Autocallable Principal at Risk Notes: Why?

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Michael D
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Autocallable Principal at Risk Notes: Why?

Post by Michael D »

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?
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Shakespeare
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Re: Autocallable Principal at Risk Notes: Why?

Post by Shakespeare »

Why would anyone ever buy this?
Well, they're a good deal for the seller and the broker. Two out of three ain't bad. :wink:
fee-based account.
Advise her to consider moving elsewhere. This kind of crap should not be pushed in such an account.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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