Section 1.3

Why structured products?

6–8 min

5 fundamental needs

Mini-quiz · 3 questions

Essential question

When a client says "I want yield", are they really saying what they want — or are they conflating five very different needs?

Discovery The 5 fundamental needs

A portfolio manager who puts a client into "structured products" without specifying the underlying need makes the same mistake as someone who prescribes "a medicine" without a diagnosis. Structured products do not answer a generic need — they answer one (or several) of five distinct needs. Identifying which one immediately points to the right product family.

Before the visualization — think it through

"I want a better return than my bank deposit"

A client says: "I want a better return than my bank deposit". Is that a sufficient objective for choosing a structured product? What is missing from this formulation?

The 5 fundamental investor needs

←Click on each need to activate a reflection prompt

Practice Case exercise

Case studyIdentify the need and the appropriate structure

A family officer manages the wealth of a retired client. This client must cover regular expenses of 10,000 CHF per quarter without touching their invested capital. The current portfolio is composed of equities and bonds. The client refuses to sell positions.

Identify the fundamental need, the most suitable structure and the main risk to explain to the client:

Need

Structure

Main risk

Key message

Before proposing any structured product, identify which of the 5 fundamental needs is at stake: yield, protection, tailor-made exposure, cash flow or diversification. The structure follows the need — never the other way round.

In practice, a single product can answer several needs simultaneously. An autocall protects capital conditionally (protection), generates a coupon (yield) and redeems automatically if the market rises (early cash flow). Analysing the dominant need allows you to choose the family, while secondary needs fine-tune the parameters.

Elaborative exercise: For each of the 5 needs, name one type of structured product that answers it directly and one that does not fit — with a one-sentence justification.

Mini-quiz · Section 1.3

3 diagnostic questions

~3 min · instant feedback

Question 1 / 3

A portfolio manager wants to expose their client to the global artificial intelligence theme without buying US technology stocks directly. Which fundamental need does this primarily illustrate?

Question 2 / 3

A family office must pay a monthly annuity to its client without selling assets. Among the 5 fundamental needs, which one does this case illustrate?

Question 3 / 3

An investor buys a BRC on the SMI with a 60% barrier and an 8% coupon. What is the main economic trade-off they are making?

0 / 3 answers

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