Financial Planning

Structured Products are one of the more complex and less well-known types of investments but at NLP Financial Management we believe they can play a useful role within a broad investment strategy for our clients.  This article outlines how they work and some of the different products available.

In simple terms, a Structured Product is a pre-packaged finance product offering a given return, or coupon, over a specific period of time linked to the performance of a financial instrument, for example the FTSE 100 Index.  The main attractions of investing in structured products are that the potential annual returns can be quantifiable at the outset, albeit they are not guaranteed, and they provide useful diversification from other more traditional investments such as equities and fixed interest.  Although capital invested can be tied up for up to eight years, most plans offer the potential for early maturity on any investment anniversary, usually from the second year but sometimes after one year, subject to the performance of the underlying index.

There is a wide range of structured products available at any point in time, covering the full width of the risk spectrum, from lower risk products to high risk.   We carry out extensive research into the various structured products available to retail investors, and maintain a panel of approved products which can be offered to clients.

There are two types of product available; Structured Deposits and Structured Investments, and each product will target capital growth or income.  Structured Deposits are plans with a given rate of interest, which is payable subject to the performance of, for example, the FTSE 100 Index over the period of the plan, with each plan having specific conditions.  If the underlying index underperforms, investors may not receive any interest at all, but the capital invested is secure, while the products have the same protection of £85,000 under the Financial Services Compensation Scheme (FSCS), as with any other savings account.

Returns from Structured Investments usually depend on how a stock market index performs, and we only recommend plans linked to the FTSE 100 Index, rather than more than one index or individual stocks, which may offer higher returns but are higher risk.  We often favour more defensive plans, which can pay out even if the FTSE 100 Index falls, even by as much as 35% during the full term of the plan.  Some plans offer a “step-down”, whereby on each anniversary the measurement level of the FTSE 100 Index falls, so the plan can mature early even if the market has fallen since the start of the plan.  However, there is a risk that capital may be lost if the underlying index falls significantly, typically by more than 35% on maturity.

Another risk is that the provider purchases underlying financial instruments from one or more banks, known as counterparties, and if these institutions fail or become insolvent during the term of the investment, investors may lose their full investment as they are not covered under the FSCS.  Understanding the financial strength of counterparties is essential and a key part of our research process, and we will only invest in products where we are completely comfortable with the counterparty, or in some cases multiple counterparties, involved in that product.

In times when the FTSE 100 Index has fallen, investing in structured products arguably becomes more attractive, as the likelihood of loss of capital reduces, simply on historical levels of the Index.  Furthermore, the returns offered from structured products are often higher during periods of stock market volatility.  From a tax perspective, returns from growth plans are usually subject to Capital Gains Tax, providing the opportunity for investors to utilise their annual CGT exemption of £12,000.

In conclusion, due to the wide range of products available, their complexity and associated risks, we believe it is essential to obtain financial advice when investing in structured products.  Investing in a portfolio of carefully selected products, perhaps at different times to provide diversification between counterparties and a range of maturity dates and returns, can be an appropriate strategy to adopt alongside a broader investment portfolio.  Returns can be attractive relative to other investments, but it is essential to fully understand the risks involved, and due to their complex nature structured products are not suitable for all investors.

Elliot Gothold is a Consultant with NLP Financial Management Limited and can be contacted on 020 7472 5555 or at [email protected].

It’s become relatively standard practice over recent years, for medium to large companies to offer their employees access to a range of staff benefits that are over and above the traditional areas of private healthcare and life insurance.  Some even provide free food, holidays and unlimited flexi-time!*

A benefit that is growing in both popularity and need, is that of financial education, with the opportunity for employees to meet professional financial planners who can demystify what can be perceived as a complicated subject.  With 94% of UK workers experiencing money worries, 77% of these say their work is impacted and productivity is impaired, with protection, budgeting/planning and tax being among the highest concerns.**

There are various ways in which financial education can be implemented within businesses, from workshops and presentations on a range of financial topics, to one-to-one meetings; or as in the case recently, attending a benefits fair at Goldman Sachs, with whom NLP Financial Management has had a long-term business relationship.

Whilst events such as these usually cover a wide selection of wellbeing providers, employees can informally meet finance professionals and ask questions in a relaxed environment, with the option of continuing the discussions afterwards, should they wish to do so.

Crucially, these events help employees to start having conversations about aspects of their current or future finances that they may have pushed to one side.  It’s a common misconception that individuals need a large capital sum of money before speaking to a Financial planner, when in fact, a beneficial relationship can be started early on, that can help people effectively formulate their financial futures and put themselves in a far better position later on in life.

If you’d like to discuss the option of NLP Financial Management attending your workplace please contact us at [email protected]

*https://www.glassdoor.co.uk/blog/best-place-to-work-with-great-comp-and-benefits/

** https://www.closebrothersam.com/for-employers/news-and-insights/25-million-uk-employees-affected-by-money-worries-while-at-work/

Pictured – Ed Beaber (Business Development Consultant), Adam Katten (Managing Director) and Elliot Gothold (Chartered Financial Planner).

Please click the link below for our latest monthly figures for the five model portfolios.  The figures show the performance of our model portfolios versus various indices over the month of October.

October 2019 Panel Performance Figures

Click here for further information on the investment management service we offer, or contact one of our consultants.

We believe it’s crucial to keep supporting our staff in developing their careers and experience.  Not only does this benefit our clients, but also enables us to be an employer of choice, attracting and retaining talented individuals within a fast moving industry.

For this reason, we recently held an event in London for our para-planners across the NLP Financial Management group.  The day focussed on developing their existing knowledge of tax efficient investments including:

BPR: Business Property Relief – Investments that qualify for BPR can be passed on free from inheritance tax upon the death of the investor, provided the shares have been owned for at least two years at that time.

VCT: Venture Capital Trusts – after ISA and pensions allowances have been exhausted, VCT’s could be the next best option.  Adventurous investors get the chance to invest (up to £200,000 annually) in small firms to help them thrive, with the Government offering generous tax breaks in the process.   You get up to 30% income tax relief on the amounts invested (up to the total tax due), tax free capital gains, and tax free dividends.  However they are high-risk and longer term than more traditional investments.

EIS: The Enterprise Investment Scheme – run by the Government, this aims to help younger, higher risk businesses raise finance by offering risk-taking investors substantial tax relief; up to £1m worth of investments in companies per person that qualify.

The staff then received important updates on Compliance and HR from relevant experts, before heading out as a team for some rest and relaxation!

Due to the high risk nature of BPR, VCT and EIS products, financial advice should be sought before making an investment. Tax reliefs stated are subject to change and are dependent on individual circumstances.

We’re delighted to have received the news that NLP Financial Management has been featured in the Top 100 financial planning businesses in the UK.

The New Model Adviser Top 100 list is a prestigious accolade to obtain, especially as it takes into consideration financial planners the length and breadth of the country, from very small firms to companies much larger than ourselves.  We are also one of only 16 London financial organisations to be included, which in itself is highly significant, taking into account the number of financial planners who are based in the capital.

Our willingness to share our knowledge and expertise with external bodies and individuals was also noted, which is part of our company’s ethos.   In the same way, our drive to develop our people has helped us become both an employer of choice and a company respected and trusted by our clients, who refer to us on a consistent basis.

Recognition in this form is also an appreciation of the efforts and hard work by our staff, to ensure we are consistently delivering a personal service and putting our clients at the heart of everything we do.

Please click the link below for our latest monthly figures for the five model portfolios.  The figures show the performance of our model portfolios versus various indices over the month of September.

September 2019 Panel Performance Figures

Click here for further information on the investment management service we offer, or contact one of our consultants.

Please click the link below for our latest monthly figures for the five model portfolios.  The figures show the performance of our model portfolios versus various indices over the month of August.

August 2019 Panel Performance Figures

Click here for further information on the investment management service we offer, or contact one of our consultants.

Please click the link below for our latest monthly figures for the five model portfolios.  The figures show the performance of our model portfolios versus various indices over the month of July.

July 2019 Panel Performance Figures

Click here for further information on the investment management service we offer, or contact one of our consultants.