Investments: Beware of structured products

Investors are being warned against purchasing structured products.

Investors are being warned against purchasing structured products.

Warnings are being made to consumers about investing in structured products. The fuel for the warnings is that these products come with high and hidden fees. Together with high-risk returns, these structured products could result in many investors losing their hard-earned money.

Directly linked with stock market indices

The warnings seem especially urgent today, they offer seem to offer a better return than other options. And with low interest rates projected to stay low for at least another year, many savers feel forced to expose themselves to riskier investments in search of greater returns.

Structured products are sometimes known as protected products, and are sold by banks and building societies. These products are fixed-term accounts and they will run for three to six years. They are directly linked to the performance of one or more stock market indices and are often available as cash ISAs. The current financial markets are uncertain at best and these will not only affect these products but will also directly impact pensions.

“Offer poor value to investors”

Patrick Connolly of AWD Chase de Vere commented on these structured products: “Any product which tries to combine cash savings and stock market investments has to make compromises.” He continued, saying that those circumstances offer “poor value to investors. That is the case with combination bonds, which combine a fixed term savings account with a structured product or investment bond.” Furthermore, Connolly recommends against such accounts, saying, “people would be advised to keep cash savings and investments separate.”

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