Retail Brokerage and Distribution Report—Canada Spring 2017

Since their introduction in the late 1990s, the issuance of structured notes has grown every year with the exception of 2008. Since then, a design renaissance around structured notes saw their star rise in full-service brokerage—an ascendancy evident in the large number of notes issued on a near-continuous basis by the Big Six banks. We examine how the evolution of the structured note, from the relatively vanilla, principal-protected note (PPN) to the new wave of principal-at-risk notes (PARNs), has shaped the activity of both issuers (for the most part, the Big Six banks) and distributors, particularly full-service brokerage advisors. Supported by advisors seeking to manage risk and maximize yield among a clientele that is both increasingly wealthy and often older, structured notes have been a welcome addition to the product shelves of full-service brokerage firms. Understanding how these products have gained prominence among FSB advisors and how they have evolved to fit into the demand profile and practice models emerging in the channel is the focus of this feature. We track the issuance of notes as well as the uptake measured by outstanding balances, net of the steady stream of auto-called PARNs. While structured notes represent a very minor part of the FSB business, for now, their narrative arc remains compelling and makes this feature an important read for all issuers and distributors of structured notes.