Breaking the chains

The need to diversify customer credit risk and the rising importance of fiduciary standards make open architecture distribution vital to structured products’ future. As advisers become concentrated in bigger institutions and market volumes remain static, can the industry afford to ignore the open model? By Sophia Morrell

The structured products distribution model in the US is skewed. Captive channels held within the brokerage arms of a handful of major banks have traditionally stayed relatively closed. Third-party broker dealers, by contrast, have taken products from all issuers, adopting the same approach as independent registered investment advisers (RIAs), which answer only to their own due diligence requirements.

A gradual shift towards open architecture on the part of the biggest distributor banks has been