IFAs plan to increase usage of structured products in 2009

Nearly three-quarters of IFAs expect their usage of structured products to increase in 2009, according to a Barclays Wealth survey of more than 240 advisers.

Seventy-three per cent of the 242 advisers polled in late February said they expected to increase the amount they use structured products this year, with more than a quarter - 27% - pledging to boost their usage 'substantially'.

Twenty-one per cent said they expected their usage to stay the same while just 6.5% expected it to decrease.

When asked which payoff styles they found the most attractive, nearly two-thirds (65%) of advisers ranked in first place products offering fixed returns with capital protection.

Another fifth (19%) put fixed return products as their second choice - 84% combined.

The next most popular investments (combining first and second choices) were products offering a geared return with a predefined maximum (45%) and products offering a set minimum return with the potential for an additional bonus (44%).

The survey also revealed that more than half of advisers believe investors are generally willing to take on more risk to achieve above-average rates of income, in an environment of falling interest rates and ongoing market uncertainty.

Fifty-two per cent of respondents said investors were willing to accept more risk to gain potentially higher returns, although only 2% of these said they were willing to accept 'significantly' more risk to do so.

Thirty-three per cent said investors were not prepared to take on more risk, while 15% said investors were more averse to risk than previously.

Commenting on the findings, Colin Dickie, a director at Barclays Wealth, said: "Sales of structured products have been very strong for many months now and that looks set to continue with the vast majority of advisers expecting to increase their usage of protected investments this year.

"Ongoing market uncertainty is clearly a key driver as advisers seek ways to improve clients' potential returns in a worsening environment for savers.

But it is also apparent that many investors have been shocked by the losses they have suffered in the past year or so and are keen to build some much-needed protection into their portfolios.

Products offering a fixed return are the clear favourite here and that has very much been our experience in the past eight months, with sales of our Defined Returns and Annual Kick-Out plans exceeding anything we have experienced before.

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