You are at your financial institution to make a fixed deposit. Before processing your request, the person you are dealing with is likely to suggest exploring investment opportunities to help you earn returns higher than the current fixed deposit rate. If you agree, you will be ushered to another section where one of the sales staff will introduce you to investment products and also the latest product promotions.

The sales staff may introduce a structured product to you. Before you decide whether to invest in a structured product, you should get satisfactory answers to these important questions:

Q1. Are you familiar with my financial needs and objectives?

Financial institutions are equipped with fact finding tools to help you understand your financial health and investment needs. It is important for you to go through financial health checks with your financial institution before embarking on any investment product discussions. You must be honest and willing to disclose your financial information. If there is insufficient or inaccurate information, you may be recommended products that are not suitable.

Q2. Do you know my risk profile? Financial institutions are also equipped with suitability analysis tools to help identify your risk profile (or preference). This, together with the fact finding process - should be conducted by the financial institution before introducing products to you. You must insist on this process.

Q3. How risky is the structured product(s)?

Usually, the first question investors ask is "what kind of returns will I get?" But knowing the returns first may just distract you from first considering the risks of the investment. It is therefore important for you to know all the risks of the structured product first before knowing the returns. Find out what is the worst case scenario. For example, can you lose all or a significant part of your capital? Ask for details of the various risk factors that may affect your returns or put your principal at risk.

You must also ask who the counter parties are and the counter party risks involved as well as the possible risk default by the issuer and counter parties' default risk. These will help indicate how risky the product is.

Always remember, higher the returns, higher the risks. Do not take on more risk than you can tolerate.

Q4. What are the expected returns on the structured product?

You should be familiar with the conditions attached to the payment of returns especially for structured products. One way to assess the attractiveness of returns is by comparing this against interest currently offered by fixed deposits. Attractive past returns are not much use to you if there is limited certainty of similar returns in the future.

Q5. How does this product(s) fit my investment needs?

Once the financial institution's sales staff has taken time to understand your investment needs, risk profile, budget and explained to you the different products shortlisted, he should explain how well they fit your investment needs and risk profile, rather than focus on how good the structured products are.

Also ask the sales staff of the financial institution whether there are alternative investment products with a similar risk-return profile as that of the structured product introduced to you.

Q6. How does this product fit into my investment portfolio?

All investment opportunities should not be considered in isolation but should be assessed together with the rest of your portfolio. This will ensure that your investment portfolio is well diversified and not unnecessarily skewed by any investments.

Q7. How much fees would the financial institution and its sales staff earn on the product?

This can help you assess whether the financial institution and its sales staff would be in a position of conflict where they may be motivated to promote one product over another.

Q8. How often will you update me on the product after the investments? You should ensure that you receive product updates from your financial institutions frequently regardless of the financial or economic conditions. This will allow you to make adjustments to your portfolio through the investment period. You should therefore get a commitment from the financial institution to provide such "after investment" service.

Q9. How can I exit this structured product and what should I expect when exiting?

This is an important question. Knowing how and when the structured product can be liquidated and also the cost attached to the process of liquidation will help investors plan their cash flows and also their balance sheet.

Do note that when you invest in structured products, your money will be tied up for a period of time and early withdrawal may result in loss of part of your return and/or principal. Make sure that you have sufficient savings set aside before investing in structured products.

Q10. Can I go back and consider the structured product you have introduced? You should not part with your hard earned money to invest in any structured product(s) without fully understanding what you are doing. It is important for you to take the information back and read through the materials. (Note that you may be asked to indicate that you have read and understood the material in the transaction documents.) If you have any questions, ask the financial institution for clarifications. If you do not understand it or are not comfortable with the risks, by all means seek a second opinion.

Do not rush into any investment without due and proper consideration.