.

He says the best thing about his current role is the satisfaction at creating a product which is successful with advisers and their clients.

“It’s not that you become emotionally attached to the product but you take pride in it if you do the work, put together a product and it is a success. The worst thing about the job is getting shouted at by advisers if there are any admin errors or people have missed deadlines.”

Godley believes the RDR has been positive in promoting growth in the structured products market.

“We always saw it as a good thing in terms of raising the level of the profession and with independent advisers having to consider structured products. We have already seen an increase in the number of advisers using our products, which could be due to the RDR or that advisers are realising there are good structured products out there. We have also seen an increase in the level of understanding about structured products, even in the way advisers talk to us and the kinds of questions they ask.”

The whole landscape for structured products has changed recently, in Godley’s view, partly due to the collapse of Lehman Brothers in 2008.

“It was the only time a counterparty has gone under, so there was a lot of scrutiny from advisers and the end clients. There has been a period of education for adviser and the general public. They are more knowledgeable now.”

Godley believes the negative publicity surrounding structured products has waned a bit but feels that chairman of the UK Structured Products Association Jamie Smith had a point when he recently called for the press to be more accountable for the accuracy of their stories.

“There used to be criticism of structured products published mainly in the trade press and a lot of what they were coming out with was incorrect. There was a lot of stuff about Keydata which was reported as a problem with structured products but was really about an alleged fraud.”

Godley also believes the precipice bond scandal that happened over a decade ago was due to misselling rather than problems with the structured products themselves. “With these products, if the index fell dramatically, people would lose money. But anything can be missold and the problem with precipice bonds was where they had not been explained properly to clients. We have not seen this type of product in the market for years.”

There are three negative perceptions about structured products that Godley has come up against – complexity, opaqueness and illiquidity.

“A lot of products are complex if you look at what is under the bonnet, for example, absolute return and multi-asset funds. It all depends on the level of understanding you have and we would say that if you can understand our products, they are not complex. Neither are they opaque as we will go through any product with you to provide full transparency. Your money is tied up, so the illiquidity is true but investments are realised over a five to six-year term which is a sensible time horizon.”

According to Godley, the best structured products are easy for providers to explain to advisers so that the end consumer can understand them properly. “The best products are attractive invest-ment propositions with a realistic payoff and flexibility. You have the ability to add bells and whistles but it is about making sure the risk and reward balance is right because you can put out a product that looks attractive but has little chance of achieving the returns.”

Godley says the recent regulatory guidance on the design and monitoring of structured products is positive if it signals the end for products where the odds for achieving returns are stacked against investors. But he sees the guidance largely as a formalisation of the way most providers already run their businesses and feels it will level the playing field only slightly.

“The guidelines are open to interp-retation so everybody meets them in a slightly different way. If they had been more prescriptive and focused on stress testing and quantitative feasibility tests for products, you would have a real level playing field.”

Nev Godley Morgan Stanley 2012

Born: Durham

Lives: Chiswick, West London

Education: Southend High School for Boys, South East Essex College

Career: 2009 – Present: vice president, UK Retail Structured Products at Morgan Stanley; 2006-2009: head of distribution, Dawnay Day Quantum, 2000-2006: assistant sales manager, Gartmore Investment Management, 1995 – 2000: British Army (Infantry)

Likes: Scuba diving, cycling, eating out, movies, a nice glass of red

Dislikes: Being late (it’s an Army thing!), arrogance, crowds

Drives: I cycle more than drive but have an Audi A4 cabriolet

Book: 11/22/63 by Stephen King

Film: Saving Private Ryan or The Usual Suspects

Album: No need to argue by The Cranberries

Career ambition: To see Structured Products become as widely accepted as mutual funds and to continue to grow Morgan Stanley’s profile and market share

Life ambition: I’m getting married in September, so being a good Husband and hopefully in future a good Father.

If I wasn’t doing this I would be…. A diving instructor somewhere tropical.


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There is one comment at the moment, we would love to hear your opinion too.

  1. Structured products are stupid for many reasons. I’ve analyzed those reasons and I stay away from proprietary products.

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