Another Sorry Saga
So, KeyData appears to be another casualty - albeit not directly of the recession, this time, but rather a direct victim of the regulatory system. No doubt readers will have their own ideas regarding what may have brought about the demise of this well-known structured investment provider - and we are grateful at 2020 Financial Services that very few of our Appointed Representatives have chosen to use their products.
Three factsheets are available for download, by clicking on the following links:
Why am I highlighting this particular issue - especially given that this is not a product-provider that many AR firms actually use? There are three points of relevance:
- IFAs that make themselves well-informed about the issues, may be able to extend well-balanced, proactive and reassuring advice to their clients - and also to non-clients. It may well be that this sorry saga does not epitomise the drawbacks to these kinds of products (instead it may speak volumes about the role of the Regulator), but it may be that intermediary firms can articulately promote their own investment proposition as a valid, and lower-risk alternative. The factsheets above may help you to construct an appropriate message, for aiming at existing clients and also at potential clients.
- This kind of crisis with a product-provider can happen, in practice, very suddenly. It was only at the end of last week, that KeyData sales representatives were endeavouring (unsuccessfully) to appeal to my cautious tastes with their new life-settlements fund. A similar phenomenon happened in relation to the Lehman Bro's structured products - Friday marketing, followed by Sunday insolvency. Whilst we cannot insure ourselves and our clients against everything that happens in the financial world, this does encourage the selection of simple, discrete products which are less likely to succumb to this kind of failure.
- And lastly, as a development of that third point, there is the lesson that there are, in fact, huge benefits in simplicity. There are other KeyData's out there. There remains, despite everything we've learned from this financial crisis, a settled and determined obsession with highly sophisticated investment products. And the lesson goes like this: the more complex they are, the more likely they are to unravel and dump all of us in misery. According to the insider accounts I've read, it's not just the clients and their advisers who don't fully understand structured products. Their designers don't understand them either.
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