This overview is intended to assist professional advisers who recommend Barclays structured products to their retail clients. It shows how we group consumers together so that products can be designed to meet their investment needs.
Naturally, defining consumer groups among a wide spectrum of retail investors is not an exact science, and advisers may well categorise their clients into groups of a different kind. However, we believe that if advisers understand how we define consumer groups for structured products, this will help them to demonstrate that their client recommendations are appropriate.
There are five consumer groups to which Barclays targets its retail structured investment plans and structured deposits. The table below shows the key characteristics that define each group.
|Consumer Group 1||Consumer Group 2||Consumer Group 3||Consumer Group 4||Consumer Group 5|
|Investment priority / goal||Security of capital is important||Maintaining spending power is important||Achieving investment growth higher than inflation is important||Achieving significant gains is important||Targeting highest potential gains is important|
|Attitude to capital loss||Is only willing to risk losing a small proportion of investment; prefers investments to have fairly certain future outcomes||Is averse to the possibility of substantial losses, but is prepared to hold some investments to target higher returns than deposit accounts||Is comfortable with higher risk investments to target enhanced potential return; is prepared to risk a meaningful loss in adverse markets||Will commit a large part of portfolio to higher risk investments to target long term growth; accepts the potential of significant losses or gains||Accepts that portfolio may be entirely exposed to very risky assets; accepts that the portfolio may fall or rise significantly in value|
|Attitude to investment volatility||Accepts lower long term returns to minimise risk of loss||Prefers a steadier, lower rate of growth than a highly volatile one||Accepts the possibility of frequent fluctuations in portfolio value||Accepts regular and large short term portfolio fluctuations||Accepts high levels of volatility even over long time periods|
|Time Horizon||Has a shorter term investment horizon and accepts that inflation may erode the value of wealth||Has a medium term investment horizon to target inflation-beating returns||Has a long term investment horizon to target increasing spending power||Has a long term investment horizon to target potential significant gains||Has a long term investment horizon to target maximum potential gains|
Our investment specialists consider these consumer groups during their product design process, in order to ensure that the product features are aligned with the attitudes and preferences identified in the proposed target market(s). Products may be designed to suit more than one target market, to increase the distribution opportunities; where this is the case, the product features will be structured to potentially appeal to the investor characteristics found in both groups.
This does not mean that we aim to offer products to suit all consumer groups at all times; on the contrary, investors in consumer group 5 (those most comfortable with very high investment risk even over long time periods) are rarely accommodated, since most structured products aim to repay capital at maturity and usually balance this aim by capping the potential returns on offer.
Once a product has been launched, it may subsequently be re-released: that is, a second tranche of almost the same design is created, sometimes with refined features such as different rates of potential return. These refinements are usually made in response to changes in the wider economy, including interest rates or levels of the underlying investment indices.
If a new tranche of a product is released, it is usually designed to suit the same consumer groups targeted by the original edition, as refinements to the product features are not intended to materially change the essential nature of the product.
Structured investments are not without risk. You should ensure that your clients understand the risks detailed in the product documentation before they invest.
Repayment of investors’ capital and the payment of any return will depend on the ability of the relevant counterparties to pay at the maturity of the investment or the early sale of the investment, in accordance with any early disposal feature.
Investors can sell the investment before maturity or early redemption but may get back less than they invested.
Please note that products may be structured as capital at risk investments and will not be guaranteed. Payment of the return and repayment of capital will be conditional on the performance of the underlying index. Please read the terms and conditions in the brochure.
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