The Way Forward! Structured Products within the Affluent Segment

Structured products are financial instruments whose performance or value is linked to that of an underlying asset, product, or index. These may include market indices, individuals or baskets of stocks, bonds, and commodities, currencies, interest rates or a mix of these.

investments which provide a return based on the performance of an underlying asset. These are tailored to the needs of investors and designed for those who want to invest for a fixed period and have a degree of protection over their initial capital.

Within the affluent segment, structured products offer a range of benefits, allowing investors to achieve tailored financial goals, manage risk, and potentially enhance returns. While these products are often associated with High-Net-Worth Individuals (HNWIs), they are also increasingly popular among affluent investors who have significant, though not ultra-high, levels of investable assets. Here’s how structured products fit into the affluent segment:

Customized Solutions:

Affluent investors, like HNWIs, can access structured products that are tailored to their specific financial needs and goals. These products can be designed to match their risk tolerance, investment horizon, and market views, offering a personalized investment approach.

?Capital Protection:

For affluent investors who are focused on wealth preservation, structured products with capital protection features are attractive. These products ensure that the principal is safeguarded, which can be particularly appealing during market volatility or economic downturns.

?Enhanced Yield Potential:

Affluent investors often seek better returns than those provided by traditional savings accounts or bonds. Structured products can offer enhanced yield opportunities by linking returns to various underlying assets, such as equities, commodities, or interest rates.

?Access to Diverse Asset Classes:

Structured products provide affluent investors with exposure to a wide range of asset classes and markets that they may not easily access through traditional investment vehicles. This diversification can help reduce risk and improve the overall risk-return profile of their portfolios.

?Wealth Generation:

Many structured products are designed to provide regular income, which can be an important feature for affluent investors looking for consistent cash flow, especially those approaching retirement or those who rely on their investments for supplemental income.

?Risk Management:

Structured products can be used as a tool for managing specific risks, such as interest rate risk, currency risk, or market volatility. For affluent investors, this capability is valuable in maintaining portfolio stability while pursuing growth opportunities.

?Lower Minimum Investment Requirements:

Compared to products designed for HNWIs, structured products within the affluent segment often have lower minimum investment thresholds, making them more accessible to a broader range of investors. This democratization allows affluent investors to benefit from sophisticated financial strategies without needing extremely high levels of capital.

?Tax Efficiency:

Structured products can be structured to provide tax advantages, such as capital gains treatment rather than income treatment, which can be beneficial for affluent investors seeking to optimize their after-tax returns.

?Advisory Services:

Financial institutions often provide educational resources and advisory services to help affluent investors understand the complexities of structured products. This support ensures that investors are well-informed and can make decisions that align with their financial goals.

?Flexibility:

Structured products can be designed with varying degrees of flexibility, allowing affluent investors to choose products with features that meet their specific needs, whether that be liquidity, investment duration, or exposure to certain markets or assets.

?Potential for Upside with Controlled Downside:

Affluent investors who are cautious about risk but still want to participate in market upside can benefit from structured products that offer a capped upside potential while limiting downside exposure.

Structured products in the affluent segment strike a balance between providing sophisticated financial tools and maintaining accessibility. They offer a means for affluent investors to achieve more tailored investment outcomes, manage risks, and enhance returns while still considering their financial comfort zone.