GOOD NEWS IN BAD TIMES ……
As you know, we at Best Price are loud advocates of the benefits of structured products, regularly highlighting that their USPs offer unique investment propositions which can add real value for many investors in properly diversified portfolios, especially during uncertain times such as the current COVID-19 environment.
The deep protection which structured products can provide (typically allowing markets to fall 40% while providing full protection from that downside market risk), plus their ability to generate positive returns without requiring markets to rise (with many products also generating positive returns even if markets fall), can ‘reconcile investor’s hearts and minds, particularly at times when investors need to make important investment decisions.
We’ll be writing again soon about the importance of ‘time in the markets, not timing markets’, but, for now, we’ll simply highlight the point that structured products can help investors make more confident investment decisions, adding to their portfolios at potentially critically important times, such as now.
Prior to that, however, we’re pleased to highlight details of a unique structured product feature available from one of our favourite plan managers, with specific examples of how it has just benefitted some of our clients.
The ‘Tempo pledge: Stated terms or better’
Over and above all of the generic features of structured products that we are so keen on, a particular feature which we loved as soon as we saw Tempo introduce it to their plans last year is their unique ‘Tempo pledge: Stated terms or better’.
This industry first allows Tempo to increase the terms of their plans above those stated in their plan brochures if the stock market and other factors during an offer period mean that they can do so.
For example, while the most recent brochure for Issue 12 of their Long Kick-Out Plan detailed that Option 3 offered 13.1% p.a., it also explained that if stock market movement and other factors meant that they could increase this further during the offer period, the actual terms might be increased to, say, 13.5% p.a., which would be confirmed following the start date.
Clearly stock market movement has been significant in the recent period, and so we were wondering how the pledge might translate into improved product terms for investors. I am therefore pleased to confirm that this pledge has seen Tempo achieve a really exceptional outcome for investors, in two of the options of their most recent product suite, which started (‘struck’) last week, as the following details explain:
Option 3 of the Long Kick-Out Plan
The potential fixed return of this plan, which accumulates for each year that the plan runs, and is paid if the FTSE 100 FDEW closes at or above 100% of the start level on one of the kick‑out anniversary dates or on the end date, has been increased from the 13.1% per year stated in the plan brochure, to 20.4% per year.
Option 2 of the Long Growth Accelerator Plan
The potential return generated on the 5th anniversary of this plan, if the FTSE 100 FDEW closes at or above 110% of the start level, has been increased from the 107.5% stated in the plan brochure, to 175%.
In addition, if the FTSE 100 FDEW does not close at or above 110% of the start level on the 5th anniversary, the return generated on the end date has also been increased from the 6 times the amount by which the FTSE 100 FDEW closes above 90% of the start level stated in the plan brochure, to 10 times the amount by which the FTSE 100 FDEW closes above 90% of the start level. And the maximum potential return for investors on the end date, if the FTSE 100 FDEW closes at or above 120% of the start level, has therefore increased from the 180%, stated in the plan brochure, to 300%.
We love Tempo’s Long Growth Accelerator Plan, which usually offers higher potential returns than all comparable kick-out products in the market (including Tempo’s own Long Kick-Out Plan). For example, following the increase in terms, if the index is at 110% of start level, i.e. 10% up, the 175% coupon (plus capital back) at year 5 is equivalent to an incredible 35% p.a. simple (or 22.42% p.a. compound. This would nearly triple capital, i.e. £100,000 invested would mean £275,000 returned (including capital). OR, if kick-out is not triggered at year 5, the maximum return of 300% (plus capital back) at year 10, achieved if the index is 20% up, is equivalent to 30% p.a. simple (or 14.87% p.a. compound). This would quadruple capital, i.e. £100,000 invested would mean £400,000 returned (including capital).
These terms are clearly exceptional, highlighting the benefits of structured products per se, and tangibly demonstrating the value of the unique Tempo pledge.
Clearly, this is a great result for those of our clients who invested in these Tempo plans last week, all of whom invested happily based on the terms stated in the brochures, which were already good, but who are now finding out that the final terms are even better: in fact, the best ever for these plan options.
Along with everything else that Tempo does as part of their aim of ‘doing the right things – and doing simple well’, to redefine structured products for professional advisers and their clients, outcomes like this are why Tempo are our first and only ‘Best Price Star Structured Product Plan Manager’.
Details of their new plans are expected soon, and we understand that they are working hard on some compelling new product developments as a response to the current environment.
We look forward to providing details of the new Tempo plans at the earliest opportunity.
Richard, Sian and team