N&P pulls structured products after Keydata fiasco

Missing the point

If this article is accurately reporting N&P's position it is a highly bizarre one : given that Keydata's problems were and are nothing to do with structured products. That's a plain and simple fact. Keydata's product issues - and therefore N&P's product issues with Keydata - are and were Life Settlement investments NOT structured products. Life Settlement linked investments have nothing in common with structured products, even when the provider providing them is known to be a structured product provider. They are actively managed portfolios, with a manager apparently using their skill, perhaps with the help of an actuary, to select lifae assurance policies of people who they think will die on time. Unfortunately people are even less relinable than equities and they cannot always be relied upon to 'die on time'. Life Settlement linked investments therefore have more in common with actively managed equity funds, with stocks replaced by life assurance policies. There is no major investment banking counterparty, no bond issued in their name that legally requires payment of the income and/or growth throughout the investment term AND repayment of capital at maturity, unless the counterparty defaults (ie goes bust), no zero coupon bond, no options strategy, etc. There is no pre-defined levels of risk and return, through the terms of a bond. There is no similarity at all. In fact, all of Keydata's structured products have been proven to be absolutely fine, despite the companies demise for its Life Settlement problems. This stance, if accurately reported, therefore, indicates more about N&P's lack of understanding of the actual issues and facts than it does about structured products.

Posted by: Chris Taylor, Managaing Director, Incapital Europe

Known ?

Chris says Keydata a known product provider - not according to the FSA - they were not classed as providers. I say good for N&P they were taken in but have now seen the light easy money (by way of enhanced commissions paid) come from only one place their customers. They have decided that their customers are worth more to them long term. Perhaps it is because they are regional and word of mouth still counts?

Posted by: John whipple

focus on the facts and the lessons ...

John, You make two good points : but, again, both need to be in context and understood. 1. Whether or not Keydata was a provider according to the FSA is, again, nothing to do with N&P' apparent decision re sstructured products. You are presumably making reference to FSCS compensation coming down the line to land on advisers desks - and I understand advisers reaction to this : but the compensation claims are the result of Life Settlement linked investment problems not structured products. 2. You are right to draw attention to easy commissions, etc, and indeed the numbers being reported for the fees that Keydata and the controllers of Lifemark allegedly stood to make are deplorable. Even if their Life Settlement portfolio was to perform as it it should, such fees would not represent an equitable distribution of the gross i.r.r. But, this again, is a characteristic of Life Settlements, not structured products, where fees are finite, disclosed and - if you're dealing with a client-centric provider - at levels that make sense. There are plenty of lessons to be learnt from the demise of Keydata, and indeed other structured product providers, but the lesson is not to avoid structured products : which will not be regulatorily permissable.

Posted by: Chris Taylor, Managaing Director, Incapital Europe