RBS UK Growth Early Kick-Out Plan

petemcdermott

Hi

Has anyone any information on this plan which seems to offer 9% return!

Is it too good to be true?

purch

http://ukmarkets.rbs.com/EN/MediaLibrary/Document/PDF/IFA/Launch_2/Brochures/UK_Growth_KickOut_Plan_Brochure.pdf

Most things that are too good to be true, are exactly that :eek:

Cautious_Investor_3

Hi

Structured products are a little like marmite, however I personally think they have their place and I have certainly been happy with how they have performed.

There are a few important factors to take into account before you invest, for example:

1. The coupon, is it attractive and worth the risk you will take?

2. What is the downside? In this case there is a 50% floor, you need to take your own view on the likihood of this

3. Counterparty, in this case it is RBS, which is largly state owned but may not be at maturity

In my humble opinion, having recently carried our some research into kick out plans such as this I believe this is not a bad example. Do your own research though and don't take my word for it!

The Cautious Investor

pqrdef

If you want to gamble, what's wrong with spread betting or the bookies?

cepheus

This sounds exactly like the Premier asset one (PLE37) I'm in, except it offers 16% per annum for 6 years rather than 10% for 5 years.

If so it appears to be poor value

Jonbvn

There are some other products offering even better returns.

http://www.fairinvestment.co.uk/structured_investment_products.aspx

Investec are offering 11.25% - note the T&C's very carefully!

dunstonh

You can actually best 9% at the moment with a decent counterparty risk.

Investec are offering 11.25% - note the T&C's very carefully!

That one fails our advice criteria. However, those doing DIY don't have to worry about things like that as they don't have to worry about failures and troubles coming back to bite you on the backside.

Cautious_Investor_3

Jonbvn wrote: »

There are some other products offering even better returns.

http://www.fairinvestment.co.uk/structured_investment_products.aspx

Investec are offering 11.25% - note the T&C's very carefully!

The reason the Investec one offers a higher coupon is the fact that they are the counterparty and have a lower credit rating than RBS.

If you talk to Investec they will explain why they have a lower rating, but nevertheless they are deemed by the ratings houses to carry a greater risk of default therefore a higher coupon is offerd.

Simple risk v reward.

The Cautious Investor

Loughton_Monkey

Personally I would never touch such a 'structured product'.

Unlike investing your money, it's a bit like leaving a briefcase full of cash on a train and then betting me £1,000 that you will get get it back!

In other words, yes you might get it back, because there are lots of honest people around. And if you do, then I will have to pay you the £1,000 on top [provided I'm still solvent - a risk you are taking with a structured product].

A pure 'equity' risk, on the other hand, seldom puts your entire capital at risk and at least you can choose the timing over which you might allow it longer to perform, or withdraw it earlier if you fear a crash. But at least the 'upside' is variable. In a structured product, your upside is limited, even if the FTSE were to grow phenomenally (e.g. through hyper-inflation) by 30% a year over the period.

This is one of the worst I have seen. The 'best' [of a tremendously bad bunch] are those that offer some possible growth, but if X,Y or Z doesn't happen, then you get your money back with no interest. These were effectively 'bonds' guaranteed to pay back the capital in, say, 5 years, with the balance (less an embarrassingly large commission and expenses) 'bet' on some exotic mix of hedge funds, derivatives, and other instruments that could perform and deliver a profit - but could also fail and 'die' [Exactly like betting on 'Lucky Lady' on the nose in the 3:30].

Banks have since discovered that huge commission/expenses on only (say) 30% of your capital is not enough, and so they went to other varieties that only guarantee 50% of your capital back, leaving around 60% or more of your lump sum to be lovingly raped of huge commissions all round before being committed to hedge funds and other complex derivatives.

In this particular case, you are not even guaranteed 50% back!

They say never invest in something you do not understand. Well although many of us know the principles of how these things work, we are banned from knowing the details, since (most surprisingly in today's regulatory climate) banks do not have to (and very specifically keep it a secret) disclose the actual investement that lies behind your structured product. They only need to tell you the 'front end' of how the investment rules work from your point of view. The exact nature of the Call options, warrants, hedge funds, futures, and other derivatives that your money is spent on does not have to be disclosed. Nor (and here I am guessing) does the ongoing commission two or three levels further down the financial food chain in all these parcelled-up derivatives. [A bit like the old Lloyds underwriting scam in which basic insurance risks, on which 20% commission had been deducted from the premium were parcelled up as 'Reinsurance' about 5 or 6 times at different levels, meaning that your £80 'Risk Premium' ended up being worth about £32 by the time it got to the poor s0d who had to pay the claims].

jamesd

It's easy enough to use a range of different products to diversify, just as you would with other investments. That's where the higher risk products like the Investec one can come into play because even at higher risk than some they are still adding diversification and can reduce overall risk. Kick out plans can be quite good deals but it's also worth looking at other options like corporate bonds.

I'm more keen on holding the FTSE itself than a kick-out plan at the moment, though. Perhaps combined with some corporate bonds and term deposits to provide a capital guarantee (ignoring inflation).

Cautious_Investor_3

Each to their own Loughton but I know many very smart investors and also institutional investors running large pension funds who like structured products, not the retail rubbish the high street banks offer through their branches but the more bespoke products.

I saw one recently with the upside linked to emerging markets and the downside linked to the FTSE, that, for example, was extremely interesting.

They have their place in some people's portfolios but I'd disagree with your assessment that the RBS plan discussed here is amongst the worst you have seen.

Each to their own though!

The Cautious Investor