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Started By
Message
Structured Notes Under New Fire
Posted on 6/27/16 at 2:05 pm
Posted on 6/27/16 at 2:05 pm
LINK
Someone here a few weeks ago posted about their husband being duped into one of these things.
I have a number of wealthy clients who have been put into these things, almost every one of them in a investment account that is managed by a "financial advisor".
Some of these clients are very, very smart people, and in every single case, not a single one of them had any idea how these worked. A couple didn't care because they "trust their broker" but many were surprised.
These things aren't inherently bad per se, but they are very complex and few people really understand how they work.
Someone here a few weeks ago posted about their husband being duped into one of these things.
I have a number of wealthy clients who have been put into these things, almost every one of them in a investment account that is managed by a "financial advisor".
Some of these clients are very, very smart people, and in every single case, not a single one of them had any idea how these worked. A couple didn't care because they "trust their broker" but many were surprised.
These things aren't inherently bad per se, but they are very complex and few people really understand how they work.
2
Posted on 6/27/16 at 2:16 pm to LSUFanHouston
I get about 3 emails a month from TD Ameritrade telling me they are selling blah-blah structured notes and if I'm interested I should contact them. There must be a hellava commission for selling those things to retail investors.
Posted on 6/27/16 at 3:36 pm to LSUFanHouston
quote:
These things aren't inherently bad per se, but they are very complex and few people really understand how they work.
"A structured note is a debt security issued by financial institutions; its return is based on equity indexes, a single equity, a basket of equities, interest rates, commodities or foreign currencies. The return on a structured note is linked to the performance of an underlying asset, group of assets or index.
All structured notes have two underlying pieces: a bond component and a derivative component. The bond portion of the note takes up most of the investment and provides principal protection. The rest of the investment not allocated to the bond is used to purchase a derivative product and provides upside potential to investors. The derivative portion is used to provide exposure to any asset class.
An example of a structured note would be a five-year bond coupled with a futures contract on almonds. Common structured notes include principal-protected notes, reverse convertible notes and leveraged notes."
come on, how could a retail investor not understand that
Posted on 6/27/16 at 4:58 pm to Ole War Skule
There's a market out there for good structured products such as the ones with 90% downside protection (i.e. the 90% is the bond piece).
The ones like my OP had zero downside protection - they were pure derivative plays.
And again, that may make sense in certain portfolios with a clear understanding by the investor.
It's like whole life insurance, annuities, etc. They all have their place, however, they are all more likely to be overhyped, oversold commission-earning crap investments sold to unwittingly uninformed people that happen to have some money.
The ones like my OP had zero downside protection - they were pure derivative plays.
And again, that may make sense in certain portfolios with a clear understanding by the investor.
It's like whole life insurance, annuities, etc. They all have their place, however, they are all more likely to be overhyped, oversold commission-earning crap investments sold to unwittingly uninformed people that happen to have some money.
Posted on 6/28/16 at 7:00 am to LSUFanHouston
quote:
It's like whole life insurance, annuities, etc. They all have their place, however, they are all more likely to be overhyped, oversold commission-earning crap investments sold to unwittingly uninformed people that happen to have some money.
etc
Exactly. Their appropriate places are few and far between, they are very expensive fee-wise, the vast majority of buyers don't understand how the products work, and overly complicated variations are created which have virtually no appropriate application.
Posted on 6/28/16 at 7:24 am to Ole War Skule
Posted on 6/28/16 at 9:36 am to Iowa Golfer
Which do not meet all the points I made?
* appropriate places are few and far between
* very expensive fee-wise
* vast majority of buyers don't understand how the products work
* overly complicated variations are created which have virtually no appropriate application
Annuities: check
Whole life: check
Structured notes: check
No one suggested they were alike in what they were or what they did. The point is not that they are similar things, but they are usually sold due to high commissions, not because they are usually appropriate.
* appropriate places are few and far between
* very expensive fee-wise
* vast majority of buyers don't understand how the products work
* overly complicated variations are created which have virtually no appropriate application
Annuities: check
Whole life: check
Structured notes: check
No one suggested they were alike in what they were or what they did. The point is not that they are similar things, but they are usually sold due to high commissions, not because they are usually appropriate.
Posted on 6/28/16 at 1:55 pm to Ole War Skule
Have some fun. It's been an extremely profitable couple of days n the market.
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