Lowes Financial Management managing director Ian Lowes says wraps have been slow to offer structured products but he hopes the platform he is setting up with Meteor Asset Management will give advisers more access to the market.
Lowes and Meteor will launch the platform, SPwrap.com, this summer to offer advisers an overview of their clients’ structured product portfolios as well the ability to invest in new products. Lowes is also planning to offer a fund of structured products as another way to access the vehicles.
Lowes believes the history of platform development explains why structured products have little presence. He says: “Fund supermarkets were never designed to hold anything other than funds.”
Lowes says the charging model of structured products has been a significant hurdle. The new platform accommodates initial and annual charges and advisers can enter their own pricing details on the platform. Structured products usually have a minimum investment of £5,000 or £10,000 but investing through the wrap has a minimum of £1,000.
The wrap has a number of portfolio management and online valuation tools to help advisers manage their clients’ structured product portfolios.
Advisers can see details of the products held by a client, information on barrier and current index levels, timelines of key events in the portfolio’s lifecycle, such as maturities, and a breakdown of a client’s entire portfolio exposure to different counterparties.
There will also be a breakdown of plan maturity dates to help with tax planning.
Lowes believes the timelines and notifications system is useful from a client management perspective because clients and advisers get notification of relevant events, such as a maturity, counterparty upgrade or downgrade.
Lowes says: “The counterparty breakdown tool is essential from a compliance perspective.
As advisers, we know we should diversify portfolios and having the ability to look at a client’s portfolio and instantly identify exposure to an individual bank is useful.”
Lowes says his development in structured products does not stop at the launch of the wrap, as the firm is also looking at launching a fund of structured products.
He says: “The listed structured product market has developed significantly and there are now ample opportunities. We are looking to launch a fund where managers can trade in and out, using their experience and knowledge to offer a solution previously unobtainable for IFAs. This should be able to get a premium above a buy-and-hold strategy and the fund would offer a degree of capital protection.”
He says the firm’s expertise in structured products can add potential value for advisers. He says: “An IFA does not have the time and expertise to be buying shares and bonds for a client and deciding when to sell and buy them. Arguably, you are going to get to the same stage with structured products as the market grows.”
Lowes firmly believes the structured product market is set for significant growth.
He says: “The sector has been somewhat battered but that does not mean all structured products are bad. There are a lot of advisers that use them and clients that profit from them. Advisers previously had justification for turning a blind eye to the sector, as they would only listen to negative press. To be whole of market after the RDR, you have got to consider structured products alongside other investments.”