IDAD Royal Bank of Canada US Income Deposit Plan - Issue 5 - June 2024
The IDAD Royal Bank of Canada US Income Deposit Plan - Issue 5 - June 2024 has a 4 year 2 week investment term offering an Interest Rate of 7.00% p.a. paid quarterly, if on any annual Observation date, the Underlying Index is between the upper and lower barrier levels the investor will receive income. This plan is only available on an Advised basis.
- Market / index link: S&P 500 Index
- Counterparty: Royal Bank of Canada
- Investment term: 4 years, 2 weeks
- Kick-out / Early maturity: No
- Barrier type: Not Applicable (Structured Deposit)
- Barrier level: N/A
The closing date for ISA transfer applications is 17 May 2024.
Product Literature & Forms
You should always read the relevant plan brochure and any other plan documentation, for full details of the plan’s features, including any risks, and the terms and conditions. In addition to the plan brochure and terms and conditions there are other important documents, including a Key Information Document ('KID'), that you should consider, before deciding to invest in the plan.
If you do not fully understand the risks or are unsure as to the suitability of the investment, please contact us
How to Invest?
Please note: This plan is available on an advised basis only. If you are interested in this plan, please telephone us on 01639 860111 to arrange a free consultation
1 Call for a free initial telephone consultation. If you wish to progress the process of the product purchase, the regulatory process of ‘advice’ must commence.
2 The completion of a financial review – which will confirm details of your income/capital and investment needs and experience
3 The completion of a risk profiler - which will help to measure your attitude to risk.
This process will enable ‘advice’ to be provided in relation to the suitability of the product to meet with your needs. The fee for this service and process is 1.5% (subject to a minimum fee of £300) for focused advice – which is focused and narrowed to the suitability of the structured product you want to purchase.
Further Information
This is a 4 year 2 week Deposit Plan linked to the performance of the S&P 500 Index. The Deposit Plan is constructed to offer a potential return of 8.00% p.a. If on any annual observation date (including the Final Observation date), the Underlying index is between the upper and lower barrier levels income will be paid. For clarity, if on any annual observation date, the Underlying Index is outside the range, no income will be received, and the plan continues until the next observation date.
The opportunity for full capital protection and Income is the key aim of this investment.
The investment is linked to the S&P 500 Index (see page 8 of the Brochure for full details) and investors will benefit from growth or declining market conditions.
The initial investment into the Deposit Plan, minus any initial adviser fee, will be returned in full at maturity.
Please see Page 7 of the Brochure for an illustration of how the upper and lower barriers observed annually would be set, assuming the S&P 500 Index on the Strike Date being 4,500 points.
The Deposit Taker is Royal Bank of Canada. Royal Bank of Canada is a diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services. Royal Bank offers its services to personal, business, public sector and institutional clients with operations worldwide.
Royal Bank of Canada are the Deposit Taker for the US Income Deposit Plan; therefore investors are exposed to the risk of them defaulting on their obligation to repay the capital and any returns due under the terms of the Deposit Plan.
Considerations when selecting the deposit taker / issuer:
Fitch, Moody’s and Standard & Poor’s are the main three independent credit ratings agencies that research and grade the ability of financial and other institutions to make the payments due from the Deposit / Plan issued and / or guaranteed by them. Each rating agency describes and names its ratings in a different way. For example, Standard & Poor’s highest possible rating is AAA, followed by AA and A. These three ratings along with their BBB rating are generally regarded as investment grade (i.e. of higher quality). All of these ratings, except the AAA rating, can also be modified by a plus or a minus to give a deposit taker’s / Issuers relative status within the grade; for example, A+, A, A- for the A rating.
Royal Bank of Canada have ratings from each of these agencies as follows:
*S&P’s AA- / Moody’s Aa1 / (*Source Bloomberg and Plan Termsheet)
Don’t forget the risks
All investments carry risk. It is identifying those risks, understanding how they may affect an investment and assessing whether an investment is suitable for your circumstances that is important.
The potential returns of most structured products and repaying the money invested are usually linked to the level of a stock market index and also depend on the financial stability of the issuer and counterparty bank. You should only consider investing if you understand and accept the risk of losing some or all of any money invested.
You should always read the relevant plan brochure and any other plan documentation, for full details of a plan’s features, including any risks, and the terms and conditions. In addition to the plan brochure and terms and conditions there are other important documents, including a Key Information Document (‘KID’), that you should consider, before deciding to invest in a plan.
Structured products should only be considered as part of a diversified and balanced portfolio.
Below is a summary of some of the main risks usually associated with an investment in structured products plans:
Market risk to potential returns
Whether or not a plan generates the potential returns for investors usually depends on the closing level of the relevant index on the relevant dates for the plan, i.e. the kick-out anniversary dates for kick-out products; the early maturity dates and end dates for growth products; the annual income dates for income products.
If the index closes below the level needed, for the plan or plan options chosen, on all of the relevant dates, the plan or plan options will not generate a return.
Market risk to repayment of money invested in 'Capital-at-Risk' plans
If the closing level of the relevant index is below the level needed on all of the kick-out anniversary dates or early maturity dates, if relevant for the plan or plan options chosen, and on the end date, repaying the money invested at maturity will usually depend on the closing level of the index on the end date..
Different structured products use different types of protection barriers. Some products use barriers that are observed every day that can therefore be breached on any day during the investment term, while some products use barriers that are only observed at the end of the investment term and that cannot therefore be breached during the investment term.
Market risk to the repayment of money invested on the end date will depend on the type of barrier and its level.
For example, for a product with an end of term barrier, set at 60% of the start level, if the index for the plan closes at or above 60% of the start level, on the end date, money invested will be repaid in full (less any agreed adviser fees and withdrawals). However, if on the end date the index closes below 60% of the start level, the amount of money repaid (less any agreed adviser fees and withdrawals) will be reduced by the amount that the index has fallen. For example, if the index has fallen by 45%, the repayment of money invested will be reduced by 45% (meaning that investors will get 55% of their investment back).
'Protected' types of structured products
Some structured product plans are designed so that they are 100% protected from stock market risk at the end date.
It is important to understand that even if a structured product plan is designed with 100% protection from stock market risk, at the end date, it will still usually have issuer and counterparty bank risk. In other words, both the potential returns of the plan and repaying the money invested at the end date will depend on the financial stability of the issuer and counterparty bank. If the issuer and counterparty bank become insolvent, or similar, or fail to be able to meet their obligations, it is likely that investors will receive back less than they invested.
Issuer and counterparty bank risk
Both the potential returns and repaying the money invested of most structured products depend on the financial stability of the issuer and counterparty bank. If the issuer and counterparty bank become insolvent, or similar, or fail to be able to meet their obligations, it is likely that investors will receive back less than they invested.
Financial Services Compensation Scheme ('FSCS') protection
It is important to understand that it is not usually possible to claim under the Financial Services Compensation Scheme if the issuer and counterparty bank fail to meet their obligations or if the stock market index that a plan links to falls.
Structured deposits
Structured deposit plans are deposit-based and will usually be fully protected from stock market risk at the end date and also benefit from the protection of the Financial Services Compensation Scheme, if the bank or building society is a licensed UK deposit taker.