Happy New Year
Last year was probably the most challenging year for structured products in Europe for a long time. According to www.structuredretailproducts.com, sales across the Continent fell by a third as compared with the 2011. The same story is true for the investment industry as a whole as providers and distributors prepare for new regulations and investors hold back from spending and long term saving.
What does 2013 hold in store?
I am hopeful for the industry as a whole. Investors need to earn a return on their money and simple deposit accounts do not pay enough to live off. Certain banks are predicting that long term UK interest rates will rise a little which will help pricing for capital protected ideas as will lower volatilities. Although pricing kick out plans may be more challenging. Meanwhile, I suspect that the trend towards more innovative ways of using credit risk to boost returns will continue.
No doubt, the pace of regulatory change will be maintained and provide new challenges for issuers and investors. How has the industry responded to FSA guidance on product development and governance issued last March? How will the FCA use it’s new product intervention powers?
We shall see whether RDR will encourage more independent advisers to look at structured products and drives changes in the types of solutions that are popular. We have already seen a number of attractively priced products with no commission and structured deposits that are able to pay fees under RDR.
It will be interesting to see how the trend for IFAs to outsource to discretionary investment managers will play out for structured investments. Also, the impact of millions of clients being unable or unwilling to pay for advice and investing directly themselves. Capital protected solutions may prove to be more appealing and enabling them to make informed decisions will be key!
I would be interested to hear what others think?
14th January 2013