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Structured sceptics

Structured products have a place in today’s market but advisers are not generally recommending them to clients, according to panellists at the Money Marketing RDR and Economic Update last week.

Seven Investment Management chief executive Tom Sheridan said his experience working at a UK bank left him sceptical of structured products designed by investment bankers and sold to consumers who do not understand what they are buying.

He said: “Investment bankers would create all these lovely structured products and give them to the bank tellers and say, go flog them and tell everyone they are savings products.

“Most of the people who bought them had no clue what they had bought and they do not tell you that you do not get the dividend income. If you look at the value of investing in equities in the long run, it is the reinvestment of the dividends that is the dominant source of the return.”

Sheridan said it takes too much time and expertise to figure out what is in a structured product but there are some situations where they are appropriate.

He said: “There are places for structured products when you cannot get at the asset class or regional manager style that you want because that vehicle is not listed or there is not that kind of fund. But it is the marketing, investment-bank-led, flog it to the retail market variety that I am sceptical of.”

Taxbriefs editorial director Danby Bloch said structured products have specific time limits, usually of three or five years, meaning they do not provide any long-term solutions to clients.

He said: “I want my money to be reasonably well looked after over a long period of time. Just getting certainty over a particular period of time feels good but I do not think it does what I want it to do so I find myself not buying structured products and not thinking that other people should buy them either.”

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