The UK Structured products association (UK SPA) has joined efforts with the Tax Incentivised Savings Association (TISA), to produce a guide for investors who may be considering investing in a structured deposit.
This four-page “easy-to-understand” document guides potential investors through how a structured deposit works, the investment risks and the potential benefits of investing in a structured deposit.
It is not meant to replace any investment brochure for a particular structured deposit, said Zak de Mariveles (pictured), chairman of the UK SPA who stressed that consumers should read this guide alongside any product-specific materials, to make sure that they understand the main features of how structured deposits work.
“The consumer guide to structured deposits, produced jointly by UKSPA and TISA , was created to help investors better understand whether structured deposit could fit with other saving they may have, helping to address what appears to be a generic concern of the FCA of financial literacy of retail investors throughout the UK,” said de Mariveles.
In addition, the UKSPA has also published a guide to professional indemnity and structured products which provides an overview of the impact that the use of structured investments and deposits has on the terms and conditions, as well as the premiums, for firms looking to secure their Professional Indemnity (PI) cover.
The report also contains tips and guidance for firms regarding the level of record keeping and information that brokers or insurers will require in order to undewrite clients that have used (or intend to use) structured products.
“The UKSPA is committed to educating and offering help to the investment community at all levels and this most recent publication offers useful advice to the UK IFA community seeking Professional Indemnity,” added de Mariveles.
According to the trade body, whilst the regulatory environment has changed a great deal since the introduction of the retail distribution review (RDR), the market for professional indemnity insurance (PII) cover seems to have changed in just two ways.
“Firstly, all firms seem to be facing rising premiums and secondly, a wider range of products, including structured products and pension planning vehicles, seem to be giving rise to concern when proposals are submitted,” stated the association.
The report found that instead of a bias against structured products, rising premiums and greater exclusions for PII policies is a much broader issue.
A shrinking pool of insurers means that they can be more selective of the risks they underwrite and what firms they insure, said the UK SPA.
“Structured products, like any investment product, can become part of the issue if you do not disclose sufficient information in your proposal or fail to demonstrate how you risk manage your business,” it said.
Based on these findings, said the UK SPA, the report includes a number of useful tips to help invesotrs ensure that structured products do not contribute to their PII premiums including the need to build a strong relationship with brokers, and establish strong record keeping procedures and document all relevant information, but also the need to present proposals clearly, legibly and accurately, and use proposal forms as a guide.
In addition, the UK SPA recommends to allow plenty of time to prepare a proposal and review quotes, conduct ongoing reviews with clients on their structured product positions, and avoid PPI policies solely on the basis of cost.
Click here to read the UK SPA guide to structured deposits.
To download a copy of the professional indemnity report click here.
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