KeyData: A warning ‘Structured investment product’ tale

Wednesday, 10th June 2009 11:49 - by Resident IFA

I am up against it today, so sorry for the short, sharp Blog. I will carry through my promise to write again about Platforms and Wraps in the near-future. One item of news that caught my attention yesterday was the collapse of the firm Keydata. They are now in administration, having previously designed and supplied ‘Structured products’ i.e. an investment that will guarantee your capital (with small print), but still provide, say, a return of 50% of the growth of the FTSE100 over 5 years. The problem I always had with these products is their ‘opacity’...it was quite hard to define how ‘cast-iron’ their guarantees were, how strong the product/company was in financial terms, and how the costs and charges affected the investment. Hence, I have never recommended one for a Client of mine, having always been repelled by the above ‘fog’ of terms & conditions. Hopefully, people that are invested in a Keydata product will get the good news that the actual ‘invested’ monies KeyData held were in separate, protected, accounts. The Financial Services Authority seem to be slow in getting these facts and possible reassurances out in the open. Could this whole debacle be a case of ‘Director’s greed’ played-out in large? It seems that the Directors of KeyData took out £7.8M in the last two years, thus making the company’s financial stability move from good to parlous. When you add to this the fact that their business model seemed to be based on inflows of investment monies being vital to service ongoing liabilities when they fell due, you have to ask some serious questions of the Director’s actions and what they were thinking of. Raised eyebrows all-round. This further brings the personal investment industry into doubt and underlines why Investors are suffering a crisis of confidence at present. With this example and another Investment management firm to tick off the list, who can argue with people being sceptical of investing money, rather than suffer the paltry returns savings accounts currently provide? At least Keydata Investors who invested through an Insurance Bond product ‘wrapper’ have the protection provided by the Financial Services Compensation Scheme of 100% of the first £2,000 and 90% of the rest of the monies. ft.com reports that ‘Companies are lining up to buy KeyData’, so all may not be lost. Yet again, watch this space... Until next time...