The following article was written by Paul Stadden, UK Sales Manager at iDAD.


In the world of Independent Financial Advisers (IFAs), dilemmas abound. Clients armed with the knowledge of easily being able to source 5% to 6% gross annual returns on cash are beginning to deeply question the value added by their advisers. After all, why pay for advice when cash is seemingly king? Yet, IFAs are stuck in a rut, heavily reliant on Model Portfolios that have recently struggled to deliver the consistent 7%+ type returns many clients’ desire. The bond markets have finally emerged from a formidable 30-year bull run, and equities continue their frustrating sideways dance.

Enter the much-maligned hero of this tale: the 'Structured Product.' Some have unfairly judged it in the past, but it often provides compelling solutions for both clients and their IFAs. These intriguing financial instruments offer a logical path for investors seeking achievable returns, particularly in uncertain times. They present a clear view of 'defined returns,' often attainable even in flat or falling markets. And, perhaps most importantly, they come with transparent, well-accepted risks, as attested by those who have used them effectively for years.

So, why don't structured products enjoy a reputation for lower risk, given their ability to protect capital against substantial market falls and still deliver positive returns in turbulent times? The proverbial elephant in the room is 'Credit Risk,' an issue that looms large across the entire financial spectrum. Ironically, it is also a legitimate means of climbing the risk-adjusted returns ladder. In the new era of higher interest rates, Structured Deposits have made a comeback, shielding capital from market risk, backed by £85,000 FSCS cover against Credit Risk, and offering defined returns even in challenging markets. They are a lifeline for clients, preventing panicked selling, instilling predictability, consistency, and the promise of returns.

Risk is an unavoidable companion in the world of investments. The key is to calibrate one's acceptable level of risk relative to the potential rewards available at a given moment.

Structured Products are trading a historically rarer form of risk—the collapse of a global bank—for a more prevalent risk: the likelihood of markets tumbling. Some IFAs have long clung to unwarranted excuses for not introducing clients to these sound investments that complement portfolios alongside passive and active fund management.

"I don't understand them and don't want to consider them." - They don't necessarily need to be dissected under the hood. If the bank is credit-worthy, they operate within legally binding terms outlined in the brochure, a fact well-appreciated by clients who have embraced these plans for over two decades.

"Access is restricted." - Not true, they are highly liquid, and they offer daily liquidity and pricing when required.*

"They aren't on my preferred platform." - This issue lies more with the platform industry. There is no reason why structured products shouldn't be accepted. These assets can be held without explicit AMCs and should find a place in most SIPPs and open-architecture platforms.

Other excuses may surface, but when clients discover these investments, they often lament not having encountered them earlier.

With the FTSE 100 at 7,600 today, having languished at 6,930 in December 1999, equity performance has relied solely on dividend growth. Crystal balls remain elusive, but there's much to gain from exploring the merits of the structured product market, especially in an environment where confidence in equities, bonds, and model portfolios wanes. It's a story of adaptability and opportunity in an ever-shifting financial landscape.

Paul Stadden

UK Sales Manager iDAD




Structured investments put capital at risk

*It is unlikely that an investor would receive the original value in full