Six reasons to use an adviser for a structured deposit | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 22/04/2020

A structured deposit is a fixed term investment that pays a return based on the performance of a stock market index, for example the FTSE 100. Structured deposits are deposits and as such are capital protected. Find out more in our guide about how structured deposits work.

Why should you use an adviser when considering a structured deposit?

Here are six reasons why you should consult with an adviser when comparing structured deposit products.

1. To explain how structured deposits work

There are a range of different types of structured deposits, all of which have different terms and conditions. Some structured deposits require the stock market to grow to deliver a return, while others may allow for a small decline.

2. To explain the jargon

Structured deposits come with their own language and terms. When you read about structured deposits, you’ll see terms such as ‘kick out’, ‘index level’, ‘averaging’, ‘capital return’ and ‘FSCS protection’. You can consider your financial adviser as a translator, someone who can explain what these terms mean in straightforward plain English.

3. To set out the risks and rewards

Structured deposits offer appealing headline rates, usually in excess of the cash savings market (savings accounts such as fixed rate bonds for example), but they come with the increased risk. Both structured deposits and traditional cash products protect your initial deposit. However, while a traditional cash savings product will pay you a guaranteed interest rate, a structured deposit will only pay you interest if the underlying index (usually the FTSE 100 index) performs in a certain way.
Some structured deposits offer a lower interest rate that is more likely to be achieved (for example, even if the FTSE 100 has fallen by a certain amount), while others offer a higher interest rate that’s less likely to be achieved (for example, only if the FTSE 100 has risen).

Savers should be careful to not confuse structured deposits with structured investments, as the latter caries more risk as your capital may not be protected.
An adviser can explain the benefits and drawbacks of these products and help you to establish which is right for you, given your appetite for risk.

4. To review structured deposits and their role in your savings portfolio

Savers considering investing in structured deposits are usually more sophisticated and are likely to already have fixed term deposits, ISA investments and a pension fund.
A structured deposit needs careful evaluation, even for an experienced saver. For example, structured deposit products can range in term from three to eight years. This is a significant duration, and savers need to be sure they can tie their funds up for this period of time and accept the risk that the structured deposit may not pay any interest at all.

5. To help you manage your tax-free allowances and tax on savings interest

Structured deposits can often be used as part of your £20,000 ISA allowance. Your financial adviser can also guide you on matters such as your Personal Allowance for savings interest – this is a set amount of interest that you can earn across all your investments, including structured deposits, without paying tax on these. Our guide, How are my savings taxed, has further information.

6. You are protected if the advice proves to be poor

If you use a Financial Conduct Authority (FCA)-registered financial adviser, then you are protected if their advice is later proven to be incorrect or inappropriate. This may mean you can escalate any complaint to the Financial Ombudsman Service and may be able to claim compensation from the adviser if they are at fault.

What are the alternatives to receiving financial advice about structured deposits?

You usually cannot invest in a structured deposit directly with the provider and need to use an intermediary such as a financial adviser or an online broker. These online brokers offer structured deposits on an execution-only basis. This means that you choose to make the investment and are therefore wholly responsible for that choice. You will also not receive any help or advice in selecting the right structured deposit for you and your circumstances.
If you have invested in structured deposits before, then you may be more comfortable using an online broker.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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