Structured products: IFAs urge FSA to rule on provider communication

As advisers urge providers to be more proactive in keeping them informed about products their clients hold, some, including Graham Newman (pictured), are calling for the regulator to set a universal policy.

Advisers are asking for structured product providers to communicate more once deals have been sealed, but the rules for post-sales responsibility remain unclear.

Last summer, Graham Newman, owner of Middlesex-based Newman Wright Financial Advisers, received a letter from Legal & General (L&G) regarding a FTSE-linked product in which he had invested four clients and was waiting for the strike date.

‘The counterparty was Santander, and the parent company in Spain had a scare of a downgrade due to the Spanish government debt problem,’ he said. ‘Although the subsidiary, Santander UK, wasn’t responsible for parent debt, I was obliged to tell all my clients. Of the four clients, two got out, two didn’t have a problem with it, and all four got their money back.’

However, Newman said many providers did not send any information to him after his clients had invested in a product. He is calling for a universal policy of communication when it comes to events such as counterparty downgrades.

‘It’s good to tell clients, as otherwise you could be accused of having not told them,’ he said.

Providers seek more guidance

With no rules to follow, providers have sought clarification from the Financial Services Authority (FSA).

Jamie Smith, chairman of the Structured Product Association (SPA) and a senior director at Lloyds Banking Group, said that after the FSA issued its final guidance on structured products in March 2012 mentioning post-sales responsibility, he challenged it to give a clearer definition.

‘The FSA is led by the principles of treating customers fairly (TCF),’ said Smith (pictured). ‘In other words, products should perform as customers have been led to expect.