Structured notes are turning heads among advisors, says CAIS

More investment advisors are finding a place in their clients’ portfolios for structured notes, according to leading alts provider CAIS.

In a statement Thursday, CAIS said it’s registered a spike in demand for structured notes on its platform, which it attributed to an increased appetite for diversification.

An opportunity accessible to accredited investors, structured notes give investment advisors more room to maneuver through market turbulence. Also known as structured investments, the flexible investment options are structured to potentially achieve a range of objectives including mitigating volatility, generating substantial returns, or enhancing income.

"Structured notes have emerged as an integral part of an advisor’s toolkit by providing the potential for yield, growth, and/or protections," Marc Premselaar, head of structured investments at CAIS, said in a statement.

A 2023 CAIS-Mercer survey involving over 250 independent financial advisors shows a sector in sunrise, with nearly one-third currently invested in structured notes and a quarter planning to increase their allocations by 2025.

On its platform, CAIS reports that it has seen a 46 percent rise in advisors allocating to structured notes in Q1 2024 compared to Q1 2023, outpacing the broader industry over the same timeframe.

"We view these products as another core alternative to help advisors achieve outcomes for their end-clients, and our technology is paving the way in ensuring these solutions are both accessible and well-understood," Premselaar said.

In response to the growing demand, Osaic, whose wealth footprint includes a staggering $500 billion in assets under administration, recently expanded its partnership with CAIS to enhance its structured notes offerings.

In May, CAIS also unveiled a collaboration with MassMutual, giving advisors at the firm’s broker-dealer subsidiary access to the CAIS platform of structured notes and other alternatives.

In September, Mariner and CAIS announced a partnership to introduce Mariner Wealth Advisors’ SMA capabilities for structured notes to a wider audience of advisors across the independent wealth space.

“Since launching with CAIS last year, our structured notes SMA strategies have seen remarkable growth,” said Marty Bicknell, CEO and president of Mariner. “CAIS’ ability to help us deliver streamlined access to our advisors, alongside their experienced advisor-focused team, has made this an ideal collaboration.”

It must be said that structured notes, like most if not all investments, aren’t for everyone. That point was made plain in July 2023 when a veteran advisor with Stifel saw himself hit with eight investor claims with damages totaling $23.5 million over the sale of structured notes.

The laundry list of allegations included breach of fiduciary duty, negligence, fraud, and breach of contract, among other charges.

“While structured notes may enable individual retail investors to participate in investment strategies that are not typically offered to them, these products can be very complex and have significant investment risks,” said a 2015 SEC bulletin to investors. “Before investing in structured notes, you should understand how the notes work and carefully consider their risks.”