Structured Notes

A Structured Note is a unique financial product that blends traditional securities, like bonds, with advanced financial instruments called derivatives. This combination creates a customized investment that aligns with specific risk and return objectives. Structured Notes can be linked to various underlying assets, such as stocks, indices, commodities, or interest rates, offering tailored exposure to different markets. Whether you’re looking for potential growth, income, or a combination of both, Structured Notes provide a flexible way to achieve your financial goals.

  • Tailored investment options
  • Potential for enhanced returns
  • Exposure to diverse markets
  • Risk mitigation with principal protection (on specific notes)

A Principal Protected Structured Note offers the best of both worlds: potential for growth linked to an underlying asset, along with the safety of knowing your principal is safeguarded. At maturity, you are guaranteed to get back all (or a specified portion) of your original investment, regardless of how the underlying asset performs. This makes Principal Protected Structured Notes an attractive choice for investors who want to participate in market opportunities while keeping their original investment secure.

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*Refer to the Prospectus for all risks.

How do Structured Notes work?

Banks create structured notes linked to assets or indexes, with payout structures and barriers that determine returns based on performance.

What types of risks are associated with Structured Notes?

Risks include market volatility, credit risk from the issuer, liquidity challenges, and potential principal loss.

Can you sell/liquidate Structured Notes before maturity?

Yes, however notes held till maturity gives the best results, also early sales/liquidation may involve penalties, discounts or limited liquidity since secondary markets for these notes are often restrictive.

What happens when a Structured Note gets called?

If market conditions are favorable, the issuing bank may recall the note early, ending it before maturity and requiring reinvestment.

Who should invest in Structured Notes?

Investors seeking customized exposure, risk management, or higher returns than traditional investments, and those comfortable with market and credit risks.

What is the difference between Principal Protected and Yield Enhancement Notes?

Principal Protected Notes safeguard initial investment, while Yield Enhancement Notes offer higher potential returns with increased risk of loss.

What fees and costs are involved with Structured Notes?

Structured notes include fees and commissions embedded in offering documents, and early redemption may result in penalties or losses.

Are structured notes liquid, and what should I consider if I need to sell them before maturity?

Yes, Structured notes meant for Growth are liquid, however, selling price is dependent on interest rates and market conditions. You are not guaranteed full return of principal if sold early. However, if market is doing well, you could potentially get above par. These notes are designed to be held until maturity.

How banks make money from Structured Notes? 

Banks generally levy fees, like embedded fees and in most cases sales commission and/or early redemption penalties. Management fees cover the costs of managing and maintaining these investments. Banks don’t benefit from the gains or losses from the underlying stocks or ETF’s. 

What are the risks of Investing in Structured Notes? 

Investing in structured notes carries notable risks. Key among them is credit risk, as investors essentially lend money to the issuing bank, meaning they may lose their principal if the bank defaults. Market volatility also affects returns, as structured notes are tied to underlying assets that fluctuate with economic and geopolitical conditions. Understanding these risks is essential before committing to structured notes.

How corporate actions like split, merger, etc. affect Structured Notes?

Read more about these corporate action scenarios.

Are these banks safe and what are their ratings?

Yes, these banks are safe. Read more

How does Barrier differ from Buffer?

Buffer protection remains in place after the threshold is crossed at maturity, while barrier protection is lost once the threshold is breached.

For instance, with a 30% hard buffer, if the underlying tickers (underlier) drop by -31%, you will only experience a -1% loss. However, with 30% barrier protection, if the underlier falls by -31%, the loss is also -31%.

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How do investments show up in my Schwab account?

In a Schwab account, investments are typically displayed under the “Positions” section. Here’s how to locate them:

  1. Log in to your Schwab account.
  2. Navigate to the “Accounts” tab on the dashboard.
  3. Select a specific account
  4. Under that account, click on the Positions option.

This section lists all the holdings in the account, including:

  • The investments you own.
  • Their current market value.
  • Quantity.
  • Cost basis and other relevant details.
  • If the investments are newly added, they might take a short period to reflect in your account after the transaction is processed.

 

Can we sell these investments on Schwab?

Yes, you can sell your investments on Schwab. Here’s how it works:

  1. Selling Investments:
    • You can choose to sell your investments at a price determined by the market or as agreed upon through a bidding process.
    • It’s up to Barclays (or the relevant intermediary) to decide whether they will sell the investment at $100, $50, or another price based on market conditions.
  2. Requesting a Bid:
    • Investors have the option to request a bid on their security.
    • This allows you to obtain the best price available for your investment at that time.
  3. Checking Bid Status:
    • If you’ve requested a bid, you can review the details on the Bid Request Status page in your Schwab account.
    • The page will display the best bid obtained. Note that in certain limited instances, the prices on this page may differ from those shown in Market Depth, which reflects real-time market conditions.

Ensure you review the bid details and market conditions before finalizing a sale to optimize your return.

How many days does it take for credit to appear in my Schwab account post sale?

3-5 business days for the settlement.

I don’t see details of the note on my Schwab account. How can I get additional details when I need it?

  1. Login to Your Schwab Account:
    • Navigate to the “Positions” tab where your list of investments is displayed.
  2. Locate the Investment and CUSIP Number:
    • Each investment will have a unique identifier called a CUSIP Number (like a serial number for securities).
    • This number is listed alongside the investment.
  3. Click on the CUSIP Number:
    • Clicking on the CUSIP will provide a brief description of the investment.
    • The details might include maturity date, interest rates (if applicable), and other key information.
  4. Refer to the Prospectus for Detailed Information:
    • For comprehensive details, download the Prospectus for the note.
    • The Prospectus contains all the critical information about the investment, such as terms, risks, and payment schedules.

Having the CUSIP number and the Prospectus will ensure you have detailed and reliable information about your investment whenever needed.

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Disclaimer: The information provided in this FAQ is for educational purposes only and does not constitute financial advice or a recommendation to invest in structured notes. Investing in structured notes involves risks, including the potential loss of principal. It is important to review offering documents and consult with a financial advisor to understand the risks, costs, and suitability of these instruments for your financial goals. Past performance is not indicative of future results.

Here are some articles and resources that you might find helpful in understanding Structured Notes.

The information provided in this advertisement is for informational purposes only and does not constitute financial or investment advice. Structured notes, Private Credit, Private Equity, Private Infrastructure, and other financial investments are complex financial instruments and may not be suitable for all investors. Investing in such investments involves the risk of potential loss of principal. Their performance may be linked to one or more underlying assets or indices, making them subject to market risk.

Before investing, it is crucial to fully understand the risks associated with structured notes, including but not limited to credit risk, market risk, liquidity risk, and early redemption risk. Structured Notes are often unsecured obligations of the issuing financial institution, meaning that repayment of principal and any potential returns depend on the creditworthiness of the issuer.

This advertisement does not constitute an offer to buy or sell any financial instrument. Investment decisions should be based on independent research, risk tolerance, financial circumstances, and consultation with a licensed financial advisor or investment professional. Past performance is not indicative of future results. The tax treatment of structured notes may vary, and we recommend consulting a tax advisor before making any investment decisions.