Structured Notes

A complex investment not suitable for retail investors. I.e. 95% of people who transfer their pension. Investors normally have to sign a waiver or disclaimer stating they are in fact a sophisticated investor to invest in such products. Normally 95% of clients do not qualify for a sophisticated investor.

The reason these are sold to offshore clients are mainly due to the high commissions. Up to 8% commission can be taken on structures notes! This figure is hidden and no investor fully understands how much they are paying. The higher the fees the lower the quality of the note. The quality of the note determines you return and security.

Notes generally have a protection barrier which is claimed to be the security of the investor. In the past these were described as capital guaranteed. This is not the case. They are capital guaranteed if certain parameters are met. If the parameters are not met your money is not protected or guaranteed. This confusion makes notes easy to sell but normally they are not sold properly and investors do not understand the risks.

Some notes can be fully capital guaranteed meaning you capital is not at risk. Yet this will restrict the potential upside or returns.

They are illiquid investments. You cannot withdraw your money when you choose. If you do you will see are a large penalty to do so. These withdrawal penalties are high as you get the price of the lowest performing assets in the basket.