Vontobel has announced that starting this month it will disclose the issuer margin and distribution fees of its own structured products.

As of October 1, Vontobel will therefore not only be transparently stating distribution fees – as called for by the Swiss Structured Products Association and the Swiss Bankers Association – it will also be disclosing its own expected issuer margin. Both these figures are contained in the Total Expense Ratio (TER).

Roger Studer, head of Vontobel Investment Banking said that the move is aimed at enabling the bank to create further trust among investors. “It will make it possible to view the potential performance of a product in the context of its costs,” he said. “This is not only transparent, it is also fair, and should give investors additional guidance to help them in reaching their investment decisions.”

The fee figure disclosed by Vontobel Financial Products in future will include the Issuer Estimated Value (IEV), the Total Expense Ratio (TER) and the distribution fees stated in the TER. The TER corresponds to the difference between the issue price of the structured product and the IEV. The latter is essentially determined by the model price of the individual product components, the finance income, and the necessary hedging costs.

SSPA guidelines
The Swiss Structured Products Association (SSPA) announced in September that from March next year Swiss issuers will be required to state product distribution fees in their marketing materials, a move to further improve fee transparency in structured products.

The trade body said that mandatory disclosure is part of the new guidelines issued by the SSPA together with the Swiss Bankers Association (SBA) on enhancing transparency around structured products.

The SSPA said it has discussed for some time ways to render structured product prices more transparent and readily understandable and that discussions by the association’s committee regarding structured product key figures, including total expense ratio (TER) and issuer estimated value (IEV), are part of the process.

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