The German derivatives association (DDV) unveiled in its latest annual issuers survey that 95% of issuers said that establishing a certificates culture and overcoming the misunderstandings surrounding the derivatives and structured products market in Germany would help the market grow.

SRP spoke to Lars Brandau (pictured), managing director at the DDV, about the association’s issuer survey results, as well as its views, plans, and educational initiatives for 2019 around its Facts & Figures document collection.

What is the key highlight from the issuer survey findings (keyword 'securities culture'), conducted at the end of 2018?

A key finding of the survey is that nearly all issuers expect market activity to remain unchanged or improve in 2019. However, issuers largely also expect tougher competitive conditions.

In addition, almost every certificate provider is advocating for the creation and establishment of a securities culture in Germany, a demand that we have been representing and spearheading with a number of activities for years now. Especially in the context of low interest rates, it is almost grossly negligent for investors to leave their savings on their accounts as they will not receive any interest. A rethink should take place here because only then can asset generation succeed. The world of structured securities offers the right products for every taste and every market opinion, and is a key piece of the puzzle in the overall picture of the securities culture we want to create.

Is education enough? What other initiatives are you planning to achieve that goal?

One single initiative is not enough to bring about something positive in the direction of a securities culture in the long-term. That's why we always work with different formats, which we promote via different channels, so that there are always accompanying publications, explanatory films, e-papers, road shows, etc. in addition to the normal training tools. It is always about a consistent target group-oriented approach and, above all, a consistent process. As we say in Germany, only the constant dripping hollows out the stone.

Over the past five years, that the DDV has been working on educating retail investors. What milestones/achievements would you highlight have happened in that space?

We scrutinise everything that we put forward with our projects very carefully, and adjust the idea and implementation behind this so that we see corresponding feedback. If we get the impression that we are not reaching investors, we will replace the project with a beneficial one. The biggest response in recent years has certainly been the comprehensive book on structured securities, the series of explanatory videos, as well as a wide-ranging lecture series with 35 dates per year.

Are there any specific areas/issues where German retail investors lack knowledge when it comes to investing in structured products?

From an international perspective, financial education in Germany is not as bad as it is often believed. It is important that, in principle, investors and their needs are always kept in mind. In this respect, it is always about the question of how much capital the person has available, how risk inclined or averse they are, what products they already have in their portfolios, etc. The certificates industry is certainly traveling at different speeds.

On the one hand, there are the more conservative investment products for investors who pursue a medium to long-term investment horizon. These investors are mostly savers who get support from their respective bank advisors. On the other hand, there are the well-informed self-directed investors who, with a lot of experience, allocate their own portfolio and know exactly what they are doing. These are often investors who tend to be more speculative and invest in leverage products; so a completely different type of investor. The DDV's initiatives provide information and training materials for both types of investors.

Are you planning any educational initiatives for 2019?

This year, there will be two new training tools. The first step will be about understanding investment products while the second will be a kind of driver's licence for investors looking to invest in leverage products. In addition, we have launched an initiative called 'Finally Understandable' in which we answer frequently asked questions from investors; both in writing in the form of e-papers and by video. In this way, we can reach different target groups, which access information in different ways.

Are you working on any initiatives at a European level?

Definitely. We are constantly talking to colleagues in the other associations and work in joint projects. For example, colleagues from Austria have taken on a number of initiatives the DDV has developed and implemented successfully. We have also been working with Swiss colleagues for a long time with regard to joint training initiatives. In principle, we do not limit ourselves to working with the partner associations, but are always open to alternative ideas.

For example, SRP and we as the DDV, have many common interests that we can bundle in joint projects. In this respect, I think it is right and important to continue to think and act in collaboration because only in this way will the individual initiatives become broadly sustainable projects to promote a securities culture.

The DDV won the “Best Educational Initiative” at SRP’s European Conference 2019.