Structured investment products – the way forward?

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With current interest rates sitting around 1.8% many investors are looking for innovative ways to increase returns. So a structured investment product that offers a return of 8% per year that protects your money sounds like a great option. However if something looks too good to be true there is usually a downfall.
Rob Morgan at Hargreaves Lansdown said, “We are sceptical of structured products.”
“If a product cannot easily be explained then we are on our guard.”
A structured product generally has a set investment term, requiring you to invest for up to for six years and is usually linked to the stock market index. As many products state your investment is not guaranteed and you could find that if the stock market goes down, or if the provider of the product fails you could lose some or all your money.
Philippa Gee, of Philippa Gee Wealth Management stated, “I loathe and detest most structured products.”
“All too often they fail to deliver and tend to be “sold” to those investors who are scared of the markets.”
A property investment company recently hit the market with a range of innovative property investment options. They claimed to outperform UK residential house prices and made clear whether they rise or fall you would earn a regular income. However looking deep in to the terms and conditions of the product there are many pitfalls and exclusions. The best advice on the market is if you don’t understand them, it’s probably best not to invest in them.
Jason Hollands at Bestinvest said, “Anyone thinking of investing in this should definitely plough through the 71-page prospectus document to try and understand the structure and workings of the products.”
There have also been recent concerns in the media surrounding hidden costs and these structured products are notorious for this. Jason Hollands added, “All too often the charges are not explicitly shown and instead are hidden in the product.”
“So the investor believes that the company is operating the investments on a saint-like basis, taking no charge – but usually it is quite the opposite.”
Managing director at Chelsea Financial Services Darius McDermott commented, “A structured product we like at the moment is the Gilliat Income Builder Plus which is offering 8 per cent income each year as long as the FTSE doesn’t go below 3,500.”
“With the FTSE where it is today, we think this is a reasonable risk to take.”
All financial experts do agree that once the money is locked within a product then you may face a financial penalty for accessing it. There are also obvious risks with all financial investment that need to be fully understood. If you are not sure then seek sound independent financial advice to avoid all the nasty surprises lurking beneath the surface.


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