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Advisers shun execution-only route for structured products
on Dec 18, 2012 at 12:25
Concerns about structured products’ complexity and suitability for clients, as well as liability are among the issues deterring advisers, like Nick Thomas (pictured) and Julian Davies, from becoming brokers for execution-only services.
Advisers have said they are unlikely to be tempted by the prospect of becoming structured products brokers for execution-only services offered by providers.
Nick Thomas, managing director of Horsforth-based Thomas Heald, said the complexity of the area deterred him from allowing clients to buy structured products through him on an execution-only basis. And Julian Davies, founder of Bridgend-based Davies Financial, said he would not act as a broker because it may not be in the best interests of the client.
Out of the mainstream
Thomas said the area was too complex for most people to understand. ‘If you’re buying execution-only, it’s difficult to understand who the counterparty is, what the form of the product is and the nuances of such a complex area,’ he said.
‘No doubt there are some people who are sophisticated and intelligent who want to do their own research, but they are very limited in number.’
Thomas has a sister company that focuses on execution-only but said brokering structured products was not mainstream enough to interest him. He warned that some people were always looking for ways to blur the lines.
Providers expect an uptake
Morgan Stanley, Investec and RBS confirmed that they did not allow consumers to approach them directly to buy structured products, and their execution-only service meant an adviser or stockbroker would have to act as an intermediary to strike a deal.
Gary Dale (pictured), head of intermediary sales at Investec, said two products with commission would be available on that basis after the retail distribution review (RDR): the FTSE 100 Enhanced Income Plan 1 and the FTSE 100 Enhanced Kick-Out Plan 34, the pricing of which was yet to be finalised.
‘The reason we have an income product and an autocall is they are slightly simpler for the client to make a decision, and the return profile is completely explicit,’ he said.
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