SPA Conference: For advisers selling structured products, expertise takes time, practice

By Emma Trincal

New York, March 8 - Advisers who have expertise in selling structured products shared their experience during the "Advisor & Fiduciaries" panel at the 8th annual conference of the Structured Products Association. For most advisers, getting comfortable with those products did not happen overnight; it was a learning curve and it continues to be one.

Eric Greschner, portfolio manager at Regatta Research & Money Management, said that he uses 20% of his portfolio in structured products.

"Our use of structured products has evolved. We're using them now to handle a lot of problems that we didn't know structured products could handle. For instance, we use them for optimal asset allocation in rainbow structures," Greschner said.

Kelly Campbell, financial adviser at Campbell Wealth Management and author of Fire Your Broker, said that he started using structured products last year. "There was a need for something different in the market. Some portfolios are extremely aggressive on one side and conservative on the other. We found structured products could help," he noted.

"We got into structured products because, first, we were doing a lot of derivatives - simple strategies, like covered calls," said John Farrall, director of derivatives strategies at PNC Wealth Management, a structured products user since 2006.

"You try to modify the risk return profile. Derivatives can do that. But structured products in particular do a pretty good job at that."

Farrall further said that he also uses structured products to gain access to particular asset classes.

"We've been using structured products as a vehicle to get into commodity-like or currency-like or alternative investment strategies that many high net worth clients are interested in," he said.

Panelists agreed that getting started in structured products was not easy.

"The most important is to have a relationship with someone who understands the product," said Campbell.

"We looked at structured products three years ago, and we didn't do anything with them because they were difficult to understand and difficult to explain. We just didn't know enough about it."

Long-term benefits

Once adopted in a portfolio, structured products can be a useful investment tool, the advisers said.

"We like structured products for the ability they offer to craft your own risk-reward profile. They are also a conceivable competitive edge," said Greschner.

"There are a lot of open doors for me as very few clients use structured products," said Campbell.

Farrall added that structured products can offer specific answers to some investment problems.

"How do I get better yield without taking a huge credit risk like in junk bonds? What do I do when interest rates start to rise and inflations starts to come back? We can do a yield steepener, for example. Structured notes are not going to create world peace and they are not for every client. But for some particular problems, they represent innovative solutions that can be used intelligently," he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.