Barclays will continue to develop its range of unbundled structured investments and educate independent financial advisers (IFAs) about how they work now that the Retail Distribution Review (RDR) has come into effect, according to Richard Henry (pictured), structured products director at Barclays, who told SRP about the plans for the bank for 2013.

"During 2012, the focus was on consolidating our position in the platform arena by increasing our presence on those platforms carrying structured products," he said. "At a product level we have been working on developing our range of unbundled investments."

How does the 'unbundled range' work?
"Depending on the type of client, they will have a different 'fee experience' - it depends whether they invest on, or off platform" said Henry.

"If you put a supertracker into a SIPP [self-invested personal pension], you probably pay your SIPP provider on a monthly basis or an annual basis so, given that you have paid for administration once, there's a risk of paying for administration twice if you use a plan and pay for plan manager fees too," he suggested.

Henry said that the key element of the new approach is that "we can get rid of an extra layer of fees in some cases and that has been well received by the market. Of course, doing this can give a higher potential return."

Transparency
"Breaking down the charges does aid transparency", said Henry. "It's also a way to counter the criticism that the charging structure of structured products is opaque..." which, according to Henry, is particularly useful for fee-based advisers.

"We put a lot of time and effort into making sure brochures are clear and not misleading and we feel granularity on charges helps this" he said.

Adviser responses
Investment advisers, said Henry, will get additional benefits depending on the investment platform they are plugged into such as daily liquidity, daily valuations and monthly snapshots, "and they can invest right up until the strike date."

"Some intermediaries have said that they are going to switch completely," he said. "They want to use the unbundled route because it just suits them better. They can put it in their model portfolios, they can see valuations, it's easier for them to buy, and they like not having the two-week delay between investment and the strike date."

Post-RDR
According to Henry, the arrival of the RDR is an exciting time for the structured products market. "You don't see many game changers like RDR in your career and it's exciting to be part of it," he said. "But there are still unknowns and uncertainty."

Henry believes that the RDR is right to focus on the people at the foundation of the pyramid, "and we hope after the industry's efforts that the end client will get a better investment experience," he said. "It's important that we deliver on that - ultimately we have to wait until later this year to form a complete view."

Short-term challenges
The current pricing environment makes it difficult to offer fully protected products, said Henry, "but if you have clean pricing (as we have through our unbundled range) it becomes a bit easier, although you still have to weigh any fees coming on top of that," he said.

Capital-at-risk structures are also challenging at the moment, added Henry, as bank funding spreads are lower now than they were in July and August of last year.

The general feeling is that providers will continue to leverage their credit strength if they have a chance to gain business. "You'd have to say that capital ratios and the overall health of a firm are as important as ever," he said. "... and that is before even you talk about products."

"Then you have to take into account the delivery mechanism and the service provided once the product has been placed," he said. "It is a three-pronged approach - counterparty risk, product proposition and after-sales service."

Going forward
According to Henry, offering a holistic approach could confer an advantage going forward.

"We expect to continue growing in the structured products market as more people look to transact" he said. "If anything, we have fewer products on the shelf than we had earlier in the year, but volumes haven't changed significantly."

The bank's output in terms of product, said Henry, has been consistent since May and June of last year year and the structured products team had only a few difficult decisions to make: "We did stop issuing our regular income bond because after conducting value testing, we thought it appropriate to do so," he said.

Despite the RDR being the focus of the market, Henry said that there are other issues to be addressed including developments around platforms.

"This has been slower than we expected - not all platforms offer a full suite of structures yet," he said. "It's hard to pinpoint one reason; perhaps platforms aren't fully ready from a technology perspective, perhaps intermediaries have taken longer to sign up, perhaps providers have been slow to develop products which work well on platforms - in any event, there are developments to come soon."