Democratization: More Than Just a Buzz Word

When it comes to structured products, there has been no shortage of industry pundits who have called for their democratization over time. Ever since structured products began stirring up interest in the financial universe roughly 30 years ago, it has been shown time and again that these particular investments can be effective tools for advisors to achieve their clients’ goals. Even so, this does not mean that the path to democratization has been simple. In reality, it’s been a process that continues to take shape today and has a transformative impact on the structured product and investment management industries.

Democratization is defined as “the action of making something accessible to everyone.” It has become a buzz word within the fintech industry as both technology and innovation have emerged to battle the headwinds that previously blocked accessibility to a subset of investment vehicles such as structured products. While many in the industry claim to be democratizing structured products, only a few are acting to truly revolutionize the space and put it on the same playing field as more commonly used vehicles, like mutual funds and ETFs.

Time and again, structured products have been criticized as being too complex, having large minimum investment requirements, and high transaction fees, thus creating a barrier to entry. In addition to the costs, there are limited post-trade management tools for tracking product performance.

The Rise of Fintech

The combination of technology and structured products was a natural fit. As technology platforms were launched as a way to better serve advisors in the transaction of structured products, the pivotal tailwind the industry so desperately needed in order to battle aforementioned criticisms and finally democratize the product set, had officially arrived.

Those who have embraced technology within the investment management space now experience a streamlined and digitized workflow from one convenient, centralized location. Educational materials and in-depth product details are now available at an advisor’s fingertips. Investment minimums and distribution fees have continued to decrease due to an influx of product competition. Enhanced customization features now allow advisors to construct products tailored to their clients’ investment objectives which helps enrich the advisor/client experience.