Ignorance about structured products is diminishing, says Ian Lowes, MD of Lowes Financial Management, but there’s still a lack of educational coverage
A friend of mine recently suggested to his wealthy uncle that they should talk to their adviser about structured products, given that he knows how passionate I am about them. The ultimate response from the adviser was (and I paraphrase): “You don't want any of those things. They're complicated, and they have hidden charges.”
Whilst ignorance of structured products at this level was common four or five years ago, I had hoped that RDR would have had the desired effect of encouraging advisers to be more professional in their approach to investing. Not least, because the FSA specifically mentioned structured products as being one of the product areas that Whole of Market advisers could no longer dismiss out of hand if they wanted to remain Independent.
Just two or three years ago there were a number of myths and misconceptions being put about around structured products, of the kind mentioned above, but these have been dying out. A major reason for this is that RDR has encouraged advisers to take a proper look for themselves at structured products – and that has opened eyes to their real value and potential. Importantly, more advisers have started to use the products in their client investments. In consequence, advisers have seen right through the myths and misconceptions to the value that structured products can bring to their clients’ investment portfolios.
A reflection of the interest among advisers for structured products can be seen in the fact that we started StructuredProductReview.com only in 2010, and that registered users now number over 8,500.
One of the main drivers behind our decision to create StructuredProductReview.com was to help advisers and other commentators gain a greater understanding of the sector. And the feedback we have had from advisers who have used the site to build their knowledge of structured products has more than vindicated the initiative.
The Education tab on our website hosts guides to structured products, videos, links to Asset TV coverage, news items, our own articles on the investments, plus weekly articles from leading industry professionals. And elsewhere the structured products market has been putting in hundreds of hours to provide free training and education for advisers on the subject.
Not only that, but providers have also been responding to requests from intermediary firms to go in and provide education, guidance and training in the use of structured products. So is there still an excuse for people not to have the level of ignorance exhibited by the adviser above?
There shouldn’t be, but one reason why this is happening, to be frank, is that official education around structured products in the qualification process is significantly lacking. The textbooks covering the syllabus for most professional exams, both at a basic level and advanced levels, are shameful in their coverage of structured products.
Yet if, as an adviser, I am to advise consumers on structured products, and if I am to conform to FCA guidelines to remain a Whole of Market Independent Financial Adviser, then I need to have that “sufficient knowledge” – to use the FSA/FCA’s words – of structured products to make a decision on them.
There is a wealth of professionals in the industry willing and able to help design examination level content for the examining bodies and the sooner this is tackled the better.