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SJP and networks’ structured product due diligence questioned


On Monday 9 January 2017, we published an article with the headline “SJP and networks’ structured product due diligence questioned”, which has now been removed from our site. This article contained incorrect information and did not reflect the views and opinions of Investec Structured Products or Investec Bank plc. We would like to apologise to Investec and all third parties mentioned in the article.



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There are 20 comments at the moment, we would love to hear your opinion too.

  1. Structured products appeal to providers because they make more money out of them than ‘plain’ investments. Hence SJP’s interest. As for other advisers (particularly in Networks) it appeals because they don’t know much about investing, they perceive the compliance to be easier and they see a ready excuse if it fails to do what it says on the tin. In other words structured products appeal to the greedy, the fearful and the lazy.

  2. Hi Harry, that’s a bit harsh! Certainly, from an IFA point of view there are only relatively few regulated products that are, in essence, ‘bad’. Any decent policy/investment can become a bad one if it is sold to the wrong person for the wrong reasons at the wrong time. I cannot vouch for SJP or networks (wouldn’t want to frankly!) but, as an IFA, I cannot agree with your sweeping generalisation on this occasion. Kind regards

  3. @CDL

    Perhaps harsh, but as a generalisation I think justified. Some of these structures can be replicated by an IFA mixing and matching at a fraction of the cost. These products are by no means cheap and when you compare the returns when markets have risen they are somewhat behind the curve (and that’s trying not to be harsh!)

  4. Chris Taylor, The Investment Bridge 9th January 2017 at 4:23 pm

    Harry, it isn’t harsh – it’s just wrong. Wrong in all that you’ve said about SPs – and also you’ve picked up the wrong end of the point made about SJP, which is that they are NOT using SPs. If you would like to engage offline I would be more than happy to objectively and empirically evidence my assertions re SPs for you, which I think might surprise you.

  5. I largely agree with Harry when it comes to SPs owned directly by retail clients. Most would not be understood by most clients. They are opaque when it comes to charges. There is never any mention of what the manufacturer stands to gain. They appear too good to be true to most retail clients. Added together it’s difficult to see how they can make an informed decision about buying them. One day this will all come home to roost when the merry-go-round stops. Markets will fall and the ‘guarantees’ clients thought they had will fail. The FOS and FCA will agree that clients probably didn’t understand the risks they were taking and advisers and the FSCS will pick up the bill.

    The FCA published a paper about SPs about a short while back and it’s not very positive. Indeed, it could be seen as a ‘told you so’ paper that can be rolled out when needed.

    @Chris Taylor
    Given your background and services you provide, how objective can you be?

  6. I have a client who won’t invest in anything but and all those she’s used thus far (via me, only ones on Tenet’s panel) have done just what they said on the tin. Harbouring a blind prejudice against them all is just silly.

  7. And what of Connaught – just went bust and perhaps you have forgotten Key Data? Presumably that is wrong too. And perhaps you will tell me that the charges are reasonable as well.

    Basically if you are a nervous investor – keep out. If you want to invest then invest properly. There are loads of opportunities and you don’t have to tie your money up in knots. True you will rerap all of the downside, but you will also reap all of the upside and that is what inveting is all about. Structured products often just attract those who can’t decide (ort don’t want to) and shove the whole wad into one or two vehicles.

  8. It appears to be Harry who is speaking from a position of ignorance. Both structured deposits and SCARPS (retail and institutionsl) when used appropriately can prove invaluable….and have done so. Both for clients and personally.

  9. What a useless article with some very sweeping statements. There’s a reason SJP don’t use Structured Products and that is due to the counterparty risk. With the advice guarantee they offer, it’s not worth taking the risk with something they can not control.

  10. Hmmm, nice to see a decent SP debate every so often. I suspect SJP don’t use SPs because they’re a poor fit with their business model (generally have limited offer periods, no trail income and low margins) rather than because of any counterparty risk (presumably their clients have bank accounts, so are used to taking on credit risk of the issuing banks).

    Harry, Connaught was a Fund (nothing to do with SPs) but it can’t be used as an argument to say all funds are bad (any more than Arch Cru, EEA etc. can). The Keydata example is always worthwhile as it demonstrates the security of structured products. All the Keydata structured products delivered exactly what they promised, even though the management of Keydata were seduced by some daft life-settlement investments which blew up the business – the structured products were all fine.

    The point of the article is to highlight the dangers of dismissing investment types simply through ignorance. In the low-interest rate environment we’ve been experiencing over the last 8 years, structured products have played a valuable part in the portfolios of most investors, even if only via the holdings in funds they’ve invested in, or DFM services they’ve used, rather than as direct recommendations from the advisers concerned – all advisers’ clients are pretty much certain to have benefitted from them whether the adviser realises or not.

  11. Sweeping statements aren’t great but when they are made by the FCA you should sit up and take notice because there will be no sympathy later…

    “Our consumer research highlights that retail customers generally struggle to understand the complex features common to many structured products and frequently overestimate the potential returns available from them. This can have a negative impact on the quality of their decision-making.”

    “We compared investors’ expectations about FTSE100 returns with the returns they expected from different FTSE100-linked structured products. This enabled us to calculate bias in how respondents evaluate structured deposits relative to the FTSE. While investors’ expectations of the FTSE growth were on average well aligned with the assumptions we used in our model, investors significantly overestimated the expected returns of all structured deposits, including the most simple.”

    They are not inherently bad products in the same way guns aren’t inherently bad but in both cases it’s sensible to restrict their use to people who really know what they are doing. I would suggest that most clients don’t really understand what they are agreeing to and when the time-bomb goes off, just like SCARPs back in the late ’90’s/early ’00’s, clients will have a ready made complaint backed by the FCA view and enforced by the FOS.

  12. @ Grey Area: So, perversely, a retail investor seeking advice to go into SPs could be a very shrewd operator indeed; “when the time-bomb goes off” they “will have a ready made complaint backed by the FCA view and enforced by the FOS” which gets them their money back and 8%pa simple interest!

    I can see that’s a less attractive proposition from the adviser’s side of the desk, of course…

    • @Adam Smith
      That’s right, it’s like an indemnity for the client. If the product performs how you expect, all well and good. If it doesn’t, then no doubt the client failed to understand the implications (as evidenced by the FCA’s research) and the adviser has to make them whole.


  13. St James’s Place don’t offer structured products because they are in the business of selling their own managed funds and their philosophy is to ‘keep it simple stupid.’

  14. Dear Mr Katz
    Over the last 16 years I have invested in 38 SP contracts, never once lost any invested capital but I have received just my capital back without growth or interest on five occasions. My profit has averaged out at over 9% with no sleepless nights. I have terminated early on a number of occasions, the last time securing a return of 30% over eighteen months. Now compare that with the twelve VCT’s I have owned over the same period where 8 managed to lose money some as much as 60% and that includes the so called tax free income. So how come IFA’s feel comfortable recommending VCT’s but not so with Structured Products. Perhaps it would be better to do the research rather than deprive the investing public of an essential component of good investment planning. Disclosure—- I no longer have any interest or influence in any financial advice company nor have I for the last thirteen years.

    • @Ken Lowes
      There are two possibilities here. Firstly, you have taken a high degree of risk (given the return over the risk-free rate) and been rewarded accordingly in the knowledge it could have gone the other way. Or, secondly, SPs are capable of magically de-coupling risk and reward. I guess there is a third possibility and you have stripped the shirt off the back of the SP provider… but that would be beyond magic and into the realms of pure fantasy!

  15. Chris Taylor, The Investment Bridge 16th January 2017 at 2:04 pm

    @Grey Area and Harry,

    Well, the article has disappeared, but not the comments.

    Just to add, many of the comments made really are text book examples of otherwise credible people making what sound like truism comments, that are actually nothing more than reverberating ‘faction’. The points made simply don’t stand up to scrutiny.

    It really is high time to engage with evidenced, empirical facts, and to ensure genuine knowledge prevails: happy to have a healthy look at the issues, objectively, with either/both of you, if you’d like to ‘fact check’ your own stances.

    No investment is perfect: but there are plenty of unique benefits and advantages to the best structured products, that simply can’t be accessed or replicated via any other investment option, that can make structured products an invaluable addition to properly diversified portfolios – portfolios that diverify investment type, as well as asset class and geography, etc.

    As I say, I’m happy to engage in a worthwhile look at this, if you both are (pls contact me if you’d like to: but time to let this now pulled article rest at this point!).

  16. A standard FCA distraction strategy. When under fire for one’s own litany of catastrophic failures, go on the offensive by alleging faults with what everyone else is doing and how they’re doing it. A few people may actually be fooled into thinking that the FCA knows what it’s doing.

  17. Facts are Facts. Anyone who boldly criticises the Structured Products Sector as a whole as unfit, expensive, poorly preforming or, failing to meet investor expectations is doing so from a position of UTTER IGNORANCE. Lowes Financial Management have the data, the facts and the truth. If you would like to see it or, challenge my statement please do get in touch – We’ll be glad to help you.

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