Structured Products: Advisers shy of bespoke market despite efforts to improve access

Providers are opening up the bespoke structured product market to advisers, but the adoption of clean pricing models by off-the-shelf products mean they are likely to continue to win favour, as Adrian Murphy (pictured), Ian Lowes and others suggest.

Advisers are wary of creating bespoke structured products for their clients, despite widening access to this market and the attractions of institutional rates, as off-the-shelf plans begin to adopt clean pricing structures.

Kevin Deamer, chartered financial planner at Essex-based KMD Private Wealth, has created bespoke products for his clients but said most advisers would be put off by the minimum investment limit.

Providers Barclays Investments and EFG Financial Products allow advisers to create products with a minimum investment of as little as £50,000, and Deamer argued that other providers were likely to reduce their minimum.

‘I wouldn’t be surprised if some providers chose to lower the minimum amount. There is more margin for banks doing it in the retail space,’ said Deamer (pictured). Bespoke products allowed advisers access to a wider array of assets than off-the-shelf products, he added.

‘In my limited experience, in the institutional structured product space there is greater diversification of underlying assets, rather than in retail, where 90% of it is with the FTSE,’ he said.

Deamer has created 19 bespoke products since 2008 and has raised £1 million for each launch. His last creation was in September 2011: a Credit Suisse FTSE-based autocall that will kick out after three years.

Wary of DIFs warning

Adrian Murphy, associate partner at Glasgow-based Murphy Financial, said he would be wary of creating his own structured products due to the Financial Services Authority’s (FSA) concerns over adviser-owned investments. He pointed to the regulator’s warning to advisers not to ‘shoe-horn’ clients into distributor-influenced funds (DIFs).

‘If you start with that [creating bespoke], you would need to provide X amount of assets, then you’re going into the likes of DIFs and the FSA has not been keen on that,’ he said. ‘There is no one solution for your client; you can’t just have one product and put everyone into it.’