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IDAD Structured Products Review

It’s always best to diversify your investing options, and if you were offered IDAD structured products, we’ll evaluate in this article the positives and negatives of such investment to help you weigh your alternatives. And, learn how IDAD Structured Products can enhance your offshore structured products portfolio.

If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.

This includes if you are looking for options that have a potentially better risk-adjusted return.

IDAD Background

IDAD, established in 2002, is a developer of structured products. The majority of the firm’s over 1.5 billion British pounds worth of issuances have been distributed through UK and foreign independent financial advisers who are subject to regulatory oversight.

There are administrative and operational headquarters in Petersfield, Hampshire, in addition to offices in London’s financial district. IDAD abides by all rules and regulations set forth by the UK Financial Conduct Authority.

IDAD Investments

What are IDAD structured deposits?

Different investors have different needs, thus the company offers a variety of structured deposits, from simple solutions to complex frameworks. Access to first-rate investment opportunities is ensured by a team of experts that vetted prime options from leading financial institutions.

Among the benefits provided are capital preservation and risk mitigation. The returns you could get are also potentially higher.

The good thing about IDAD is that they are transparent about the products they are offering, so you can get a picture of what you’re getting into. Just make sure you read everything there is to know, ask questions whenever something is unclear, and consult with a financial adviser to execute better moves.

Structured product investments can be advantageous to your portfolio, but it comes with certain risks as well. With that being said, let’s discuss the specific details of each of IDAD’s structured products that are being offered right now.

UK Income Deposit Plan – Issue 4

IDAD Structured Products deposit taker
Image by Ben Nelms/Bloomberg

The duration of this investment agreement is six years and two weeks. It is linked to the performance of the 100 largest publicly traded firms in the UK (FTSE 100 Index or Footsie). The Royal Bank of Canada will accept your deposit.

An interest rate of 8.25% will be paid out to you if the FTSE 100 Index remains between 80% and 120% of its baseline value each year, on a particular day dubbed the “observation date.” You won’t receive any income for the specific year it’s outside the threshold, albeit the investment will still be active.

The capital you put into this investment is guaranteed to be secure. This means that you may rest assured you will get back 100% of your initial investment at maturity regardless of the performance of the Footsie. However, keep in mind that it will be decided by the future of the Royal Bank of Canada, as in you could lose your money should they end up bankrupt.

You need to have at least 10,000 pounds to invest in this structured product. An individual savings account (ISA), pension, or business can all be vehicles for investment. The profits from this investment may be subject to taxation, so keep that in mind too.

This income deposit scheme commenced Aug. 17, 2023 and will mature on Oct. 16, 2029. You have until September 11, 2023 to transfer funds into an ISA.

Inflation-Linked Deposit Plan – Issue 4

Linked to the movement of UK retail prices over time, as measured by the Retail Price Index (RPI), this investment term lasts for three years and two weeks.

Here’s how it works: If the RPI rises while your money is invested in this plan, you will receive a bonus payment equal to the percentage increase. It’s like getting a cut of the price increase windfall. But even if the Index goes down, you will get back at least the capital you invested.

If the FTSE 100 Index doesn’t fall throughout the time you’re invested, i.e., from its value from when you invested, you may receive an additional 3% when the plan matures. If the major UK companies tracked by the FTSE 100 Index do well, you could benefit financially.

Just like the UK Income Deposit Plan discussed above, you can begin investing with 10,000 pounds through various vehicles such as individual savings accounts, pension plans, corporations, trusts, charities, and even offshore bonds (subject to applicable taxes).

This investment is less risky than the UK income deposit plan.

The inflation-linked deposit scheme started July 31, 2023 and will run through October 12, 2026. The deadline to transfer funds into an ISA is September 7, 2023.

UK & Europe Deposit Kick Out Plan – Issue 8

Eurostoxx 50 Index
Image from The Corner

There is a 6-year and 2-week time frame for the UK & Europe Deposit Kick Out Plan. It is linked to the performance of the FTSE 100 Index and the Eurostoxx 50 Index, two major stock market indices. Unlike most other investments, this one is meant to reward you whether or not the markets rise.

IDAD projects a yearly return of 8.65% for you under this plan. Your investment is said to “kick out” after four years if the FTSE 100 Index and the Eurostoxx 50 Index are at least as high as they were when you first invested. In other words, the investment will be over before expected. You will receive your original deposit plus interest for the time period you specified.

Don’t fret if your investment fails to bear fruit because of poor market performance. All of your initial investment will be returned to you after 6 years and 2 weeks.

You can protect your initial investment while opening the door to a potential profit.

This investment, which opened July 26, 2023, has the same risk level as the UK income deposit plan.

Who can invest on IDAD?

IDAD’s structured products are good investing alternatives to explore, if you’re someone who wishes to increase your profits from what your regular savings account can provide. Capital protection awareness and an interest in contributing to the Underlying Index’s success are two crucial considerations. You must also be someone willing to keep investing until the maturity date in order to receive the advertised returns along with your initial deposit.

Medium-term investors that are committed to seeing their money grow and want to see a diversified portfolio could consider these investments as well.

There are some types of investors for whom this investment opportunity is not a good fit, like if you’re someone who didn’t receive any advice from a financial planner or adviser and if you didn’t take a so-called “appropriateness test.”

You must also stay away from this if you don’t get the risks associated with each of the structured products detailed above, if you need to be reassured all the time that you’ll earn from this, if you want to have access to your invested money any time you want, if you feel like you’re gonna throw up just with the thought that the deposit taker might go bankrupt, and if you aren’t willing to take some risk on an Index’s growth potential.

If you don’t even have 10,000 pounds to invest this definitely isn’t for you. You must not borrow money just so you could finance your investment goals.

What are the risks of IDAD structured products?

  1. Depositor Exposure. The Deposit Taker may experience financial issues, such as going out of business or collapsing, and so lose all deposits. The Deposit Taker’s ability to fulfill its payment obligations under the Deposit Plan would be jeopardized in this scenario. Potential returns and initial investment principal are at risk for those who are not protected by the Financial Services Compensation Scheme.
  2. Market Danger. Since stocks are volatile, their performance may vary suddenly during the investing time. These assets’ prices affect the value of your investment, and if they fall, you may not get anything more. You won’t get dividends because your investment isn’t in the underlying assets.
  3. Premature Redemption. You must be willing to leave your money in the Deposit Plan until its maturity date has been reached. Withdrawing funds prior to maturity may be conceivable depending on factors including market conditions and the circumstances of the Deposit Taker; nonetheless, doing so may result in a loss of principal.
  4. Disruptive Events. Trading problems, modifications to the index, modifications to the companies comprising the index, and modifications to tax rules are all examples of market-disrupting events that could occur. The Deposit Taker has the authority to modify the Deposit Plan in such situations. The underlying index may need to be modified by shifting its beginning and ending values, modifying the timing of its observations, or even being replaced altogether. When making these changes, the Deposit Taker must do so in a fair manner.
  5. Liquidity Risk. Under normal market conditions and depending on the circumstances, the Deposit Taker may allow you to withdraw your funds before the expiration date, but this is entirely at their discretion.If you ever need access to cash quickly, you should look elsewhere than the Deposit Plan because of its lack of adaptability.In times of market stress, you should be aware of liquidity concerns that could result in a return that is significantly lower than your initial investment if you opt to cash out.Reasons for this include the performance of the underlying index, the market interest rate, and confidence in the Deposit Taker. In addition to these considerations, you will also be responsible for paying withdrawal fees.
  6. Possibility of Loss Due to Further Investing. Your Deposit Plan investment will be secured for a set period. However, interest rates and available investment opportunities may shift during this time, resulting in a superior overall return. It’s possible that you’ll get back less than you initially invested if you cash out of the Deposit Plan.
  7. Inflation Danger. Inflation, the overall rise in prices over time, has no bearing on the value of your investment or any potential earnings you may receive. The true value of the Deposit Plan and any rewards from it could decrease if inflation is strong during the time you have the plan.
  8. Concentration Danger. Make sure your investments are spread out and not all in one area by seeing a financial expert. When you put too much of your capital into a single investment, you can end up at a greater loss should that investment performs poorly.
  9. Tax Risk. During the duration of the Deposit Plan, tax laws may change. The tax treatment of deposits varies by individual and may be subject to change in the future.

What are the fees?

Plan Charge and Other Fees

For their services in coordinating this Deposit Plan, IDAD will charge the Deposit Taker a fee. An expected fee of less than 2% is factored into the Deposit Plan cap. No matter how much money is collected during the offering period, all other terms of the Deposit Plan will remain unchanged. In exchange for this charge, IDAD will set up and manage your Deposit Plan and all associated marketing, distribution, general operation, and profitability expenses.

In addition, James Brearley will keep 100 pounds as an administration fee if you decide to withdraw, cash out, or transfer your Deposit Plan before the end of its stated period.

Adviser Fee

Prospective investors are required by IDAD to seek the advice of a financial professional before contributing to the Deposit Plan. Exactly how much money will be given to your counsel for their services should be negotiated with them. The Adviser Fee can be paid directly from the application funds if you so choose.

Once the charge is established, James Brearley will deduct it from your payment and send the remainder to your adviser’s firm. Include the correct amount for the Adviser Fee in your application. James Brearley and IDAD may not be able to issue a refund of the Adviser Fee if it has already been paid to your financial adviser and you later change your mind about investing.

Cancelling Your Investment

You can still back out if you change your mind even after making an investment. The plan administrator will give you a termination notification once they gave their go-ahead to your application.

Within 14 days of receiving the withdrawal form, you must notify the administrator of your decision to rescind your application.

Take not that you should think about the adviser fee if you ever decide to terminate your investment. Your permitted fee may have already been collected and paid out by the administrator to your financial adviser. To find out if you could get your money back, you should communicate directly with your adviser.

What happens to my investment if the offering is oversubscribed?

IDAD and the Deposit Taker will confer to settle on an initial trade size as they establish the Deposit. All investments received and the overall amount raised are tracked continuously. IDAD communicates with the Deposit Taker to discuss the possibility of expanding the trade size as it gets close to the initial trade size.

They may not agree to increase the deal’s size, so the initial trade size may be the Deposit’s maximum. If this situation develops, the Deposit will be liquidated early, and the investor will receive a refund for any funds received in excess of the overall deal size.

Pained by financial indecision? Want to invest with Adam?

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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