Direct Access: Structured Products & Certificates in Europe. Empowering Investors ?

As technology advances, investors are increasingly opting for direct access to these investment opportunities, thereby eliminating intermediaries and reaping various benefits.

We will delve into the growing trend of direct access to structured products and certificates in Europe and Switzerland, examining the benefits for investors and the evolving role of intermediaries in this dynamic financial landscape.

Europe and Switzerland have witnessed a surge in the popularity of structured products and certificates over the past few years, thanks to favorable market conditions, increased investor appetite for alternative investments, and the availability of a diverse range of products. In Switzerland, the Swiss Structured Products Association (SSPA) has played a significant role in promoting and standardizing the market for these products, while European regulations, such as the EU’s Markets in Financial Instruments Directive (MiFID) and the EU’s Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation, have fostered transparency and investor protection.

Eliminating Intermediaries: The Rise of Direct Access Platforms

One of the key trends in the structured products and certificates market is the elimination of intermediaries through the use of direct access platforms. These platforms enable investors to access structured products and certificates directly from issuers, bypassing the traditional role of banks and brokers. This trend has been driven by the increased availability of digital solutions and a growing demand for cost-effective investment options.

For instance, Leonteq, a Swiss-based fintech company, has developed a digital marketplace for structured products that connects issuers and investors directly. Similarly, Vontobel, a leading Swiss financial services provider, has launched its own digital platform for structured products and certificates, called “deritrade.” These platforms not only provide investors with a wide range of investment options, but also offer enhanced transparency, pricing efficiency, and streamlined execution.

Advantages for Investors

The elimination of intermediaries in the structured products and certificates market offers several benefits for investors:

1. Cost Savings: By cutting out intermediaries, investors can save on fees and commissions typically charged by banks and brokers. This results in a more cost-effective investment process and potentially higher returns.
2. Enhanced Transparency: Direct access platforms provide investors with detailed information about the underlying assets, pricing, and risk factors associated with structured products and certificates. This transparency empowers investors to make informed decisions and mitigate potential risks.
3. Customization: Direct access platforms often allow investors to tailor structured products and certificates to their specific needs and preferences. This customization enables investors to create investment solutions that align with their risk tolerance and investment objectives.
4. Improved Execution: With direct access to issuers, investors can benefit from faster execution times and more accurate pricing. As a result, investors can capitalize on market opportunities more effectively and minimize the risk of unfavorable price movements.
5. Access to a Wider Range of Products: Direct access platforms typically offer a vast selection of structured products and certificates, including those from smaller issuers that may not be available through traditional intermediaries. This increased variety enables investors to diversify their portfolios and explore unique investment opportunities.
6. Greater Control: Eliminating intermediaries provides investors with greater control over their investments. They can monitor their positions more closely and make adjustments as needed, without having to rely on third parties.

Several examples illustrate the benefits of eliminating intermediaries in the structured products and certificates market:

1. In 2018, Credit Suisse launched its Advanced Execution Services (AES) platform, which allows institutional investors to access the bank’s structured products directly, without going through intermediaries. The platform has been praised for its cost efficiency, transparency, and customization capabilities.
2. The German fintech company, Exabel, offers a platform that connects investors with structured products issuers, enabling them to negotiate customized investment solutions directly. This direct access has been credited with reducing costs and improving the overall investment experience for users.
3. In 2019, Barclays introduced its iPath platform, which provides investors with direct access to its suite of structured products. The platform has been recognized for its ease of use, transparency, and wide range of product offerings.

The trend towards eliminating intermediaries in the structured products and certificates market in Europe and Switzerland is a reflection of the ongoing digital transformation in the financial services sector. As technology continues to reshape the investment landscape, investors are increasingly seeking direct access to investment opportunities that offer cost savings, transparency, customization, and improved execution.

Direct access platforms have emerged as a viable solution to meet these demands, providing investors with an efficient and user-friendly way to access the growing market for structured products and certificates. As this trend continues to gain traction, it is likely to revolutionize the way investors approach alternative investments, empowering them to take control of their portfolios and achieve their financial goals.

While the article highlights the advantages of eliminating intermediaries in the structured products and certificates market, it is essential to recognize that intermediaries can still play a crucial role in onboarding hesitant potential investors. Not all investors have the technological savviness or confidence to navigate digital platforms and make informed decisions on their own. Intermediaries, such as financial advisors, can help bridge this gap and provide valuable guidance to these investors.

The following points elaborate on why intermediaries can still be necessary for some investors:

1. Expert Guidance: Intermediaries with extensive knowledge and experience in the financial sector can provide valuable insights and guidance to potential investors. They can help investors understand the nuances of structured products and certificates, as well as the associated risks and potential returns. This expert advice can be beneficial for investors who are new to these investment options or those who lack the time or interest in researching the market independently.
2. Building Trust: Some investors may be hesitant to invest in structured products and certificates without the guidance of a trusted intermediary. The presence of a financial advisor or broker can help build trust and confidence in these investments. Intermediaries can also act as a safety net for investors who may feel overwhelmed by the complexity of the financial markets.
3. Navigating Technological Barriers: Not all investors are comfortable using digital platforms to manage their investments. Some may lack the necessary technical skills or may simply prefer a more traditional, personal approach to investing. Intermediaries can assist these investors in navigating the digital landscape and help them understand how to use direct access platforms effectively.
4. Tailored Advice: While direct access platforms may offer customization options for structured products and certificates, investors may still benefit from the personalized advice and recommendations provided by intermediaries. This tailored approach can help investors create a well-balanced and diversified portfolio that aligns with their unique financial goals and risk tolerance.
5. Ongoing Support: Investing in structured products and certificates is not a one-time event. Investors need to monitor their investments, assess their performance, and adjust their strategies as market conditions change. Intermediaries can provide ongoing support, helping investors make informed decisions throughout their investment journey.

In conclusion, although direct access platforms offer many benefits, intermediaries still play a vital role in helping hesitant potential investors navigate the world of structured products and certificates. Their expertise, personalized advice, and ongoing support can be invaluable for those who lack the technological skills or confidence to invest independently.

As technology continues to evolve, intermediaries may need to adapt their roles and services to remain relevant in this changing landscape, ensuring they continue to provide value to their clients.