Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Private banks are stuffing structured products into client portfolios wherever the banks have discretionary authority to purchase these notes on behalf of clients – without explaining the risks and without obtaining specific client consent to these opaque, high risk, conflict-ridden investments.
If you’ve ever wondered how the major structured note issuers are able to move such massive amounts of highly-complex debt no customer could possibly understand, let alone ask for, now you have your answer. According to published reports, banks and Wall Street brokers sold more than $50 billion of structured products in 2010 alone. For the period January- November 2010, J.P. Morgan was rated as the fourth Top Seller in structured product retail sales, with $4.21 billion in sales and 9% market share.
My investigations nationally reveal that private banks today typically invest around 15% of client portfolios in structures issued, or underwritten, by the banks themselves.
Look to pay fees in excess of 2% to purchase and an additional 1% to exit these roach motels. Structured investments are not subject to any uniform standards and transparency as to pricing, valuation and fees is profoundly lacking.
Private bank clients aren’t clamoring for this junk. Most clients don’t even know what a structured product is, or that their assets are being invested in so-called structures. Holdings such as DB 95% PPN FX BASKET 1/25/13 LNKED or BARC 95% PPN EM FX BASKET 5/23/12 LNKE mysteriously appear on the account statements private banks provide to their clients. What client could make sense of those listings?
Where a bank serves as trustee of an endowment or foundation portfolio, I have observed that structured notes issued or underwritten by the bank are most likely to be found in abundance. If the complexity and risk related to structured notes weren’t daunting enough, you’d think banks would consider conflicts of interest and self-dealing sufficient reason to avoid recommending them to fiduciary accounts. I can only conclude that the worldly profits derived from selling these products are compelling.
Forget investing, Wall Street is a marketing and sales machine. They’ve developed a real stinker of a product that at first glimpse appears like the answers to your prayers but really is just one more way Wall streets is going to separate you from your money.
Wall Street banks have rightly earned a bad rep for their disreputable behavior. Attracting assets under management then proceeding to enrich themselves with client's capital at the client's expense, predators and their prey, seems endemic and systemic to the financial services industry, mutual fund complex included.
Ted and Pat. Thank you for the information about this area.
As remains, the "big houses" are still in charge of the risk to one and all. Wonder whether the "FED/Treasury" and their super computers study the continued risks to the market place with all of the financial play toys that remain in place from those who really run the market place? 'Course the common folk would have to consider whether the central banks really care. We small investors play with a most dangerous bunch.
Comments
If you’ve ever wondered how the major structured note issuers are able to move such massive amounts of highly-complex debt no customer could possibly understand, let alone ask for, now you have your answer. According to published reports, banks and Wall Street brokers sold more than $50 billion of structured products in 2010 alone. For the period January- November 2010, J.P. Morgan was rated as the fourth Top Seller in structured product retail sales, with $4.21 billion in sales and 9% market share.
My investigations nationally reveal that private banks today typically invest around 15% of client portfolios in structures issued, or underwritten, by the banks themselves.
Look to pay fees in excess of 2% to purchase and an additional 1% to exit these roach motels. Structured investments are not subject to any uniform standards and transparency as to pricing, valuation and fees is profoundly lacking.
Private bank clients aren’t clamoring for this junk. Most clients don’t even know what a structured product is, or that their assets are being invested in so-called structures. Holdings such as DB 95% PPN FX BASKET 1/25/13 LNKED or BARC 95% PPN EM FX BASKET 5/23/12 LNKE mysteriously appear on the account statements private banks provide to their clients. What client could make sense of those listings?
http://www.forbes.com/sites/edwardsiedle/2012/06/07/private-banks-stuff-structured-notes-into-discretionary-accounts-deny-fiduciary-responsibility/
Demonic Structured Notes Haunt Church Portfolios
Where a bank serves as trustee of an endowment or foundation portfolio, I have observed that structured notes issued or underwritten by the bank are most likely to be found in abundance. If the complexity and risk related to structured notes weren’t daunting enough, you’d think banks would consider conflicts of interest and self-dealing sufficient reason to avoid recommending them to fiduciary accounts. I can only conclude that the worldly profits derived from selling these products are compelling.
http://www.forbes.com/sites/edwardsiedle/2011/08/03/demonic-structured-notes-haunt-church-portfolios/
Forget investing, Wall Street is a marketing and sales machine. They’ve developed a real stinker of a product that at first glimpse appears like the answers to your prayers but really is just one more way Wall streets is going to separate you from your money.
http://www.forbes.com/sites/greatspeculations/2012/11/30/structured-notes-buyers-be-warned/
Wall Street banks have rightly earned a bad rep for their disreputable behavior. Attracting assets under management then proceeding to enrich themselves with client's capital at the client's expense, predators and their prey, seems endemic and systemic to the financial services industry, mutual fund complex included.
As remains, the "big houses" are still in charge of the risk to one and all.
Wonder whether the "FED/Treasury" and their super computers study the continued risks to the market place with all of the financial play toys that remain in place from those who really run the market place? 'Course the common folk would have to consider whether the central banks really care.
We small investors play with a most dangerous bunch.
Regards,
Catch