Investor Assistance Programme For Retail Investors Wishing To Invest On A Structured Product

Date: December 17, 2008

Pursuant to the Structured Product saga recently, SIAS announced several investor assistance programme to help investors invest in Structured Products to make an informed decision. We now release the first of the said assistance programmes we announced earlier:


You may experience this sometime or other. You are at your financial institution to make a fixed deposit. Before processing your request, the financial institution could suggest exploring investment opportunities to help you earn returns higher than the current fixed deposit rate. After agreeing, you find yourself sitting with one of the financial institution’s sales staff, exploring investment products and also listening to the latest product promotions.

The sales staff may introduce a structured product to you. Before you decide whether to invest in a structured product, you should ask your financial institution’s sales staff these important questions and get satisfactory answers before making any investment decisions:

Q1. Are you familiar with my financial needs and objectives?

Financial institutions are equipped with fact finding tools to help you understand your financial health and investment needs. It is important for you to go through this financial health checks with your financial institution before embarking on any investment product discussions. You must be honest and willing in your disclosure of your financial information. If there is insufficient or inaccurate information, you may be recommended products that are not suitable.

Q2. Do you know my risk profile?

Financial institutions are also equipped with suitability analysis tools to help identify your risk profile (or preference). This – together with the fact finding process – should be conducted by the financial institution before introducing products to you. You must insist on this process.

Q3. How risky is the structured product(s)?

Usually, the first question investors ask is “what kind of returns will I get?” But knowing the returns first may just distract you from first considering the risks of the investment. It is therefore important for you to know all the risks of the structured product first before knowing the returns. Find out what is the worst case scenario. For example, can you lose all or a significant part of your capital? Ask for details of the various risk factors that may affect your returns or put your principal at risk.

You should also ask who the counter parties are and the counter party risks involved as well as the possible risk default by the issuer as well as assess counter parties’ default risk. These will help indicate how risky the product is. This is an important enquiry by you and you must never dispense with it.

Always remember, higher the returns, higher the risks. Do not take on more risk than you can tolerate.

Q4. What are the expected returns on the structured product?

You should be familiar with the conditions attached to the payment of returns especially for structured products. One way to assess how attractive the returns are is to compare the returns to interest currently offered by fixed deposits and to see how much higher are the returns. If you receive information on attractive past returns, it is not much use to you if there is limited certainty of those returns being replicated in the future.

Q5. How does this product(s) fit my investment needs?

Once the financial institution’s sales staff has taken time to understand your investment needs, risk profile, budget and explained to you the different products shortlisted, he should be able to explain to you how the products fit your investment needs and your risk profile. The conversation should not be just about how good the structured products are but also how well they fit your needs.

Also ask the sales staff of the financial institution whether there are alternative investment products with similar risk-return profile as that of the structured product introduced to you.

Q6. How does this product fit into my investment portfolio?

All investment opportunities should not be considered in silo but should be assessed together with the rest of your portfolio. This will ensure that your investment portfolio is well diversified and not unnecessarily skewed by any investments.

Q7. How much fees would the financial institution and its sales staff earn on the

This can help you assess whether the financial institution and its sales staff would be in a position of conflict where they may be motivated to promote one product over another.

Q8. How often will you update me on the product after the investments?

You should ensure that you receive product updates from your financial institutions frequently regardless of the financial or economic conditions. This will allow you to make adjustments to your portfolio through the investment period. You should therefore get a commitment from the financial institution to provide such “after investment” service.

Q9. How can I exit this structured product and what should I expect when exiting?

This is an important question. Knowing how and when the structured product can be liquidated and also the cost attached to the process of liquidation will help investors plan their cash flows and also their balance sheet.

Do note that when you invest in structured products, your money will tied up for a period of time and early withdrawal may result in loss of part of your return and/or principal. Make sure that you have sufficient savings set aside before investing in structured products.

Q10. Can I go back and consider the structured product you have introduced?

You should not part with your hard earned money to invest in any structured product(s) after a short conversation where the product was described briefly to you. It is important for you to take the information back and read through the materials. If you have any questions, ask the financial institution for clarifications. You may also want to seek.a second opinion.

Make sure you read and understand the documents relating to the product. Note that you may be asked to indicate that you have read and understood the material in the transaction documents. Do not invest in a product if you do not understand it or are not comfortable with the risks and if you need to seek advise, you should do so before investing.

In any case, investment opportunities abound and you should not rush into any investment without due and proper consideration.

You may download the above questions with advisory notes from SIAS website

You may also wish to refer to two online consumer guides on

This initiative is spearheaded by SIAS and supported by the MoneySENSE national financial education programme.

David Gerald
For Management Committee