Advice needed urently please

EdGasket

Well it seems like a stupid criteria for investment. Someone has cleverly weighed up the probablilities of keeping your money for a few years and most likely paying you nothing for it while at the same time marketing it as an attractive 'investment'. Thieves by any other name.

BillJones

EdGasket wrote: »

Well it seems like a stupid criteria for investment. Someone has cleverly weighed up the probablilities of keeping your money for a few years and most likely paying you nothing for it while at the same time marketing it as an attractive 'investment'. Thieves by any other name.

Oh, for heaven's sakke, offering a product that is precisely as described is not theivery, and as clearly explained above, they are not keeping anyone's money for a few years. They will have taken about 90% of the principal and bought a five year zero, and something like 8-9% of the principal and bought some options on the basket. They'll have kept a couple of percent for their profit.

How could you possibly think that they keep the customer's money?

dunstonh

EdGasket wrote: »

Well it seems like a stupid criteria for investment. Someone has cleverly weighed up the probablilities of keeping your money for a few years and most likely paying you nothing for it while at the same time marketing it as an attractive 'investment'. Thieves by any other name.

In the UK, that sort of product would be considered specialist or aimed at the more sophisticated investor. It has its place as it is a way to make money in volatile markets whilst giving you some capital protection. As BillJones says, the mechanisms used to fund the protection and the terms would involve investment options that can see losses when there are gains. Capital protections do come with consequences. Frequently it is higher charging. However, sometimes there are caps and collars as well. A common one on UK products is where your capital was protected unless the FTSE fell by more than 50%. In which case you would suffer the loss. On those, if the FTSE fell 49% you would get back what you invested. If it fell 50% (so just 1% more) then you would only get back 50% of your investment. These triggers events are there because the cost of protection is so high and they cannot go beyond a certain amount and remain solvent.

The issue is not the product. It has nothing to do with thieving. The issue appears to be why someone that doesnt understand investments was sold a product that was not within their understanding.

BillJones

In the UK the rules and regulations round these products are extremely tight, in terms of how they can be marketed, sold, and described. It's actually quite annoying, as someone who worked for years creating, dealing, and hedging them, to hear ill-informed posters, with little understanding of them, describe them as thievery.

Many structured products are designed with extremely specific investment needs in mind, with customers often wanting severe downsides in the event of occurrences that they just don't think will happen. They believe that their view is right, and want to get the best payoff possible if that does turn out to be the case.

For a great many of them, we are taking advantage of the fact that out-of-the-money options trade like lottery tickets (i.e. for more than they are worth), and so in the long-term selling them is a good strategy. It lets retail investors get the pick-up that otherwise only institutional dealers would get.

Jegersmart

Well perhaps we could get back on track?

I would like to see what the baskets were in this case and what and when triggered.

J

gmgmgm

truth57 wrote: »

I think the key here is the fact that I was in no condition to sign the contract and did not even realize that the investment would be over such a lengthy period.

I think this is a rather important point.

I hope you achieve a satisfactory outcome, but ultimately this is a contract you (as a free adult) chose to agree to.

truth57

Here is an extract from the email I just received from Lloyds Bank in response to my request for an explanation of these 'Barrier Events':

"Hi David,
I appreciate your comments.
It's not embarrasing as such, especially as you have made it very clear all along that you were not at all dissatisfied with me in any way.

Every client in your situation where they have just come out of this deposit with Cpital only, will be getting a letter directly from our treasury department explaining in detail the mechanics of this deposit, the original Terms and Conditions, the start levels for each of the indicies as of 30/06/2010, and the point at which the breach occoured, so that everyone can see exactly where it fell down. This will explain explicitly what has happened for you. I understand this letter is ready for dispatch on Monday, so please bare with us and you should have that iminently.

You mentioned you had received a letter last year indicating that all of the indicies were significantly up - this would have come from the same treasury department and as of June last year (annual aniversary of your initial investment) was absolutely correct. Unfortunately though the US Index in particular continued to rise strongly which has caused the average level to breach that 42% barrier. All should become much clearer when you receive the explanatory letter from the treasury department."

BillJones

Again, what was the basket?

And edited to add, the section "Are OLEDs for me" on the Lloyds Key Facts document includes these pieces;

OLEDs cold be right for you if;

...you are prepared to risk no return
...you have some experience or knnowledge of investmet markets
...
You may prefer another of our many account options if
..You don't want to risk receiving a zero return above your original capital.

So they are quite clear what the risks are, and they do explicitly list the conditions. It's hard to see at the moment what there is to be angry about, but if you couuld fill in the gaps, then someone can tell you if and when the barrier was breached.

pawest

The basket was a mix of three indices. The FTSE, S+P and Stoxx 50.

pawest

If anyone else out there invested in that OLED got a letter from Lloyds describing how this barrier event occurred then I would be interested if you could post here.
The letter that was sent out said that the increase was more than 42%, and so gave no return (other than original investment), but there is a wrinkle, which means that some investors may have been given misleading information.