In the world of finance, structured products are probably not the most popular among ordinary investors. Since the financial crisis of 2008, the term has become a buzzword. However, “there has been a misunderstanding. The structured products that the big banks offer in Europe are not particularly more risky,” says Fabrice Todeschini, group head of global structured solutions at Quintet Private Bank and president of the new Luxsipa federation.
“The aim of this federation, which was created just under two years ago, is to promote structured products that make derivatives accessible to retail clients.” And, he explains, structuring makes it possible to offer tailor-made products with limited risks, whereas a share or a bond presents a 100% risk both upwards and downwards.
The structured products that the big banks offer in Europe are not particularly more risky.
Luxsipa currently brings together seven Luxembourg banking players--Spuerkeess, Banque de Luxembourg, BIL, SGBT, BGL BNP Paribas, CBP Quilvest and Quintet Private Bank--as well as the Luxembourg Stock Exchange.
“[Quintet Private Bank] has not been able to be very active in terms of activities, but the creation of Luxsipa has offered us the opportunity to link up with the European entity Eusipa, which brings together ten federations from ten European countries,” says Todeschini.
Together, they are trying to intervene at the European level to “avoid a regulatory blanket that would make it difficult to market products.”
But in Luxembourg, it is above all through training that Luxsipa intends to promote structured products, which are still sometimes unknown to private banking professionals themselves. The association works in collaboration with bankers’ association ABBL and would like to obtain a mandate from the House of Training to be able to start providing training on derivatives.
Widening the circle
“We have already developed four modules for private bankers and portfolio managers so that they can better integrate structured products into their asset allocations. Due to a lack of knowledge, they can sometimes be afraid to offer them,” explains Todeschini.
Now on track, Luxsipa will actively seek new members in the wider Luxembourg financial ecosystem. “The interest of joining our network is to learn about recent regulations, to exchange best practices, to be aware of current needs and market trends in structured products,” continues its president.
Finally, pandemic permitting, he hopes to be able to organise live events to broaden the knowledge and circle of people interested in structured products.
This article in French on Paperjam. It has been translated and edited for Delano.