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Structured products: Demand for more clarity on structured investment charges
by Rachael Revesz on Nov 05, 2012 at 16:47
While providers develop RDR-friendly charging, some advisers, like Kevin Forbes (pictured) and James Clancy, believe they should go further in disclosing the various costs involved in structured investments.
Structured product providers have already launched or are gearing up to offer commission-free structured investments ready for the retail distribution review (RDR), but some advisers are still calling for more transparency and breakdown of costs.
Nev Godley, vice-president of the institutional equities division at Morgan Stanley, said it was unlikely a provider would fully break down costs in terms of custody and administration fees, and said advisers would not particularly care.
‘If you look at a brochure now, a typical six-year product, say, will say charges are already factored in, including any commission for the adviser,’ he said. ‘Whether they [advisers] realise or are interested in the different people behind the scenes to pay, I shouldn’t think they particularly care about that.’
Godley (pictured below) said Morgan Stanley had spent time examining whether the client would be better off with RDR pricing and came to the conclusion that any difference would be marginal.
‘To be honest, there’s not a lot in it,’ he said. ‘It depends on what the pay-off is, what the underlying assets are, how they work already and the terms of the product. Sometimes they can be marginally better off, but it nets out as about equal and probably won’t make much difference.’
Morgan Stanley has yet to launch its commission-free structured products but Godley said they would be easy to implement.
Breaking down costs
Barclays Wealth is attempting to break down costs more instead of having an aggregate number, according to its director of investor solutions, Richard Henry.
‘If that’s [a cost of] 5%, commission is 3% to the intermediary [pre-RDR], but there isn’t an explicit break down,’ he said. ‘What we have done is attempt to get closer to that. All the information is on there but we are trying to make it more explicit.’
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