Tom Lovett (pictured), the chief commercial officer at FNZ Group, discussed the role of the financial services firm in delivering a more unique set of structured products to the industry during a presentation at SRP’s flagship Europe virtual conference held last week.
According to Lovett, with customisation comes a big opportunity as well as more choice and complexity whereby each client needs to be profiled and be given a solution tailored to meet their needs.
“There's a lot of engagement that's needed throughout the journey and clearly, technology and tools are a big part of how that's facilitated,” he said. “In terms of client proposition the example of a retirement product ties in well - the firm detects three phases.”
AMCs are a huge growth area at the moment, and we have a purpose-built platform that can manage these products in a highly customized and individualised way
The first is an accumulation phase where the client would still be working and contributing money towards the product. The second involves a waiting phase in which clients may have stopped working, but not ready to start receiving their income. Finally, the third phase entails accumulation where the income is actually drawn down.
“Each end client has complete flexibility around how long they want each of those phases to last for this contribution. There is also flexibility within the investment strategy so the underlying growth instruments that go into financial products can be defined as an individual client level,” he said.
Promoting individuality is key to enhancing structured products for the end investor although Lovett acknowledged that some obstacles exist when considering customisation.
“One might question their understanding of how the financial product actually works, how the investment strategy is going to perform in different markets, flexibilities, and what levers they can pull for each client,” he said. “However, we believe that technology offers a very effective solution not just to manage the product but to tackle a lot of these challenges head on.”
Lovett explained the virtual tools offered by FNZ’s distribution platform to advisers. First, they are presented with a tutorial to understand how the financial product works, how the platform itself needs to be navigated, and the key parts of the product characteristics that need to be populated for the client.
The solutions being delivered to the end investors touch across a wide range of structured products, one of the most talked about being asset managed certificates (AMCs).
“AMCs are a huge growth area at the moment, and we have a purpose-built platform that can manage these products in a highly customized and individualised way as individualisation creates quite a big headache for manufacturers if they don't have the necessary technology and systems in place,” he said.
According to Lovett, in terms of investor priorities, the people that go into capital protection products are generally thinking about their potentially worst outcome.
There is a trade-off, either through cost or reduced exposures while people that have asymmetric risk profiles are more sensitive towards downside than the upside.
“Typically speaking it is people who are more focused on what their minimum outcomes are,” he said. “The difference here is that we can enable those minimum outcomes to be defined at the client level, and then people can choose to try and optimise the upside within a product.”
Lovett concluded that technology has enabled advisers to flexibly define and manage products at a client level.