Structured Notes (SNotes)
Target Outcome Investing with downside protection
Concerned about market volatility? It’s time for a change. Our services:
Product suitability review
S-Notes monitoring (redemption/re-investment)
October 2020 Offerings
Orders must be received and funded by 10/19/20
Structured notes are securities issued by financial institutions whose returns are based on, among other things, equity indexes, a single equity security, a basket of equity securities, interest rates, commodities, and/or foreign currencies. Thus, your return is “linked” to the performance of a reference asset or index.
Structured notes have a fixed maturity. Financial institutions typically design and issue structured notes, and broker-dealers sell them to individual investors. Some common types of structured notes sold to individual investors include: principal protected notes, reverse convertible notes, enhanced participation or leveraged notes, and hybrid notes that combine multiple characteristics.
Making SNotes more acessible!
Structured notes are more than an estimated $2 trillion dollar market globally**. So why haven’t more investors heard of them?
Traditionally, structured notes had a $1 million minimum investment. They were only available to high-net-worth or institutional investors. Our goal is to make structure notes more accessible.
**Source: Halo Investing
Types of SNotes we offer
SNotes Main Benefits
Predictable Investment Outcomes
SNotes are investments that provide a return based on the performance of an asset. Most often this asset is either a stock index, ETF, or single stock. The advantage of these investments is that an investor can pre-define both the payoff (how the investment pays) and the level of capital at risk (how much you can lose). Structured notes are guaranteed by the issuing bank..
Growth with Protection
SNotes often provide the ability to realize some or all of the upside of an underling asset while minimizing or reducing the downside risk. Some even provide the ability to realized enhanced upside. As an example a Structured Note with the S&P 500 as the underlying asset might provide all of the upside on the index returns up to 10% and protect the first 10% of potential looses on the downside. If the S&P 500 goes up 9%, you make 9%. If the S&P 500 does down 9% you do not make any gains but you also don’t lose any money. Notes with enhanced upside may allow you to realize as much as 190% or more of the gains of an underlying asset. In this case if the S&P made 10% you could earn 19% on the note.
Income with Protection
Many SNotes are designed for income oriented investors. They track an underlying asset such as a basket of stocks or an index but instead of delivering a variable return based on performance of the underlying asset, they pay a contingent or guaranteed coupon. These coupons are typically between 3%-12% and paid semiannually. They often offer downside protection on any declines on the underlying asset as well. One of the most popular Income notes provides 30% downside protection on the S&P 500 and Russell 2000 and pays contingent coupon payments between 7%-9% annually. Typically the coupon payment will increase on notes issued during periods of higher market volatility.
SNotes Main Considerations
SNotes are target-maturity investments. As such, investors should purchase them with the intention of holding the investment to its maturity 12, 16 or 18 months or more. Generally, the issuer will maintain an early redemption program and or buy back the SNote prior to maturity; however, while gains are possible there is no guarantee an investor will be able to sell the note early for a gain.
SNotes are guaranteed by the issuer. As such, an investor in SNotes is subject to issuer risk should an issuer becomes insolvent. MRA recommends issuers that have a credit rating of “A” or better.
The main purpose of a SNote is to provide growth or income with protection. For that benefit, tmost SNotes create a limit (“cap”) on the growth potential of the note. In some cases, investors may have been better off investing in the underlying securities directly without the protection of a SNotes. In addition, investors can also lose money should the market and underlying securities fall more than the barrier or buffer (“hard or soft principal protection”) of a note.
No commissions. Account minimum: $25,000
- Annual fee ranges from 0.40% – 1.50% based on the table below. Fee we be billed monthly in arrears in 1/12 intervals and will be pulled from your investment account. As an example, the monthly fee for the first assets under management tier ($0 – $499K) is $1.25/per $1,000 invested.
Why Choose MRA Advisory
Our team has been helping clients achieve their investment goals through structured notes for over 15 years.
Our clients interest is at the forefront in all we do. We get paid for advice. We don’t charge commissions.
Alignment with our clients's interests
Our firm’s objectives to Simplify Your Financial Life, Instill Confidence with a Plan and Pursue Growth
Frequently Asked Questions
What's the minimal account balance to sign-up for S-Notes?
$25,000 is the account minimum. In addition, we recommend that the amount invested in structured notes should not be more than 20% of an investor’s liquid assets.
What types of accounts can be used to invest in S-Notes?
Most types of accounts are permitted to invest in S-Notes. Some of the most common include Individual Accounts , Joint Accounts, IRAs, 401ks, SEP IRAs, SIMPLE IRAS, Pensions, Business Accounts & Trust Accounts. Our team of experienced Financial Advisors can help you determine ownership type and suitability.
How do I track my investment?
MRA has a robust online account platform where you can track your investment in real time. Paper and or e-statements are also generated on a monthly basis.
What other services does MRA Advisory offers?
MRA is a full service registered investment advisory firm offering a wide range of asset management, financial planning and protection solutions as well as accounting services and private real estate investments.
What are the fees the am I expected to pay?
MRA does not charge any commissions or service fees to invest in S-Notes. Instead, we charge an annual asset based fee based on account size. Doing so ensures our interests are aligned with our investors. A typical annual management fee ranges between 0.40% and 1.50% per year.
Have Questions? Let’s Talk.
Schedule a complimentary video call with one of our fiduciary advisors today to learn with SNotes should be part of your investment portfolio
Glossary of S-Notes terms
An Autocall feature provides for the automatic redemption (an “automatic call”) of a note upon the occurrence of certain stated conditions. Typically, a note with an Autocall feature will be automatically called if the level of the Underlying crosses a specified threshold on a specified day (or on any day during a specified period). The applicable note will specify the amount to be paid to holders (or how such amount will be calculated) which will likely be different than the payment a holder would receive if such notes were not automatically called prior to maturity.
Additional term(s): Automatic Call; Autocall; Automatic Redemption; Auto-Redemption
Geared Hard Protection
A Geared hard protection feature may be included in notes which expose investors to the negative performance of an underlying. A Geared hard protection will specify the level at which investors will begin to participate in the negative performance of an underlying and will increase the rate of an investors participation in the negative performance of an underlying. *Note that the increased rate of downside participation is a rate that would result in an investor losing 100% of their principal in the event the underlying return is negative 100%.
Additional term(s): Gearing; Downside Gearing; Airbag; Downside Acceleration; Downside Leverage; Downside multiplier.
A Growth Note provides the opportunity to participate in the performance of an underlying. A Growth Note may be tied to any positive performance or limited to a range of positive performance. The rate of participation will be determined by the Participation Rate. However, there is no assurance that the performance of the underlying asset will actually result in any “growth” or positive return of the Note.
Additional term(s): Participation; Tracker
A Guaranteed Coupon feature provides holders of a note with a periodic payment while the applicable notes are outstanding regardless of the performance of any underlying.
Additional term(s): Fixed Coupon; Fixed Interest; Interest; Interest Payment; Fixed Interest Payment; Coupon; Non-Contingent Coupon; Non-Contingent Interest; Non-Contingent Interest Payment
An Issuer Call feature provides for the redemption of a note at the discretion of the issuer. Typically, a note with an Issuer Call feature may be called by the issuer on a specified day or days during the term of the note. The applicable note will specify the dates on which a holder will be paid if the notes are called and the amount to be paid to holders (or how such amount will be calculated) which will likely be different than the payment a holder would receive if such notes were not called prior to maturity.
Additional term(s): Optional Issuer Redemption
Income Notes are Structured Products which provide a periodic coupon payment. These Notes can be used to express a wide range of market sentiments and are highly customizable.
Income Notes may have a fixed term or be subject to early termination if certain specified conditions are met. If an Income Note is subject to early termination (call), a holder will receive any payment due (usually a return of principal and a final coupon payment) and will no longer be entitled to any additional coupons. Coupon payments for Income Notes can be configured to pay on a guaranteed or contingent basis at a frequency that is determined by the investor.
Typically, an Income Note’s potential positive return is limited to its coupon payments. Despite the product’s lack of participation in the positive performance of an underlying reference asset, most Income Notes are exposed to the applicable underlying’s potential downside performance.
If the reference asset or index falls below a pre-specified level during the term of the note, you may lose some or all of your principal investment at maturity and also could lose coupon payments scheduled throughout the term of the note. This pre-specified level
may be called a barrier, trigger, or knock-in. When this level is breached, the payout return changes on the note. For example, if the reference asset or index falls below the knock-in level and its value is lower than on the date of issuance, instead of receiving a return of your principal, you may instead receive an amount that reflects the decline in value of the reference asset or index. For certain types of structured notes, you may actually receive the reference asset that has declined in value during the term of the note.
A Maximum Return feature limits the return an investor may receive on a note, regardless of how favorably the Underlying may perform.
Additional term(s): Max Return; Maximum Payment; Maximum Payment at Maturity; Maximum Redemption Amount; Cap; Capped Return
Point to Point
Point to Point can be used to describe the measurement of performance between two successive points of time of an underlying asset in a Structured Product. These two points are the “Strike Date” and “Final Observation Date”.
A Protection Level is equal to a percentage of an underlying’s initial level. A Protection Level may indicate the required level of an underlying that is required to receive certain payments on a note or the level at which certain downside features may take effect.
Additional term(s): Threshold Level; Downside Threshold; Downside Threshold Level; Barrier Level; Buffer Level; Downside Barrier Level; Downside Barrier; Knock-In Barrier; Knock-In Barrier Level; Knock-Out Barrier; Knock-Out Barrier Level; Contingent Barrier Level; Coupon Barrier; Coupon Threshold; Coupon Barrier Level; Coupon Threshold Level; Contingent Coupon Barrier; Contingent Coupon Barrier Level; Contingent Coupon Threshold Level; Downside Knock-Out; Upside Knock-Out
A soft protection feature may be included in notes which expose investors to the negative performance of an Underlying. The level of soft protection will specify at where investors will begin to participate in the negative performance of an Underlying.
Additional term(s): Trigger; Knock-In; Contingent Barrier
The scheduled duration for which a Note may remain outstanding is referred to as its Term. Term is usually measured from a Note’s Issue Date to its originally scheduled Maturity Date and is subject to adjustment if a Note may be redeemed before its scheduled maturity or extended.
The return on a note may be based, in whole or in part, on the performance of one or more Underlyings. An Underlying may be one or more: an index, single stock equity securities, or exchange traded funds.
Additional term(s): Reference Asset; Underlier; Underlying Asset; Underlying Stock; Underlying Index; Reference Stock; Reference Index; Reference Rate; Base Rate; Reference Commodity; Reference Basket; Basket; Basket Underlier; Underlying Basket
Some structured notes provide a minimum payoff of the principal invested plus an additional payoff to you based on multiplying any increase in the reference asset or index by a fixed percentage. This percentage is often called the participation rate. A participation rate determines how much of the increase in the reference asset or index will be paid to investors of the structured note. For example, if the participation rate is 50 percent, and the reference asset or index increased 20 percent, then the return paid to you would be 10 percent (which is 50 percent of 20 percent).
* Source: Investor.gov: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-76