By Tom Bradley

"We’ve priced this product to do well in the marketplace … it’s the right product for the times …” - Martin Nel, vice-president of personal bank lending and investment products, Bank of Montreal

I’m sure there are readers who wonder why we write so negatively about structured products. Why we say they’re stacked in favour of the issuer. Why we worry that they’re threatening the integrity of the wealth management industry.

Well, don’t take our word for it. Read John Heinzl’s article today in the Report on Business. He drills into the BMO Blue Chip GIC and comes away with the conclusion that it “is a safe investment alright – for the bank.”

John reveals just how convoluted products like this are. Here are a few clips:

“There are [ten]stocks that any investor would be proud to own, except that if you buy the BMO Blue Chip GIC, you don’t actually own the stocks. Nor do you collect the dividends. The stocks are merely used as a 'reference' for calculating the variable return.”

“… if a stock in the portfolio posts a positive return – regardless of how big – the 'effective return' of that stock is deemed to be 4 per cent …”

“If a stock drops by between zero and 10 per cent, the 'effective return' is the same as the actual loss. Only when a stock drops more than 10 per cent is the 'effective return' capped at negative 10 per cent.”

Reference portfolio? No dividends? Effective return? Odds in the bank’s favour? Sounds like a great product for the times.