ALL OF OUR STRUCTURED PRODUCT PLANS ARE DESIGNED FOR PROFESSIONALLY ADVISED INVESTORS, WHO ARE CLIENTS OF AUTHORISED AND REGULATED INVESTMENT FIRMS, WHO ARE INVESTING AS PART OF A BALANCED AND DIVERSIFIED PORTFOLIO
IMPORTANT INFORMATION REGARDING THE RISKS OF OUR STRUCTURED PRODUCT PLANS
As with all forms of investment, there are risks involved with structured products, including those on our website.
It should always be understood that structured products are not suitable for everyone.
In addition to understanding the USPs of structured products, professional advisers also need to understand their risks and limitations:
- structured products present counterparty risk, which needs to be understood and accepted: the potential returns of a structured product and the repayment of money invested in a structured product usually depend on the financial stability of the issuer and counterparty throughout the investment term
- the level of return a structured product generates may be capped and / or less than the level of return generated by direct investment in the stock market or via active or passive funds
- the terms of structured products can predefine what can be expected at maturity and at certain other dates, such as potential ‘kick-out’ and early maturity dates: but these terms do not apply during the investment term
- the value of structured products during the investment term may be affected by various factors: while accessing an investment is usually possible, during normal market conditions, this is not guaranteed
- past performance is not a reliable indicator of or guide to future performance and should not be relied upon, particularly in isolation: the value of investments and the income from them can go down as well as up
- capital is at risk and investors could lose some or all of their capital
Professional Advisers should access and read the relevant plan documents relating to any structured product plan of interest, in particular: the plan brochure; ‘if / then…’ summary; plan application pack, including, the terms and conditions of the plan; and the issuer’s securities prospectus, final terms sheet and key information document (‘KID’), before making a recommendation to investors. Copies of the relevant plan documents may be requested from us.
It is important that investors read and understand the plan documents explaining the features and risks of any plan and agree to the terms and conditions before investing. If there is any feature, risk or term that investors do not understand or do not agree to, they should discuss this with their Professional Adviser before investing in any plan.
Professional Advisers should not invest in, or advise their clients to invest in, our structured product plans unless they and their investors understand them, in particular the relevant risks. Our structured product plans should only be considered by professionally advised investors who understand and accept the risks of losing some or all of any money invested.
Applications to invest in our structured product plans will not be accepted if an authorised and regulated investment firm has not assessed suitability for the investor’s personal circumstances.
THE KEY RISKS OF OUR STRUCTURED PRODUCT PLANS
All investments carry risk. It is identifying those risks, understanding how they may affect an investment and assessing whether an investment is suitable for an investor’s individual circumstances that is important. The key risks of our structured product plans are explained below:
- Issuer / Counterparty bank(s) risk: The potential returns of our structured product plans and the repayment of money invested usually depend on the issuer / counterparty bank(s) not becoming insolvent, or similar, or failing to meet their obligations (for example, not making any payments due to investors). If the issuer / counterparty bank(s) becomes insolvent, through bankruptcy, or similar, or fails to be able to meet its obligations, it is likely that investors will receive back significantly less than they invested. In the worst-case scenario of an issuer / counterparty bank(s) failure and a zero subsequent recovery rate for creditors, total loss of capital is possible.
- Market risk: The potential returns of our structured product plans,, and the repayment of money invested also usually depend on the level of a stock market index (or indexes) that the plan is linked to. If the level of the stock market index is below the level required to generate returns, for certain plans, there will be no return. In addition, if the stock market index closes below the defined barrier level of any protection provided by the plan at the end date, investors will receive back less than they invested, with the money invested usually reduced on a 1% for 1% basis, in line with the fall in the market index. For example, a 45% fall would result in a 45% loss and a 65% fall would result in a 65% loss.
- Operational risk: A third key risk for investors in structured product plans is the risk of the plan manager and / or their administration and custody arrangements failing. This can cause financial losses for investors and lack of support and service for both Professional Advisers and investors.
- Financial Services Compensation Scheme protection: It is important to understand that in the event of issuer / counterparty bank(s) insolvency / failure to meet their obligations, or if the stock market index falls, investors in structured product plans will not normally have recourse, on the basis of these reasons alone, to the Financial Services Compensation Scheme (‘FSCS’).
OTHER RISKS OF OUR STRUCTURED PRODUCT PLANS
As well as the key risks of our structured product plans Professional Advisers and investors should also be aware of and consider the following points and risks:
- It is possible that no returns will be generated: Depending on the features of specific structured product plans, certain plans may not generate a return if the stock market index they are linked to is below the level needed for returns to be generated.
- Higher returns may be achievable via other investments: Depending on the features of specific structured product plans, certain plans may offer fixed returns or defined participation in stock market performance. It is possible that the stock market index and / or other types of investment will increase in value more than the level of fixed return or participation rate offered by the structured product plan.
- Dividends are usually excluded in the calculation of indexes (known as price return indexes) or may be accounted for differently by index providers: Dividends which companies may pay are not guaranteed, however they can be an important part of the total return that investors in the stock market or mutual funds investing in these companies may benefit from. Dividends may increase stock market returns in a rising market and provide some return in a falling market, which can offset some capital losses. Dividends are usually excluded in the calculation of price return indexes, such as the FTSE 100. Some indexes use alternative methodology to the price return to account for dividends, such as including dividends paid by companies in an index but applying a fixed dividend deduction to the calculation of the index level. The returns from a structured product plan linked to such an index will be different and might be higher or lower than the return that might be received from an investment in a similar product linked to the price return index, with dividends excluded.
- The stock market index which a structured product plan is linked to may suffer disruption or discontinuation: In exceptional circumstances, the calculation and publication of the stock market index which a structured product plan is linked to could be delayed, disrupted or even discontinued. If this happens, the issuer will usually decide how to work out the performance of the securities that they have issued that the plan is based upon and make other arrangements, if necessary and possible. There is a risk that this may delay or affect the value of any affected structured product plans and any payments due.
- Cancellation instructions: If the Plan Administrator receives a cancellation notice, they will cancel an application for a plan. However, costs will have been incurred in designing and arranging the plan, including arranging the investments that make up the plan. Investors may also have agreed to pay an adviser fee to their Professional Adviser. If an investor decides to cancel an application and their cancellation notice is received before the start date, these costs may reduce the amount of money which will be repaid. If an investor’s cancellation notice is received after the start date, they will receive the market value of the plan on the date that the Plan Administrator completes their cancellation instruction. This may be less than you invested if the value of the plan has fallen.
- Withdrawals from and / or cashing in structured product plans during the investment term may result in losses: Partial withdrawals from or cashing in an investment in our structured product plans are possible during the investment term. However, if an investor wants to make a partial withdrawal or cash in their investment in a plan before the end date, they may get back less than they invested, as repaying the money invested in full may depend upon the specific features of the plan and / or only apply at the end date, as described in the plan documents. The value of a structured product plan during the investment term depends on a number of factors, including the level of the stock market index which the plan is linked to, the dividends paid by companies included in the index and interest rates.
- Withdrawals from and / or cashing in our structured product plans is not guaranteed: While withdrawals from and cashing in investments in our structured product plans is possible during the investment term, this is not guaranteed. Exceptional circumstances may prevent it being possible. These circumstances include, but are not limited to, significant events related to the stock market the plan is linked to, or if the plan administrator cannot arrange the withdrawal or cashing in with the issuer. For these reasons, while access to money invested in our plans is expected to be possible during the investment term, and it may not necessarily result in a loss, investors should be prepared and able to stay invested in our plans until the end date.
- Tax law can change: Tax law could change during the investment term of a structured product plan. As a result, the tax treatment of any investment in a plan could also change at any time.
- Inflation may reduce the value of money invested and any returns: Inflation may reduce the value of any money invested in a structured product plan and any returns paid to investors in the future.
- Past performance cannot be relied upon as a guide to future performance. Past performance is not a reliable indicator of or guide to future performance and should not be relied upon, particularly in isolation. Any references to past performance of the stock market a plan links to provide no guide to future performance.
- The value of our structured product plans can go down as well as up: Investors in our plans may get back less than their initial investment.
ALL OF OUR STRUCTURED PRODUCT PLANS HAVE CAREFULLY IDENTIFIED TARGET MARKETS:
THERE ARE REGULATORY RESPONSIBILITIES UPON PROFESSIONAL ADVISERS TO UNDERSTAND THE IDENTIFIED TARGET MARKETS AND TO ENSURE THAT END-INVESTORS ARE WITHIN THE TARGET MARKETS
Professional Advisers should be aware of their regulatory responsibilities to understand the identified target markets for our plans and take appropriate steps to ensure that end-investors are within the target market, with specific attention paid to:
- the type of investors to whom the product is targeted;
- the knowledge and experience of investors;
- the financial situation of investors, with a focus on their ability to bear losses;
- the risk tolerance and compatibility of the risk / reward profile of any plan with the target market; and
- the investor’s objectives and needs.
The plan documentation for all of our structured product plans clearly details the specific identified target market for each plan.
PROFESSIONAL ADVISER INFORMATION PACKS (‘PAIPs’)
We provide Professional Adviser Information Packs (‘PAIPs’ / ‘EMTs’) for each of our plans / options.
Our PAIPs are designed to: explain how we meet our manufacturer product governance responsibilities under PROD (particularly PROD 3.2.16), providing distributors with specific information; help professional advisers meet their distribution governance responsibilities under PROD.
PRODUCT PROPOSAL PACKS (‘PPPs’)
We provide Product Proposal Packs (‘PPPs’) for each of our plans / options.
Our PPPs are made available to professional advisers in order to: provide transparency with regard to our internal product governance behind our products; support professional advisers in their product research and due diligence; providing context to help explain why we consider certain elements in our product governance process in order to: 1) meet our manufacturer product governance responsibilities under PROD; and 2) help professional advisers meet their distributor product governance responsibilities under PROD.
RESOURCES AND SUPPORT FOR PROFESSIONAL ADVISERS WHO USE OUR STRUCTURED PRODUCT PLANS
We provide various resources to support Professional Advisers using our structured product plans, including access to ‘TICS’ the Tempo Issuer and Counterparty Scorecards, our CPD Professional Adviser Academy and recorded and live video webinars.
‘TICS’ : THE TEMPO ISSUER AND COUNTERPARTY SCORECARDS
Issuer and counterparty bank risk is the most fundamental risk of A structured product. So, we think it’s straightforward – and important – to state the obvious: Professional Advisers (and investors) should seek to identify structured products which are backed by strong issuers and counterparties – in fact this is a regulatory requirement for Professional Advisers. We also think that structured product plan managers should prompt Professional Advisers to carefully consider this critical aspect of structured products and support them in their research and due diligence.
We therefore publish ‘TICS’ (the Tempo Issuer and Counterparty Scorecards), to provide transparency with regard to our internal processes and to support Professional Advisers in their research and due diligence of issuer and counterparty financial strength.
It is important that Professional Advisers take the time to look at the background information that introduces TICS, explains how to use TICS and details what TICS is – and what TICS is not.
OUR CPD-ACCREDITED PROFESSIONAL ADVISER ACADEMY
As part of our aim to provide exceptional support for Professional Advisers using our structured product plans, our Academy offers an educational resource for advisers and support staff wanting to know more about structured products.
We are also happy to discuss and provide tailored educational input and training to firms / individual advisers, to meet specific interests and requirements.
OUR CPD_ACCREDITED LIVE AND RECORDED VIDEO WEBINARS
We provide CPD-accredited live and recorded video webinars for Professional Advisers, focusing on important areas of education and working knowledge of structured products.
We place emphasis on our video webinars being educational and contextual, thinking about the investment environment, portfolio construction and diversification considerations and the interests and needs of professional advisers and their clients.
CHAMPIONING THE USE OF PLAIN ENGLISH
We are proud to be the first structured product firm to become a corporate member of Plain English Campaign. While important product points, including features and risks, sometimes require technical sounding explanations we have worked hard to ‘de-jargon’ our product literature (and to make sure our lawyers didn’t re-jargon it)!
We have also tried to use good design principles, including clear page layouts, ‘stand-out circles’ and ‘info points’, to make our plan documentation engaging and easy to read and understand.
NOTHING ON OUR WEBSITE CONSTITUTES INVESTMENT OR ANY OTHER FORM OF ADVICE
No investment, legal, tax recommendation or advice of any type and no suggestion of suitability of any investment for any prospective investor is given or implied in our website.
The information in our website does not take account of the investment objectives, particular needs or financial situation of any client or potential client of any Professional Adviser.
Nothing in our structured product plan brochures or plan application packs provides investment, tax, legal or any other form of advice.
Tempo Structured Products does not provide advice on any structured plan or suitability for any client or potential client of any Professional Adviser.