Complex investment products shunned needlessly, says JP Morgan
The global financial crisis (GFC) has caused unnecessary concern around more complex investment products, leading investors to miss out on significant gains, according to JP Morgan.
The consequences of the GFC has increased investors' desire for simpler investments, said JP Morgan's executive director of equity derivatives and structured products, David Jones-Prichard. However, he feels there are a number of myths surrounding structured products, for example, that are incorrect.
"I would urge investors not to treat all less simple investment products in the same manner," he warned. "There are a number of more sophisticated investment products in the market that have been developed to meet specific investment needs, and then tried and tested to improve delivery of returns."
Jones-Prichard said structured products are created or 'structured' in such a way as to deliver on particular investment needs, which range from protection in volatile markets to income, growth, or a combination of all.
"There's a lot of misinformation surrounding this type of investment, including ideas that are outdated, don't apply to current products or are just plain wrong," Jones-Prichard said.
"There's also the broader misconception that all structured products are the same - which is no more the case than for any other investment type. No one would argue that all equities are the same or all property or all bonds are the same."
He said the quality of a product would depend on the soundness of its fundamentals, such as the bond protecting the investment and the potential for return on the underlying assets.
Jones-Prichard said there are a number of myths about structured products that are just not true, one of which is that they are always comprised of high risk assets "such as derivatives and futures, held together by questionable credit components such as non-guaranteed or hybrid bonds". He said the components of structured products could vary widely and have different levels of risk.
Recommended for you
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
Australian investors are more confident than their APAC peers in reaching their financial goals and are targeting annual gains of more than 10 per cent, according to Fidelity International.
Zenith Investment Partners has lost its head of portfolio solutions Steven Tang after 17 years with the firm, the latest in a series of senior exits from the research house.
