Better regulation has not helped sales of structured products

The supervision of structured products has improved in recent years, but investors aren’t aware of many of the changes.

Activity in the retail structured products market has fallen despite improvements in regulatory oversight – a fact that suggests investors are unaware of how well they are protected, according to Jean-Marc Michelet, chief executive of asset management company Eurinvest Partners.

“It is especially bizarre that the activity has been going down while regulation has been improving a lot. We have better protection today than before. Maybe when the final investor understands that he is better protected today than before, we will see the reverse,” said Michelet, speaking at the Structured Products Europe conference in London.

Other speakers agreed, noting that many investors are unaware of the regulatory changes that are coming into force in the structured products space.

“In the UK, a lot of this regulation is simply alien to a lot of investors. Based on discussions we have with advisers, the end-clients are simply unaware of this regulation. They have never heard of the Markets in Financial Instruments Directive or Ucits or the Retail Distribution Review for that matter,” said Nicholas Sorensen, vice-president in the asset and wealth management group at Deutsche Bank. It is up to the industry to inform investors about the changes, he added.

Not everyone felt that the decline in activity was due to a lack of awareness among retail investors, however.

“If you look at it from the point of view of the compliance side of it or the distributor that tries to keep track of it, then it is highly confusing,” said Thomas Wulf, secretary-general of Eusipa, a trade body for the structured retail investment industry. “You would probably shy away from doing anything that could potentially infringe with any of those [regulations] that come up.”

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