Although research for the UK’s Department for Work and Pensions says guaranteed products cost too much to be a rational investment for pension savers, independent financial advisers seem to have a different take on things.
More than 90 per cent of IFAs recommend structured products to their clients, according to a survey conducted by Structured Products magazine. Even allowing for the likely bias as IFAs try to be polite to the questioner, that’s a swingeing majority in favour of a product with a distinctly opaque cost structure.
A large part of the cost to investors of guaranteed equity products (the main form mentioned in the survey) is dividends, which the product provider gets to hold onto. The DWP’s research estimates this cost amounts to between 15 and 20 per cent of the amount invested – are IFAs telling their customers that, or are they even aware of it?