SPi data shows the structured note market reached $194 billion in 2024, a milestone that underscores how quickly these products are moving into broader advisor use. But as adoption accelerates, the conversation is shifting.
Beyond growth, advisors and platforms are grappling with tougher issues around pricing transparency, simplifying complex structures, and educating clients on how structured notes fit into long-term portfolios.
According to Halo Investing co-founder and president Jason Barsema, the growth story so far is only the beginning. He’s told InvestmentNews that there is a fundamental change in how advisors and investors are thinking about risk and return.
“The growth in structured products has primarily been driven by increasing advisor demand for both defined outcome and protective investing strategies in portfolios,” Barsema said. “As equity prices continue to push higher, and as a result, market valuations, investors have been seeking more conservative ways to deploy cash for fear of missing out on a stock market rally that may continue.”
Technology has also played a central role. Barsema emphasized that growth has not just come from market conditions, but from access and education.
“Growth in the structured products market has also come from democratized access to the product through technology platforms which enable investors to not only access the products for the first time, but to become educated on and model structured products within the portfolio,” he said. “This is critical, as investors have been moving from the ‘what,’ to now, the ‘why’ within structured products. It may be a good sign for future growth within the industry.”
As adoption widens, many observers have compared structured notes today to ETFs in their early days - once niche, now core. Barsema believes that comparison is increasingly accurate.
“We have certainly been seeing the ‘ETF moment’ with structured products becoming more core within the portfolio,” he said. “For example, with Halo’s clientele, we saw more volumes being driven toward growth-oriented structured products than ever before, a market that has been primarily ‘yield-based’ when it comes to the types of structured products used.”
He noted that advisors are using these tools in more sophisticated ways alongside traditional investments.
“Specifically, advisors are using growth-oriented structured products to layer on top of their passive ETFs as a way to protect the downside while achieving a level of enhanced upside versus owning a passive index,” Barsema said. “This is an approach I used at Credit Suisse with my private banking clients that is now becoming more prevalent in the broader Advisor community.”
Despite wider use, structured notes continue to face lingering skepticism, much of it rooted in history.
“Structured products have had a challenging past after the 2008/2009 Financial Crisis, but a lot has changed in the market over the last ~20 years,” Barsema said.
Liquidity is one of the most common misconceptions, he explained.
“One of the biggest misconceptions about structured products is on the topic of liquidity. We often hear that structured products aren’t liquid, and that is not true,” Barsema said. “While it is true that the core benefits—such as principal protection and defined upside—are designed for those who hold until maturity, the idea that investors are ‘locked in’ is outdated.”
He pointed to meaningful improvements in secondary markets and transparency.
“Today, the market offers consistent secondary market access, with many issuers providing daily price transparency and the ability to exit positions under normal market conditions,” he said. “Volumes continue to grow in the secondary market of structured products, which demonstrates that investors are overcoming these misconceptions.”
Education, he added, is key to breaking down outdated views.
“Portfolio modeling tools and education are also helping address many of the misconceptions in the products, which we fully support. More transparency will only benefit volume growth in the future.”
As demographics and valuations shift, advisors are increasingly positioning structured notes as defensive or defined-outcome strategies rather than exotic instruments.
“As the investor population gets older and coupled with elevated valuations in the public equity markets, advisors are looking for more ways to maintain exposure to the stock market without having to take all the risk,” Barsema said. “I believe that is just prudent investing, regardless of equity market valuations, and advisors are starting to adopt that same thinking.”
He framed structured notes as tools designed to meet specific objectives.
“In its simplest form, end investors target a specific return profile on the portfolio, so any tool that can provide more certainty in the portfolio to meet those objectives is going to gain in popularity,” he said.
Barsema compared the role of structured products to insurance.
“It’s similar to insurance on your home. You have it and you hope to never have to utilize it, but in the event something does happen to your home, you are certainly thankful you have the protection,” he said. “Investing is no different; advisors are positioning structured products in the portfolio as a way to cut off the tail risk within the portfolio which can ultimately lead to better decision making throughout the broader portfolio.”
As products proliferate, simplifying structures and improving transparency remain ongoing challenges.
“I am a big supporter of simpler products in the portfolio,” Barsema said. “Complexity leads to more challenging client conversations, and over time, can lead to suboptimal portfolio returns.”
He acknowledged progress but said there is still room to improve.
“The industry has done a much better job of being transparent on the fees and offering technology that allows advisors to design a solution tailored to their clients’ specific needs,” he said. “Education and portfolio modeling have helped simplify the message to clients, but we are just scratching the surface on what is possible.”
Looking ahead, Barsema sees artificial intelligence as a key enabler.
“With AI, advisors will be able to take a much deeper and personalized approach to investing, which directly complements the benefits that can come with utilizing structured products,” he said. “The key is to focus on client objectives in the simplest form possible. The more complex products become, the more niche they will be.”
As structured notes become more mainstream, regulation will play a growing role in shaping trust and adoption. Barsema is unequivocal in his stance.
“While my view is not a popular one, I firmly believe that the more regulation we have in the industry, the better the industry will be,” he said. “That being said, we need regulation in the right form.”
For Barsema, that means standardization and context.
“We need even greater transparency on pricing for investors, standardized documentation and nomenclature, and also viewing structured products as solutions within the lens of a holistic portfolio, not on an individual basis,” he said.
He emphasized that regulation can ultimately benefit investors most.
“Regulations are never perfect, but they do bring a level of confidence to a market that will lead to wider adoption of structured products, benefiting all market participants, most importantly being the end investor.”
Looking forward, Barsema believes the next leap in adoption will come from integration.
“For structured products to truly surpass ETFs, which I believe they will, the market needs more seamless integration of the products into model portfolios,” he said.
He pointed to lessons from earlier investment vehicles.
“If you look at both the mutual fund, and ultimately, the ETF market, the mass adoption came when they were seamlessly integrated into model portfolios and offered transparent liquidity,” Barsema said. “The same is true with structured products, and that future is closer than perhaps the market believes.”
As structured notes move from rapid growth into a more mature phase, Barsema’s message is clear: simplicity, transparency, and integration - not complexity - will determine whether they become a permanent fixture in advisor portfolios.
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