New - Investec FTSE 100 Enhanced Kick-Out Plan 31

dunstonh

re advice from an FA, does this afford the client some protection?

Yes. Advice gives you consumer protection if the advice was wrong. It doesn't guarantee you against losses but lets say the adviser fails in their due dillegence and research on these then they could have to pay you out.

For example, a number of structured products from one of the biggest distributors failed a few years ago and if you bought them via an adviser then you almost certainly would have got paid your money back. Whereas if you had bought execution only then you would not.

These products have the potential of total loss with no FSCS protection on them. if you seek advice, the advice gives you protection. Not the product. If the adviser does good due diligence and research and points out the risks and you still choose to proceed and then the product fails, that does not mean you will get a refund. If you were fully aware of the risks and the justifications were fine then that is just tough luck. That can happen with investing sometimes. If you were not made aware of the risks or due diligence failed then you would expect compensation.

A general rule of thumb advisers use is no more than 25% of your portfolio should be in structured products and no more than 10% with any one market counterparty.

As I have said earlier, the product you are looking at fails our due diligence and I would not recommend it to a client. You can take that with a pinch of salt because you don't know if our due diligence is more cautious than you would like (although it allowed us to avoid Arch Cru, Keydata and a few others that went on to fail). What matters is whether your own understanding of the risks and your capacity to afford the potential losses is good enough.

Under no circumstances should you just be looking at the terms of the product. The riskier ones in general have the best terms.

josholi99

Your comments make sense and kinda reinforce my initial suspicions in the old adage 'if it looks too good to be true then be very careful as there are no free rides!
The returns are good but any decisions need to be matched against the risk both re terms and cons and the company offering the product.
I've got to admit to being wary of FAs and charges, but the other side of this, in my experience, is if you develop a good relationship then there are many wider benefits for both parties.
The reality is for investors like me, is whilst I'm hungry for knowledge and info, theres a limit both in time and resource as to what can be acheived and a danger of becoming jack of all trades and master of none which could be costly!

dunstonh

I've got to admit to being wary of FAs and charges, but the other side of this, in my experience, is if you develop a good relationship then there are many wider benefits for both parties.

You need to be wary of FAs. They should be avoided as they are limited in scope, often in knowledge and are often employed on a sales basis with targets and pressures from above. There is typically no reason to ever use an FA. IFAs though are different from FAs. That doesnt mean you need to use one. At the end of the day, the choice comes down to DIY or IFA. All other options are typically eliminated (including FA).