French savers poured €42 billion into structured products in 2023, with 80% of that flowing through assurance-vie (life insurance) contracts. Yet most couldn’t explain how their investment actually works. The Autorité des Marchés Financiers (AMF, France’s financial markets regulator) has been waving red flags about this knowledge gap, particularly around “indices à décrément” (decrement indices) that appeared in 73% of new products last year. These mechanisms artificially inflate advertised yields while hiding mathematical traps that amplify losses during market downturns.
The Decrement Index Trap: When “Compensating for Dividends” Becomes a Liability
The phrase “indice à décrément” sounds technical but harmless. In practice, it’s a calculation method that subtracts a fixed amount from an index’s performance before calculating your return. The sales pitch frames this as compensating for dividends you’d otherwise miss. The reality? It’s a lever that can crush your capital when markets fall.
Consider a product linked to an index at 800 points with a decrement of 50 points. In year one, that 50-point drag equals 6.25%. A 30% market crash doesn’t just reduce your index to 560 points, it makes the decrement weigh 9% instead. Your losses compound faster than the index itself declines. Many investors discover this math only when their “capital-protected” product shows losses far exceeding the underlying market drop.
The AMF’s recent study highlights that these decrement indices are “particularly sources of confusion.” The regulator now demands that documents explain clearly whether the decrement applies in points or percentages, a distinction that determines whether your investment survives a bear market or gets wiped out.
The Fee Mirage: Why 0.75% Can Actually Mean 7.5%
Structuring fees represent another layer of opacity. Banks typically quote an annual fee of 0.75% or 1%, implying a modest cost over time. But here’s the catch: these fees are often deducted entirely in the first year, calculated on a theoretical 10- to 12-year holding period that most investors never complete.
If you exit after 12 months, that “0.75% annual fee” becomes a 7.5% upfront charge. The AMF confirmed this practice is widespread, noting that “en cas de remboursement anticipé (fréquent), le coût réel annualisé peut être beaucoup plus élevé que ce qui est perçu par l’investisseur” (in case of early redemption (frequent), the real annualized cost can be much higher than what the investor perceives).
This fee structure creates a perverse incentive. Banks and conseillers en gestion de patrimoine (wealth advisors) earn retro-commissions of 4% to 8% at subscription, making these products highly profitable to sell regardless of whether they suit the client’s needs. The complexity serves the seller, not the buyer.
The Distribution Machine: How Banks Turn Complexity Into Profit
Walk into a French bank branch with €50,000 to invest, and you’ll likely hear about “diversification” and “capital protection.” The product presentation might show an attractive coupon of 8% per year. What it won’t show is the true comparison: how does this perform against simply buying an ETF tracking the same index?
Many investors can’t answer this basic question because the documents make direct comparison impossible. As one analysis noted, “Quelle est la différence de rendement entre détenir le produit vs. acheter un ETF reproduisant l’indice sous-jacent utilisé par le produit ? Dans quel cas suis-je gagnant et/ou perdant ?” (What is the performance difference between holding the product vs. buying an ETF replicating the underlying index used by the product? In which case am I winning and/or losing?) This question is “impossible à résoudre” (impossible to solve) with standard documentation.
The Senate examined this issue in 2021, recommending that banks default to recommending simple index management for retail clients. The proposal had no binding force. Banks continue pushing complex structured products because opaque bank fees on simple government bonds reflecting broader intermediary profit practices demonstrate the industry’s preference for opacity over transparency.
Real-World Damage: The Stellantis Example
When Stellantis announced €22 billion in write-downs, its stock dropped 28%. For direct shareholders, the loss was painful but straightforward. For holders of structured products linked to Stellantis through decrement indices, the damage multiplied.
Approximately 2,300 structured products were tied to Stellantis shares, many using fixed-point decrements. As the stock fell, the decrement’s relative weight increased, accelerating losses beyond the 28% stock decline. Investors who thought they owned a “protected” product discovered their capital could evaporate faster than the underlying asset.
This scenario mirrors liquidity risks in SCPIs mirroring hidden structural risks in structured products. Both involve retail investors underestimating complex dependencies until a crisis reveals the true risk profile.
The ETF Alternative: Why Simplicity Wins
Low-cost index ETFs offer a straightforward alternative. A product like the MSCI World ETF provides global equity exposure for around 0.20% annual fees, with no hidden decrement calculations or upfront structuring costs. The performance is transparent: you get what the index gives, minus the tiny fee.
Yet advisors rarely recommend this default option. As industry insiders admit, “le CGP qui investit dans un MSCI Wld sera perçu comme moins compétent que celui qui fait souscrire à 10 produits avec des noms à rallonge incompréhensible” (the wealth advisor who invests in MSCI World will be perceived as less competent than one who gets clients to subscribe to 10 products with incomprehensible long names).
The debate over transparency issues around hidden swap costs in ETFs used in PEAs shows even simple products can hide fees, but the disclosure requirements remain far clearer than for structured products. The WPEA vs DCAM hidden swap cost controversy proves French investors are becoming more sophisticated about demanding fee transparency, a trend the structured product market has avoided until now.
AMF’s Seven-Point Transparency Push
In response to these issues, the AMF now requires a seven-point summary box in commercial documents:
- Where to find regulatory documents (with direct hyperlinks)
- Investment duration (minimum and maximum, with early exit conditions)
- Capital protection (explicitly stating “if I invest €100, will I get €100 back?”)
- Final remuneration (scenarios, barriers, and whether rates are nominal or actuarial)
- Issuer default risk (credit rating and what happens if the bank fails)
- Early exit terms (how to request redemption and associated costs)
- Underlying index parameters (what drives performance, especially decrement details)
This initiative targets the core problem: information dispersion. Currently, savers must “jongler entre le document d’informations clés (DIC) et la brochure marketing” (juggle between the Key Information Document and the marketing brochure) to piece together the full picture.
Regulatory Blind Spots and Political Reality
The AMF’s recommendations carry moral weight but lack binding force. Banks can continue selling complex products to unsophisticated investors because the business model depends on it. As one commentator noted, “si la gestion du pognon de dingue ne nécessite que d’acheter des produits simples et à faible frais, à quoi servent les gestionnaires financiers ?” (if managing money only requires buying simple, low-fee products, what are financial managers for?).
This explains why regulatory risks and hidden structural dependencies in popular PEA investments create such anxiety. French savers understand that regulatory changes can transform a “safe” investment overnight, yet structured products remain largely unaddressed despite their €42 billion footprint.
What French Savers Should Actually Do
1. Demand the seven-point summary before signing anything. If your advisor can’t provide it, walk away.
2. Ask for the “ETF comparison.” Require a side-by-side showing returns if you simply bought the underlying index through a low-cost fund. If they can’t produce this, they don’t understand the product themselves.
3. Calculate the real fee impact. Take the total structuring fee and divide by your actual expected holding period, not the theoretical 10-12 years. A €500 fee on a €10,000 investment held for 2 years is 2.5% per year, not 0.5%.
4. Understand the decrement math. If the product uses a decrement index, model what happens in a 30% downturn. The result often reveals the product is designed to benefit the issuer, not you.
5. Consider the simple alternative. For most long-term goals, a diversified portfolio of ETFs within an assurance-vie or PEA (Plan d’Épargne en Actions, French stock savings plan) provides better transparency and lower costs.
The Bottom Line
The structured product market thrives on complexity that obscures poor value. The AMF’s €42 billion figure represents capital that could be working more efficiently in simpler vehicles. Until regulations force banks to default to transparent, low-cost options, French savers must protect themselves by demanding clarity and refusing to buy what they cannot explain.
The next time an advisor presents a “sophisticated” solution with an 8% coupon, ask one question: “How does this beat a simple ETF after all fees?” The silence that follows is your answer.
