At Investec Structured Products we have developed a hugely successful Retail Structured Products business with an enviable track record in the Intermediary market winning numerous accolades since our launch in May 2008.
It has always been our intention however to develop a concurrent businesses designed to support true Wealth Managers (WMs) and Discretionary Wealth Managers (DWMs) both in terms of product design and back office service proposition. In simple speak, not every client will buy the same things in the same way so it is important, given the right resources, to provide a service to as wide an audience as possible.
The term "Intermediary" covers a multitude of disciplines but for the purposes of this short article I have categorised the main 3 segments as far as I can determine into IFA, Wealth Manager (WMs) and Discretionary Wealth Manager (DWMs). My apologies if this over-simplification offends but, in the absence of anything more generic, these descriptions will have to do. Most IFAs, due to the nature of their business model, primarily work on an advisory and commission basis therefore they need retail plans available where commission payments can be taken or re-invested. It has long been recognised that WMs and DWMs work primarily on a fee basis and usually their investment mandate allows the discretionary management of some assets under their control however, there are few Structured Product providers that would appear to offer investment solutions specific to this wider market and their needs or indeed, those of the clients. It seems sensible therefore to develop business propositions suitable for this wider market. There also seems to be a very definite divide between structured investments sold by IFAs and structured investments advised and invested in by some WMs and DWMs however, is it necessarily a matter of vanilla versus complex?
We have recently developed our Boutique proposition which is a collection of structured investments designed to offer products and ideas across different markets that fall outside of our core retail range. The Boutique collection is not so much about specific product detail, rather an adviser's ability to apply these new risk and return profiles in a slightly different way to our retail collection of plans, potentially enhancing client portfolios. Plans in this collection may, from time to time, involve alternative underlyings, for example MSCI Emerging Markets index, or pay-off profiles, for example investment returns linked to bearish markets, but will always be constructed in a sensible and transparent way, to take advantage of current market opportunities. Having said all that, the strategies within our Boutique collection are designed to complement clients' existing investments, without the need for WMs to change the fundamentals of their portfolio planning process. The key theme running through Boutique is risk management and efficient use of structured investments within a client's portfolio.
There are some other key themes running through our Boutique plans which include higher minimum investment amounts reflecting not only the pay-off profiles and potential applications but also the underlying investment characteristics. In addition all plans are designed without commission so therefore will suit those advisers working on a fee or client retention basis. Fees can still be deducted from the clients investment with payments made to adviser firms which we believe should suit the wider IFA market who are working towards adjusting their businesses to comply with the forthcoming RDR framework. Boutique will also be used as the platform for Investec Structured Products to develop and launch new ideas and concepts including our first index specifically designed for Structured Products, EVEN 30, and our collateralised note programme. I would expect Boutique to be popular with WMs and would hope as the markets and our business develop further that they engage with us around new product design and ideas so that provider and distributor work a little more closely together.
I mentioned DWMs above and they definitely position themselves completely differently by working almost exclusively on a discretionary mandate with a client utilising investment strategies that many advisers are simply unable to, for example buying structured investments on the secondary market. This involves an investment manager trading the underlying security of a structured investment at a time where the pricing and valuation meets the specific needs of a client's particular investment objectives. Being able to buy product on a discretionary basis often allows the investment manager to benefit from perhaps a pricing anomaly or access a return profile required for a very specific time period with a targeted GRY. To succeed in this space providers need to develop a strong web based service proposition with accurate, clean and competitive pricing combined with good product inventory. Ironically, complicated or complex product is not a criterion that investment managers look for.
I believe that Investec Structured Products is now able to offer a strong proposition and become a provider of choice across all 3 of these adviser segments and I'm looking forward to closely watching our business develop over what proves to be interesting times for all involved with Structured Investments over the next few years.
