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Product Matters

We are seeing a raft of fixed-term stockmarket-linked products. If it is not enough that I have to look at them during the day, I often arrive home to find that another IFA has mailed one of them to me.

I won&#39t beat about bush on this – I am not a fan of these products.

My concerns stem mainly from the fact that to generate attractive headline income payments, the product developers have had to drop the investment timeframe down to around three years and two months.

Generally, I feel this is too short a time to embark upon equity-linked investment. If that is not enough to put me off, I am convinced that 99 per cent of investors who buy these products do not understand the detail.

Of course they are a marketer&#39s dream and the number of IFAs mailing them must now be in double figures.I believe these types of products are not suitable to be mailed. The terms are too complicated for many investors to buy off the page and without advice.

I am happy with two of the current crop but only for certain clients and only where we are providing advice.

I read a quote from an IFA in one of the national personal finance sections at the weekend. It said: “Stockmarkets are so volatile that it is highly unlikely you will get your capital back. Investors are turning to these schemes to boost their incomes but they rarely realise just how big the risks are.”

When I got round to opening my post, I found the very same IFA had mailed me one of these products. Strangely the newspaper comments were nowhere to be seen in the mailing. Funny that.

James Dalby is head of research at Bates Investment Services

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