But derivatives can be risky, which means the structured note can underperform and perhaps lose money for investors even if they hold the note for its full term. As such, both the SEC and Finra consider these to be complex, high-risk products and have waved the yellow flag regarding investor suitability regarding principal protected structured notes.
Brown says CAIS’s expanded structured products menu includes more educational materials to help advisors make informed decisions regarding these investment vehicles. This includes making available educational materials provided by the banks that outline the different parameters of the securities themselves in order to bring more transparency to their structures.
“CAIS is a demand-based platform, and we’re seeing a lot of RIAs and broker-dealers effectively utilize structured notes––mainly plain-vanilla ways to get access to indices and the like,” Brown says. “But overall, we want to create a better forum for advisors to be able to access these products, and we’re trying to lower the cost and increase transparency and education for advisors.”