UK Structured Products Association initial response to FCA thematic review and research on structured products
6th March 2015Today, the UK Structured Products Association ("UKSPA”) makes an initial statement in response to the recently published FCA thematic review on structured products, and the related occasional paper discussing how investors value structured deposits.
Zak de Mariveles, Chairman of UKSPA comments:
"UKSPA is pleased to see the FCA confirm that structured products are used as savings or investment alternatives by a broad range of customers...and form an important part of UK and global financial markets.
It is important to note that the independent research commissioned by
the FCA showed that consumers predominantly sought a ‘safe’ investment and
superior performance as compared with cash deposits. Taken at face value,
structured deposits and capital protected structured products appear to address
these underlying financial needs, and importantly that consumers had a good
understanding of the basic product features and where such products fit in the
savings and investments landscape.
The FCA has previously published clear product governance guidance for structured products, setting out their expectations of firms operating in this market, and this guidance has been reaffirmed in this recent thematic review. We agree with the FCA that it is important for all firms to identify target markets and bridge any gap in client understanding. We also agree that firms should aim to deliver economic value to customers, provide clear and balanced information and also to provide distributors with enough information to advise on these products appropriately.
However, their findings, including that some customers do not compare products before making decisions, and that consumers struggled with the detail, are an important reminder to the structured product industry, and no doubt the wider investment community, that more must be done to help consumers make better informed investment decisions.
The FCA particularly highlight how consumers struggle to assess potential product outcomes or performance, a topic UKSPA believe is relevant not only for structured products but for the entire retail investment industry, including the fund industry.
Providing customers with probabilities of future unknown events, such as whether a fund manager is likely to over or under perform, or what the level of the FTSE100 may be in the future, whilst potentially helping consumers, can also be fraught with complexity and uncertainty. The UKSPA believes any such initiative needs to be carefully investigated and should be applied across all retail investment products. The UKSPA is committed to working with its members and Regulators to help investors make better informed decisions, and in conjunction with future European regulatory discussions such as MIFID2/PRIIPS, we hope to build on the findings of the FCA today in that endeavour.”
Download the full PDF here.