Structured products are used by a tiny percentage of financial advisers, according to Jason Broder (pictured), managing director, head of third party distribution and Simon platform, Goldman Sachs, speaking at the 7th SRP Americas Conference on May 24 in Chicago. "Technology is great and it can help with streamlining education and analytics, but I think we can actually use this to be a little more introspective how we further penetrate the market," said Broder.

The biggest need that people have, not just financial advisers but also in the independent broker dealer market, are the different aspects of the user experience, according to Biju Kulathakal, co-founder and chief executive officer at Halo. "If you improve the user experience it will increase [people's] ability to understand the product, but also to transact more," he said adding that the biggest issue for Halo is not new networks the company has to sign, but increasing adoption within existing networks. "More than 50% of our customers are buying structured notes for the first time on our platform," he said. "We are really focused on giving people the tools in terms of analytics, pre- and post-trade, content, education, which will really help increase usage."

"Platforms are really one of the calling cards of the last couple of years," said Chris Schell, partner, Davis, Polk & Wardwell, who moderated the panel. "On the legal site, a lot of the questions we are getting revolve around platforms," he said.

Business decisions are driven by what is happening from a regulatory and compliance perspective, according to Donald Pogan, director, trading and operations at Navian Capital. "What can I do to increase revenue and improve margins?" said Pogan. "Utilising platforms can help improve margins. Technology does that in general but specifically for a structured products platform it allows them to grow the volume in their product."

Although the structured products market in the US has increased in size by 30%, the number of new participants, as opposed to existing buyers, is still very limited, according to Kulathakal. "We really want to change that," said Kulathakal. "We have a very big focus on the buy side. We focus on the RIAs (registered investment advisers) who traditionally have done very little in structured notes. Less than 1% of structured notes in the US are in the RIA market," he said.

The huge gap in penetration of sales compared to the high net worth channels, like the private banks and wire houses, was one of the main reasons that Goldman started the Simon platform back in 2012, according to Broder. "When we took a step back and asked ourselves: 'Why have structured investments been so successful in the big private banks and wire houses?' the answer was actually pretty straightforward," said Broder. "The larger institutions have the resources to properly scale their education and training and overall distribution," said Broder. For example, Goldman's wealth management division has around 400 private wealth advisers who manage somewhere in the order of $500 billion. "There is a dedicated team of about 10 specialists that sit within a private bank whose only job it has been in the last decade to go around the country, holding the hands of the adviser and get them comfortable with the product set," said Broder. "So we were fortunate that we had a model where 10 specialists assisted 400 advisers but the question became back then: 'How do you massively scale that?'"

The on-boarding of a client is a very hands-on approach, according to Pogan. "[At Atlas], we work with a number of broker dealers," said Pogan. "It is an ongoing process as the technology evolves." "Two or three years ago, there was not a lot of multi-media content or customisation available. Some of the training requirements for structured products were very plain vanilla and not adapted how quickly the structured products market can evolve.

"Education is such a cornerstone of any product," said Pogan. "Structured products are viewed as somewhat complex products by a lot of broker dealers and financial advisers so there is a heightened sensitivity before someone will on-board a structured products programme or before they'll expand it into market linked notes or different structures."

According to Kulathakal, the group of people who watch education videos or read about education is a very small, super active, super interested group in structured notes. "That's almost like the people who edit Wikipedia articles or the people who like to build their own gaming computers," he said. "At the end of the day education is like an instruction manual on structured products. Regardless how nice and interactive you make that manual the number of people who read such manual in anything for technology is very small. Most people, rightly or wrongly, they don't care for it, they don't have the time for it and they want to do other things," said Kulathakal.

According to Broder, "a lot of the firms that we are doing business with have embraced the education because it is important for the advisor to understand how these products work, how they fit in a client's portfolio."

Financial advisers want tools which help them time manage their practice and their portfolio management, according to Kulathakal. "They want to spend the bulk of their time getting new clients because that is how they make money. We found it very hard to engage them on a broad basis for education."

Pogan said that you have to keep the content of education relevant to the people who have interest in the products. "Instead of an adviser seeing an entire catalogue of 50 training videos and not really knowing what to focus on, it is going to be focused down, if you like, to sell these products," he said.  "We found that really leads to a higher level of adoption. If the advisers can quickly log onto a platform and see in front of them what is needed from a training programme, they are much more likely to complete it," Pogan concluded.

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