Structured product autocalls could be a key to helping advisers meet their Consumer Duty requirements and offer natural engagement points between advisers and clients, according to StructuredProductReview.
Autocalls, which are celebrating their 20th anniversary, offer predefined returns at predetermined dates, providing investors with market-linked investments that largely safeguard their original capital at maturity. While they can be highly tailored, retail autocalls typically offer straightforward and easy-to-understand outcomes, making them accessible to a wide range of investors.
Over the years, autocalls have primarily used the FTSE 100 index as their underlying asset and over 1,600 have matured to data. Of these, eight returned capital only while the rest generated gains. The average annualised returns has been 7.7% over an average duration of 2.2 years.
Ian Lowes, founder of StructuredProductReview, said: “Twenty years of historic performance shows that autocalls have largely delivered as a reliable solution for investors.
“For most advisers, the FCA’s impending Consumer Duty deadline is at the front of mind. Principle 12 states that ‘a firm must act to deliver good outcomes for retail investors’. Autocalls have been helping advisers do so for 20 years now and are a proven, successful solution for investors. They could be a key for firms to meet these requirements.
“Also, autocalls are structured to provide periodic touchpoints for conversation between an adviser and client. With regular dates for potential maturity, there’s a natural reason to engage and reach out to clients at regular intervals, more often than not to discuss positive outcomes.”
Autocalls can offer tax-efficient investment options, allowing individuals to hold them within accounts such as ISAs and SIPPs. For investors with £500,000 or more to invest in a single solution, customised autocalls can be created.
Lowes added: “The structured product and autocalls sector is continuously evolving and becoming easy to follow. Regulated and offering a high probability of positive outcomes, while providing contingent capital protection against all but the most extreme events, autocalls have earned their place as a valuable investment tool.”
To mark their 20th anniversary, StructuredProductReview.com has published a guide entitled ‘A Guide to Autocalls: A 20 year Evolution‘, aiming to demystify autocalls and dispel common misconceptions.
