Sir Richard Branson, Virgin's founder, has business interests as diverse as transatlantic air travel and cosmetics. So it's no surprise that his Virgin Money brand, tapping the expertise of Abbey, has entered the UK's structured products market with its first guaranteed equity bond (GEB) offering 130% of the FTSE 100 over five years. "Heads you win, tails you get your money back," is the simple and direct marketing slogan.
Virgin Money is aiming for a GEB market share comparable to that of the UK's Post Office. An ambitious goal, maybe, but perhaps an achievable one considering Virgin's notoriety for savvy marketing. Virginmoney.com, for example, woos its web-surfing clientele into applying for a credit card with the following scenario: a nurse, holding an oversized credit card, tells us that it's "plastic surgery you have to have". It's a bit risqué but it's all part of the 'Virgin way'. And the company is hoping its brand appeal will reinvigorate a market that is often viewed as rather stale.
The strategy may work but the problem is that if more people decide to invest their £5,000 in GEB's rather than building society saving accounts, then the need for investment communication increases. Distributors, independent financial advisers, and indeed investors themselves, are all crying out for more concrete ways to measure the inherent risk of structured products. And it is to this subject that our cover story turns.
In the absence of an industry rating standard, Germany's investment banking industry, analytic firms and ratings agencies across Europe are responding by developing their own risk-mapping tools. Just as bond investors know how risky their investments are, thanks to the alphabetical ratings of Standard & Poor's, Moody's or Fitch, structured products investors desire the same services.
Perhaps when such a facility is firmly in place, marketing will become a secondary concern. Until then, marketing is key.
+44 (0)20 7484 9802
The week on Risk.net, July 7-13, 2018Receive this by email