If you advise on structured products in the UK, you'll be familiar with the Key Information Document — the "KID" — that accompanies every PRIIP (Packaged Retail and Insurance-based Investment Product). This guide covers what the KID is for, what to look at, and where its limitations lie.
What is a PRIIP, and why does it matter here
Structured products fall squarely within the PRIIPs regulation's scope — they're packaged investments where the amount payable to the investor depends on reference values or the performance of one or more underlying assets. The regulation requires manufacturers to produce a standardised KID for retail investors before the product can be sold.
What's in a KID
Every KID follows a broadly standardised format, covering: what the product is and its objectives, a risk indicator (the Summary Risk Indicator, or SRI, on a 1-7 scale), performance scenarios (typically unfavourable, moderate, and favourable), costs over different holding periods, and the recommended holding period.
The Summary Risk Indicator — useful, but not the whole picture
The SRI gives a single number from 1 (lowest risk) to 7 (highest risk), combining market risk and credit risk of the issuer. It's a useful at-a-glance comparator, but it doesn't capture everything an adviser needs to know — two products with the same SRI can have very different barrier structures, underlyings, and issuer credit profiles.
Performance scenarios: read the methodology, not just the numbers
The "favourable," "moderate," and "unfavourable" scenarios are calculated using a standardised methodology based on historical volatility of the underlying. For autocallable products, this can sometimes produce scenarios that don't intuitively match how the product actually behaves — for example, the "unfavourable" scenario might not always represent a barrier breach in the way an adviser would expect. Understanding the methodology behind the numbers, not just reading the headline figures, is important for accurate client conversations.
Costs disclosure
The KID breaks down costs into one-off costs, ongoing costs, and costs related to specific conditions (such as early exit). For structured products, much of the "cost" is embedded in the product's pricing rather than charged separately — the KID's Reduction in Yield (RIY) figure is designed to make this comparable to other investment types, but it's worth checking how this interacts with any adviser charges layered on top.
What the KID doesn't tell you
The KID is a standardised document — by design, it doesn't replace a full suitability assessment. It won't tell you whether a specific barrier type is American or European in plain language (you'll need the full terms), and it won't compare the product against alternatives the client might be better suited to.
Building compliance into the workflow
For advisers handling multiple structured product recommendations, keeping KID data, suitability notes, and client outcome records organised — and easily retrievable for an FCA file review — is a significant operational task. This was one of the areas NoteScope was built around: keeping the audit trail alongside the pricing analysis, not as a separate afterthought.