Few events match the depth and expertise of SPi Canada when it comes to structured products. The success of this year's edition was largely due to the exceptional engagement from all seven major Canadian banks, which allowed us to deliver key insights to financial advisors on market risks, product pricing, and emerging opportunities within the industry.
In just half a day, we condensed an impressive range of high-value content and education. The event kicked off with a comprehensive SPi presentation focusing on the Canadian structured products market, specifically Principal at Risk Notes (PAR) and Principal Protected Notes (PPNs). With PAR notes exhibiting a remarkable 90% year-on-year growth and PPNs growing by 27%, these products are shaping the future of the market. However, while the Canadian structured products market saw a 42% uptick, the outstanding volume increased only by 8%, indicating that the boost in sales was driven largely by the faster roll-over of early-expiring autocalls.
One of the event’s most insightful discussions came from a panel of independent dealers and seasoned advisors, who tackled the pressing question of how to replace expiring autocalls. Their conclusion was clear: Investors remain yield-hungry, and in today’s environment of diminishing inflation and lower interest rates, the challenge is aligning capital preservation with income generation. This delicate balance is crucial to meeting investor expectations.
Amid heightened volatility and interest rate fluctuations, Maria Tihotchi provided a deep dive into the factors influencing indicative product pricing. Her presentation underscored the importance of understanding key elements like time to maturity, volatility, and interest rates, particularly since products are designed to be held until maturity. She emphasized that while no one calls you when prices rise, explaining price movements—especially in volatile conditions—is vital for advisors to maintain client trust.
An exciting highlight of the event was the introduction of WSD’s first structured products AI expert, Melody. During an engaging Q&A session, advisors raised insightful questions about how AI could help them navigate product selection and market availability. Melody’s interaction demonstrated the potential for AI to assist advisors in making more informed, data-driven decisions, a development many are eager to explore.
We also heard from issuers during two distinct panels. The first focused on the evolution of product ideas, particularly around capital preservation, while the second addressed the future of structured products in Canada. It was particularly noteworthy when issuers acknowledged that the rise in decrement indices cannot continue unchecked. They expressed a desire to avoid adding unnecessary complexity, though this presents a challenge for advisors accustomed to higher yields. The consensus seemed to be that with Canada’s strong dividend-paying banks and companies, seven-year terms remain dominant, though there is growing interest in short-term products despite less favorable backtesting results.
Ultimately, Canada’s structured products market faces an interesting paradox. While it continues to grow and deliver solid performance, advisors are grappling with how to diversify their strategies. As the market evolves, the key question remains: how can advisors continue to leverage these products effectively while balancing client needs for yield, capital preservation, and manageable complexity?
