Converting sometime clients to regular structured products investors, bringing manufacturers closer to investors and the importance of front-end tools for end customers were among the topics discussed in the Seeing the Light panel during SRP's fourth Nordic Structured Products & Derivatives Conference in Stockholm on September 13, 2018.

"I have looked at client bases over the years and I think that the 80/20 rule can apply," said Carl Johan Stackell (pictured), head of private banking North & head of investment offerings Sweden, Nordea Private Banking

"We see that perhaps 20% of the client base stands for 80% of the structured products investments," said Stackell, adding that there is  quite a large group of private banking customers who do a trade only occasionally, when their adviser feels like it.

According to Peter Haage, head of structuring, structured investments, Mangold, the whole tied agent landscape has changed the business. "These tied agents are not dependent on you, they can still choose other providers' products but it is less of a challenge these days and there are still opportunities to find new clients," said Haage.

Heikki Ruoppa, global head of investment solutions, Danske Bank, said the demand to invest in structured products has not been huge, especially since the interest rates became so low that capital protected products are no longer on the agenda. "You need to explain very thoroughly what the customer is buying and why it is a good thing for him or her. Then the following time is typically easier especially if the first time has gone very well," said Ruoppa.

The industry is losing clients, with, according to Mikael Axelsson, chief executive officer, Garantum, "volumes down in Sweden, and non-existent in Denmark". "Look at the aggregate volume numbers. We really have to work on that as an industry and as individual providers as well."

Stackell said he believes that the role of the sales people is pivotal in bringing manufacturers closer to investors. "It is up to the sales guys, both internal and external, to supply the information and to generate ideas, to get them to realise what the client really needs. It is also about educating the client and in our case the private banking advisers or IFAs."

Manufacturers interacting with clients can provide additional colour to a complex market, according to Haage. "Sometimes you need that to trigger an idea or get to the next step. It can be a good technique to generate more business," he said.

Ruoppa agreed that you need very technical people when executing the product and defining the details, "but typically those people are not the best possible people to explain the product to the retail investors, because you need to have a very clear and understandable message there".

However, according to Axelsson, there are a number of barriers when it comes to bringing manufacturers closer to clients. "There are legal barriers. A lot of the investment banks wouldn't want to speak directly to my clients because there would be issues from a compliance perspective," he said.

"Then you have language barriers. We have clients who do not speak English, but also when a London investment bank is speaking to us, they can use a certain language and they can expect a certain level of sophistication, the dialogue is on a certain level. When we speak to our clients we need to totally change that language and totally change the way we explain and talk about the product," said Axelsson. "I am not sure the solution is to bring manufacturers closer to clients. I think bringing manufacturers closer to intermediaries and intermediaries closer to the clients works perfectly well."

Shortening the chain is not necessarily the right option but education probably is, according to Peter De Clercq, chief executive officer, Quantessence, who moderated the panel. "But how do you work on educating IFAs," De Clercq asked.

According to Axelsson, the chosen distribution strategy when it comes to structured products is investment advice. "In the majority of cases you have the advisers sitting down with the client with a white board or a Powerpoint. That's a perfect setting to educate the client," he said.

"A lot of these clients come back and have had relationships with their IFAs for years. That setting is very beneficial for the mission of educating the client and over time bringing them to a higher level of understanding the product," said Axelsson, adding that nowadays this is done with the help of technological resources such as short films commissioned by the Swedish structured products association about certain product types and the industry as a whole.

"We see that as well," said Stackell who admitted it would be difficult to have the end client look at these front-end tools themselves. "I think it is a very good means for the meeting between the clients and the advisers. It is good for the adviser and for the clients because it educates them both. We definitely put trust in using those technical tools more and more."

Customer satisfaction depends on the expectation of the clients which has to be managed, according to Axelsson. "If you are talking about education and IFAs, and the level of knowledge and understanding in the distribution, that has changed significantly over the years," said Axelsson.

"When I first started meeting IFAs I was always told that too much knowledge will hinder sales. Many things hinder sales but I don't think knowledge is necessarily one of them," he said. "Now, the clients are more sophisticated, they know more, they have experienced through ups and downs, and learned that way, and the whole industry has professionalised. Today you have a whole different level on knowledge and understanding among IFAs and those who did not want to learn have left the industry and they are doing something else today."

Ruoppa concluded that hard selling is no longer the case these days. "It is more building a relationship, building that trust with a client by interacting rather than just push products."


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