FAQs

Why should I consider structured products in my portfolio?

Structured products are financial instruments issued by a bank, which provide an agreed level of income or growth over a specified investment period, depending on the performance of an asset, like the FTSE 100. The are designed for investors who are prepared to invest for a fixed period, and who also want some degree of protection over the amount they invest.

They allow you to invest in the markets - but with peace of mind:

A way to protect your money: Many structured products are available with defined levels of capital protection. Over the past ten years, fewer than 1.1% of UK retail structured products lost money*.
A way to diversify returns: Over the past ten years, UK retail structured products returned an average of 6.36%*. Some structured products can even give you returns when markets fall.
Suitable for every investor: There are a large and growing range of structured products available, for a broad range of different risk tolerances and investment objectives.
Clear and transparent: Your potential returns, the risks, the benefits and fees are all clear and defined upfront, giving you peace of mind in your investment.

* Source: StructuredProductReview.com, April 2024. Past performance is not a guide to future performance.

What are structured products?

These fully FCA-regulated investments provide an alternative to more traditional ways to invest in markets like the FTSE 100. They provide defined returns, often a lower risk / return profile and greater peace of mind to you when investing.

Fixed term investments, designed to be held for anywhere between 2-10 years
Defined returns, calculated based on the performance of an asset (like the FTSE 100)
The asset that returns are linked to can range from single shares and equity indexes through to funds, commodities and interest rates
Most products promise to protect investors' capital against falls in the underlying asset to a certain level. Some products (such as Structured Deposits) protect investors' capital against any fall in the underlying asset.
Investment returns are provided by major global banks.
All fees are usually reflected in the returns of the product. There are no additional fees to pay.

What is the difference between a structured product and a structured deposit?

Both have similar features, being that they are fixed term investments that offer a defined return upon maturity, however there are two fundamental differences between structured products and structured deposits:

Most structured products will put an investors' capital at risk if the underlying asset falls below a certain value, whereas structured deposits will protect investors' capital regardless of how the underlying asset performs.
Structured products are not covered by the Financial Services Compensation Scheme (FSCS), meaning investors will lost most, if not all, of their money if the issuer of that product fails or goes into administration. Structured deposits, on the other hand, are covered by the FSCS, subject to the investors' eligibility and up to the permitted limits. You can find out more about the FSCS at www.fscs.org.uk.

How do they work?

Structured Products are put together by banks, who combine a bond element (which provides the capital repayment) with some derivatives (which provide the potential return), in one single product.

They are used by a wide range of investors, from large institutions through to individuals. When added to a broader portfolio, they can add diversification benefits and help protect capital in case of market falls. They can also be used to gain exposure to markets that might otherwise be inaccessible to an investor (such as commodities, or emerging markets).

For UK retail investors, structured products are typically made available via a 'Plan Manager'. A Plan Manager is responsible for running a structured product on your behalf and they have a regulatory responsibility to make sure they follow a safe and proven process for investment, that they are clear, fair and not misleading in their communications with you and that they are focused on good outcomes for you as an investor.

The Plan Manager will provide a brochure that describes exactly how the Plan works, the returns you will receive and all the risks and benefits, along with an assessment of whether the Plan may be appropriate for you.

Should you decide to invest, you apply directly to the Plan Manager.

The Plan Manager then holds the Plan on your behalf, purchasing the financial security that delivers the Plan returns from a major global bank. They hold this for you during the life of the Plan and provide you with daily pricing updates, statements, the ability to unwind at any time, and the return of your investment once the Plan matures.

Are they right for me?

It's not always easy to know if a structured product is right for you. Firstly and most importantly, you must read the brochure, that contains all the details you need to know about how the products works, and make sure you understand it.

If there is anything you don't understand, or if you need help understanding if an investment meets your specific personal needs/circumstances, you should seek independent financial advice (click here for a list of UK financial advisers).

But for those with the knowledge and experience to make their own investment decisions, the Plan Manager will provide a handy checklist to help you assess if this product might be appropriate for you.

Is my money safe?

The Financial Services Compensation Scheme (FSCS) is set up to pay compensation if a financial firm goes out of business and can't meet its financial commitments. It offers protection for a range of products and services, such as bank or building society accounts, pensions, mortgages and insurance policies. In these cases, the maximum compensation you could claim is currently £85,000, and there are also other limits set by the FSCS.

Plan Managers are fully regulated by FCA. You can find details on the FCA website here. If you suffer a loss because of the Plan Managers actions or negligence, you may be entitled to claim compensation from the FSCS.

Likewise, if the bank holding your money before the Plan starts or after it matures becomes insolvent, you may be entitled to claim compensation from the FSCS.

However the FSCS will not protect you in all instances. Whether or not you are protected by the FSCS if the provider of your structured product fails depends on what type of product it is:

For structured products: The securities that make up your Plan will be issued by a major global bank. If that bank cannot meet its financial commitments to you, it's likely you'll lose a significant amount of your money and you won't be entitled to compensation from the FSCS in this instance.
For structured deposits: If the bank issuing the structured deposit cannot meet its financial commitments to you, you may be entitled to claim compensation from the FSCS.

Claiming compensation from the FSCS is subject to eligibility requirements. More information can be found at www.fscs.org.uk.

How do I invest?

Before you invest, you should make sure you have read the brochure and KID provided by the Plan Manager and have fully understood how the product works and that you feel it is appropriate for you. Remember if you are unsure, speak to a financial adviser.

To invest in a Plan, you must complete an application process. This includes providing information about yourself, so the Plan Manager can meet their regulatory duties.

Once your information has been processed, you will be informed of your successful application and the Plan Manager will then request payment.

Once your payment has been received and the Plan has started, the Plan Manager will inform you of your Plan details and provide all ongoing communications to you.

Please note that some structured products are only available to retail investors with advice, or after appropriateness has been assessed by a financial adviser. This will be made clear to you before you place an investment.