Greetings,
I am advising for GF who has a big bank wealth manager, fee-based account.
They bought an (in-house) principal at risk note, described below:
http://www.investorsolutions.gbm.scotia ... ueId=50369
If it goes up too much, they buy you out at a fixed gain. If it goes down less than 25%, you get your principal back. But if it goes down more than 25% you are exposed to the market. Seller takes a 2.5% sales charge off the top. The account holder's financial knowledge is low. I am a CPA, CMA, and it took me 2 hours to read the prospectus.
Why would anyone ever buy this? If I want to take the risk, I buy the equity index. If I want the guaranteed income, I would buy a bond.
Anyone have experience with these?
Autocallable Principal at Risk Notes: Why?
- Shakespeare
- Veteran Contributor
- Posts: 23396
- Joined: 15 Feb 2005 23:25
- Location: Calgary, AB
Re: Autocallable Principal at Risk Notes: Why?
Well, they're a good deal for the seller and the broker. Two out of three ain't bad.Why would anyone ever buy this?
Advise her to consider moving elsewhere. This kind of crap should not be pushed in such an account.fee-based account.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones