The serious volatility in global markets, coupled with the fall in interest rates has led many investors to seek alternative investment products.
Banks and building societies have been very active in marketing fixed term structured products that offer a capital guarantee and returns linked to the performance of the stock market index.
But many investors are simply unaware of the hidden potential dangers that lie within these plans. Effectively, the guarantee of your capital is only as good as the company that guarantees it - this is known as the “counterparty risk”.
One such guarantor was Lehman Brothers, and with the collapse of Lehman, went the capital guarantees that they offered on literally thousands of these types of plans.
The regulator is currently looking into the ways in which these plans have been marketed by banks and building societies without properly explaining the potential downsides.
Structured products are good investments and they do have a role to play within a portfolio, but you should be fully aware of the product terms and conditions.
If you have invested in structured plans, or you are thinking of doing so, we would be happy to offer you our specialist advice on the products you are considering. Please contact ADRIAN SHANDLEY, Head of Champion Wealth Management on 0161 7032500.
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