An Overview of the UK Structured Product Market
The Structured Product/Investment market is vibrant in the UK with products sold to retail in this category representing around half of the sales of mutual fund sales to the same group according to the Investment Management Association.
This represents around £14bn in retail sales per annum.
Why does this market exist? Structured investments, typically offered to investors by banks, aim to offer investors a return in excess of what they can achieve in a standard bank account but without taking on the full risk associated with investing into stocks and shares.
In return for this lower risk, investors typically give up the chance to make the very high returns they can make with equities.
It is then a trade off.
Investors give up the potentially very high return of equities in return for a bit more safety and in the opposite light, agree to accept more risk to their money in return for greater potential return when compared to putting their money in a bank account.
There are few main ways in which banks distribute these products in the UK.
The first and the largest is via internal sales channels i.
e.
the bank owned branch network of retail banks and building societies.
Other channels include financial advisers, institutional wealth managers, private banks and increasingly to direct investors via execution only stock brokers.
Who are the main players? Some of the largest issuers or product in the UK include Investec Structured Products and Barclays Structured Products who tend to launch approximately 4 - 10 products every 6 weeks.
Investec have been very successful in the UK market as a result of being able to pay market leading rates to their investors.
This reflects the fact that they are seen by the markets as riskier people to lend to than say a bank like HSBC as reflects in their lower credit rating.
Barclays have been very successful in distributing products to the financial adviser market, leveraging off of their strong UK brand and large tied sales force.
Other big players in the market include Legal and General and Morgan Stanley.
One feature of the UK market that is less prevalent elsewhere in Europe is the presence of small independent distributors of product such as Walker Crips, Meteor and Incapital Europe.
They have been successful in distributing products to the UK financial adviser market, leveraging off the fact that there are some 30,000 financial advisers in the UK which makes space for small distributors to help banks to sell their products.
How is the market changing? One of the largest changes is the onset of the Retail Distribution Review which is set to ban the paying of commission to financial advisers in the UK.
This disrupts the usual business model here which usually pays around 3% commission to a financial adviser for selling their products.
Whilst this is certainly a challenge to the UK market, this change is a sweeping one, affecting all financial products in the UK so is not likely to affect structured products more than other investments like funds or investment trusts for example.
The market in the UK is vibrant and continues to grow (at a rate of approximately 30% year on year).
This represents around £14bn in retail sales per annum.
Why does this market exist? Structured investments, typically offered to investors by banks, aim to offer investors a return in excess of what they can achieve in a standard bank account but without taking on the full risk associated with investing into stocks and shares.
In return for this lower risk, investors typically give up the chance to make the very high returns they can make with equities.
It is then a trade off.
Investors give up the potentially very high return of equities in return for a bit more safety and in the opposite light, agree to accept more risk to their money in return for greater potential return when compared to putting their money in a bank account.
There are few main ways in which banks distribute these products in the UK.
The first and the largest is via internal sales channels i.
e.
the bank owned branch network of retail banks and building societies.
Other channels include financial advisers, institutional wealth managers, private banks and increasingly to direct investors via execution only stock brokers.
Who are the main players? Some of the largest issuers or product in the UK include Investec Structured Products and Barclays Structured Products who tend to launch approximately 4 - 10 products every 6 weeks.
Investec have been very successful in the UK market as a result of being able to pay market leading rates to their investors.
This reflects the fact that they are seen by the markets as riskier people to lend to than say a bank like HSBC as reflects in their lower credit rating.
Barclays have been very successful in distributing products to the financial adviser market, leveraging off of their strong UK brand and large tied sales force.
Other big players in the market include Legal and General and Morgan Stanley.
One feature of the UK market that is less prevalent elsewhere in Europe is the presence of small independent distributors of product such as Walker Crips, Meteor and Incapital Europe.
They have been successful in distributing products to the UK financial adviser market, leveraging off the fact that there are some 30,000 financial advisers in the UK which makes space for small distributors to help banks to sell their products.
How is the market changing? One of the largest changes is the onset of the Retail Distribution Review which is set to ban the paying of commission to financial advisers in the UK.
This disrupts the usual business model here which usually pays around 3% commission to a financial adviser for selling their products.
Whilst this is certainly a challenge to the UK market, this change is a sweeping one, affecting all financial products in the UK so is not likely to affect structured products more than other investments like funds or investment trusts for example.
The market in the UK is vibrant and continues to grow (at a rate of approximately 30% year on year).
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