SPA Conference: Private wealth distributors get ready for market swings

By Emma Trincal

New York, March 20 – The Structured Products Association 2018 Structured Investments Distribution conference kicked off on Tuesday morning in New York with a panel of private wealth executives.

The main focus was the return of volatility and how it will affect the bonanza of autocallable notes, which have become the bread-and-butter of most firms during years of record low volatility but especially last year and for most of this year.

The panelists included Erin Hayes of Citi Private Bank, who works with issuers on idea generation and handles third-party relationships for the private bank; Kjeld Engberg, who heads up the structured products business at Deutsche Bank; Kirk Haldeman, head of U.S. equity derivatives at JPMorgan Asset & Wealth Management; and Mark Landers, who runs the product and platform team for Morgan Stanley Wealth Management.

Speakers declined to be quoted.

Volatility is back

“What transpires from the panel is that private banks are starting to see the impact of rising market volatility across the different private bank channels for high-net worth individuals, people who have $10 to $20 million in investable assets,” said Keith Styrcula, chairman of the Structured Products Association, who commented on the discussion for Prospect News.

“Autocalls have boosted the notionals. It’s been a significant driver of the business in 2018. Deals were called away. Everybody so far has had a very good year. But those types of products work best in a low volatility environment.

“The concern is firms getting ready for enhanced market volatility.

He described the realistic tone of the panelists.

Adjusting to a new market

“I think everybody is aware that the good times are not going to last. People are looking for defensive strategies to protect their clients.”

One of the ways private wealth channel leaders have been addressing those needs has been to focus on best ideas and asset allocation rather than calendar-based offerings.

“They’re showing structured notes as part of the asset allocation and a tool to add protection on the downside,” he said.

Summarizing the experience of one of the panelists, Styrcula said that during the February pullback, business picked up due to savvy advisers who wanted to be tactical and enter autocall trades at better levels.

“Now people seem to sit on the sidelines. Autocalls are getting called in a bull market not when volatility is picking up.

“Things are getting whipsawed and there are greater concerns about the political uncertainty in the U.S., including global tariffs. But it remains to be seen,” he said.

“The probabilities for notes to be called away are not so high anymore. Some firm have started to budget down for 2018 anticipating more market turbulence in the months to come.

Back office on the front end

Panelists had a message for issuers: “please, help us make the distribution process more seamless,” he said.

“The talk on the panel was about asking issuers to offer quicker turnovers and put together a back office set up that can support their business. It can make a big difference for clients.”

Pricing remains the most important role issuers may play.

“But getting new innovative ideas and helping distribution manage the sales process is key if we want to grow the pie.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.