Podcast: Financial product checklist (and bid to mid-spread)

I recently attended an Investec event where they introduced a structured product that piqued my interest. Simon and I have discussed structured products before, so I was expecting a hugely complicated bullshit product with massive fees. I was wrong (again).

One entire hour, especially for Jo who wants out #podcasts to be longer. We create a checklist for interrogating financial products. #justonelap #money #fatwallet

A post shared by Kristia Van Heerden (@k_r_isis) on Feb 23, 2017 at 2:53am PST

I realised in that briefing that I have a great advantage. I know what questions to ask when someone tries to sell me a financial product. I don’t get intimidated by the concept of gearing and I have a somewhat tenuous grip on the idea of hedging. I know what high fees are, because I have low fees to compare it to. I understand what the S&P 500 means in the context of a financial product.

I know all of these things because of my job. My obsessive question asking is what led to this podcast in the first place. It’s a great position to be in, but I’m fairly sure I’m one of very few people who get to be in this position.

This week is a great example of how Simon helps me understand these products. I ask the same questions until I’m satisfied that I understand the answer. You’ll note that we are talking derivatives again. Although we’ve discussed it before, I always come back to it. Even though I understand the basic premise, I struggle to wrap my head around these products. I get the feeling I’ll only ever truly understand them if I start trading them myself.

This week we do an on-the-fly checklist of things you need to ask when someone tries to sell you a financial product. We start, as always with fees. The underlying product, counter party risk, whether the product is listed and how the provider makes money are all on the list.

Kris