Structured products to get their comeuppance?


Structured products to get their comeuppance?

The Times recently featured this article stating Lloyds Bank has reserved £80 million to pay compensation to those customers it mis-sold structured products. In the article, the bank's spokesman asserts that this affected a small number of customers and refers to these investments as "deposits". He is betrayed by his mealymouthed use of the word as these are far from deposits.

I have written previously on several occasions about these highly complex and misunderstood products and below is the link to an article I wrote for Financial Adviser (a Financial Times publication) back in March 2006. These products are so complex that many in the financial services industry do not understand them, let alone the public on whom they are foisted by badly trained and ignorant bank advisers. They are often characterised as deposit accounts, despite being linked to one or more market indices and as I point out in the article, collectively they have an average expected return of precisely 0. They are highly profitable for the providers and that is the sole reason banks push these products, particularly in uncertain markets.

I have seen many instances of customers of banks buying these products without knowing what they have bought and they are usually disappointed with the outcome. My advice if you have ever owned one is to complain to the bank concerned as I believe this admission by Lloyds of mis-selling will simply open the floodgates. I cannot imagine any sale of a structured product that isn't mis-sold.

If you have never bought one, keep alert as these fiendishly complicated financial instruments are often promoted as an alternative to cash.

Financial Adviser Article - Structured Instability




This article is distributed for educational purposes and should not be considered advice or an offer of any product for sale. 


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