Why Smart Advisers Choose Structured Notes for Offshore Clients

In the evolving world of offshore financial advice, smart advisers are increasingly incorporating structured notes—also known as structured products—into their clients’ portfolios. These versatile investment tools offer a combination of downside protection, customisable risk-return profiles, and cost efficiency that make them particularly well-suited for the unique demands of expatriate and offshore investors.

While structured notes in onshore markets such as the US or UK may be commonly understood, offshore notes often differ significantly in design and application. They provide distinct advantages that forward-thinking financial advisers should consider when building robust, diversified investment portfolios for clients operating in less regulated or globally mobile environments.

What Are Structured Notes?

Structured notes are hybrid financial instruments typically issued by banks. They combine elements of debt and derivatives to create tailored investment solutions with predefined outcomes. These notes can be structured to deliver returns linked to the performance of an underlying asset, such as equity indices, stocks, commodities, or even currencies. Importantly, most NEBA structured notes include downside protection mechanisms, which limit losses in falling markets—something traditional funds and ETFs cannot offer.

For offshore advisers working with globally mobile clients, structured notes offer a sophisticated, highly adaptable investment tool that aligns well with modern portfolio construction principles.

Why Structured Notes Belong in Offshore Portfolios

1. Built-In Downside Protection

One of the key benefits that set offshore structured notes apart from traditional investments is downside protection. In uncertain times—whether due to geopolitical instability, global market volatility, or unexpected economic events like the imposition of tariffs—structured notes can help safeguard investor capital.

Unlike direct equity investments or mutual funds, which are subject to full market losses, many structured notes include a protection barrier (e.g., 20%-40% from the start value). This means even if the underlying market falls within that range, the client’s capital is preserved. In extreme downturns, the exposure is still limited in comparison to a traditional equity investment, making structured notes a valuable defensive asset.

2. Customisable for Client Needs

Structured notes offer tremendous flexibility, which makes them ideal for advisers tailoring portfolios to specific client needs. You can create bespoke notes based on the investor’s risk tolerance, preferred asset classes, market views, and investment horizon.

For example, a client with moderate risk appetite may prefer a note linked to a mix of blue-chip indices with a 30% protection barrier and a fixed coupon. Meanwhile, a more aggressive investor may opt for higher potential returns in exchange for a slightly lower barrier. This ability to match structure to investor profile makes structured notes far more personalised than standard fund offerings.

3. Defined Returns and Predictability

Another compelling advantage of structured notes is the certainty they can provide. Traditional funds and ETFs can deliver wildly fluctuating returns—2% one year, 10% the next, followed by a -6% drawdown. This unpredictability can be unsettling for clients trying to plan for their financial goals.

NEBA’s structured notes, on the other hand, often offer predefined coupons or returns. These can be fixed or conditional, depending on the note’s design, but the key benefit is that the terms are known upfront. If certain conditions are met—such as the underlying index remaining above a set level—the client receives their coupon. This level of transparency helps build trust and reduces anxiety for investors who value clarity and consistency.

4. No Annual Management Fees

Traditional investment funds often charge annual management fees in the range of 1% to 3%, which can erode investor returns over time. Structured notes generally do not have ongoing management fees. The cost of setting up the note is embedded in its pricing, and there are no deductions from the investment throughout the life of the product.

This means that clients are 100% invested from day one, with no trailing costs eating into returns. For cost-conscious clients, this can be a game-changer—particularly when you compare structured notes to active funds that may not consistently outperform passive benchmarks.

5. Simplicity of Operation

Once a structured note is created, there’s no ongoing management required from either the adviser or the client. The issuing bank tracks the performance, automatically calculates the applicable return or coupon, and processes payouts as defined in the original terms. This hands-off structure makes them efficient, transparent, and easy to explain.

In contrast, active funds require consistent monitoring, quarterly reports, and often portfolio changes to stay aligned with market conditions—adding another layer of complexity and ongoing decision-making.

6. Tradable and Liquid

Contrary to popular belief, structured notes are not illiquid. Many notes are listed and tradable on a daily basis, providing a level of flexibility that appeals to internationally mobile clients. Investors can exit early if needed, although the value will be marked-to-market and may differ from the initial capital.

This liquidity aspect makes structured notes a viable part of a broader portfolio strategy, offering optionality that long-term funds or illiquid direct investments may lack.

7. Diversification Benefits

Structured notes can be constructed using a broad range of underlying assets, from global equity indices like the S&P 500 or EuroStoxx 50 to individual stocks or commodity baskets. This versatility allows advisers to diversify client portfolios across sectors, regions, and asset classes.

More importantly, they introduce a different return profile than traditional instruments. In periods when traditional equities underperform or remain volatile, structured notes can provide positive returns due to their non-linear payout structures.

Conclusion: A Modern Tool for the Modern Adviser

The offshore advisory landscape demands innovation, adaptability, and an acute focus on client needs. Structured notes deliver on all fronts. They offer built-in risk mitigation, predefined returns, lower cost structures, and high customisability—all essential ingredients for building resilient investment portfolios in today’s uncertain world.

While they may not be suitable for every investor or every market condition, structured notes provide smart advisers with a powerful tool to add value, differentiate themselves, and deliver tailored outcomes to their clients.

In the end, smart advisers aren’t just selling investment products—they’re delivering solutions. And in the offshore world, structured notes represent one of the smartest solutions available today.