06/19/2014

Exceed Investments Survey Finds Additional Advisor Demand for Structured Investments Provided Inefficiencies Are Addressed

Note in this document, structured investments are synonymous with structured products.  Both refer to the class of products typically issued by banks to retail investors with such customized features as principal protection and leverage.

(New York, June 19, 2014) – In a survey of 700 financial advisors, Exceed Investments found that perceived and structural inefficiencies were holding back latent demand for structured investments with 20 percent of all respondents saying they would sell considerably more structured products if liquidity and transparency were improved.  Furthermore, 20 percent of RIAs said they would like to sell structured products to at least some of their clients but don’t have access to the product.

The survey also explored motivations driving the usage of structured products, finding that 80 percent of respondents cited protection against index declines as the most compelling structured feature.  Along similar lines, 60 percent of active structured product users identified the ability to customize risk/reward tradeoffs as the main driver of their usage.

Exceed Investments is a New York-based financial services firm developing next-generation structured investments.  The firm commissioned a third party to conduct studies on structured investment perceptions in both 2013 and 2014, culminating in the proprietary 2014 Exceed Structured Investments Report. The goal of the research was to identify overall advisor views on and usage of structured products, with an eye towards identifying which steps the industry can take to increase utilization and acceptance.

“The power of defined outcomes, particularly around the ability to control the degree of downside exposure, has driven some acceptance of structured investments among advisors,” said Lawrence Solomon, CFO of Exceed.  “However, product popularity is limited by several perceived weaknesses and inefficiencies.  Despite their virtues, structured products are ‘frequently sold’ by only 5 percent of respondents compared with 36 percent for ETFs.”

Complexity and illiquidity were cited as the main reasons advisors do not offer structured products to their clients.  In addition, a further obstacle was limited access within certain channels. While essentially 100 percent of wirehouse advisors reported having access, only 42 percent of RIAs reported the same.

“Exceed was built on the belief that structured investments do not have to be complex, illiquid, or restricted to only certain investors,” said Joseph Halpern, CEO of Exceed.  “The industry has great potential to drive growth simply by addressing current product inefficiencies.”

The research indicates that solving the perceived issues should lead to a spike in utilization, as20 percent of advisors would sell “considerably more structured products” if they saw improvements in liquidity and transparency.  Another important potential source of new assets would be increased access.   Of the 58 percent of RIAs without access to structured products, more than a third indicated that they would proactively offer structured products today to at least some of their clients if they had access.

 

ABOUT Exceed Investments

Exceed Investments is a New York-based boutique financial services firm focused on developing next-generation structured investments.  Our mission is to provide structured investing opportunities that push the boundaries of efficiency, liquidity, and transparency.  Exceed Investments is launching a family of structured indexes and ETFs in late 2014.

 

Select survey results follow; please note full wording of answer choices has been truncated for space.

Survey P1Survey P2Survey P3Survey P4Survey P5Survey P6Survey P7Survey P8

Research methodology

  • Research leadership – WealthManagement.com, a Penton Media company
  • Participants – 707 completed advisor surveys
  • Participant selection – Members of the Wealthmanagement.com database; random selection
  • Motivation – Participation led to eligibility in a lottery for several American Express gift cards