Details Are Part of Our Difference
David Booth on How to Choose an Advisor
20 Years. 20 Lessons. Still Taking the Long View.
Making the Short List: Citywire Highlights Our Research-Driven Approach
The Tax Law Changed. Our Approach Hasn’t.
Category: Values
Signal vs. Noise: Are Structured Notes Too Good to Be True?
Welcome to the age of the “finfluencer.” Some voices bring real experience, many optimize for clicks, not your interests. At Hill Investment Group, we believe good advice should be simple, clear, and grounded in evidence, not hype. This new series examines popular claims circulating online or in print, and separates signal from noise.
We aim to inform, not entertain; substance over speculation.
Heard something at work, on the course, or on social media that has you wondering, “Should I pay attention to this?” Share it with us at zenz@hillinvestmentgroup.com. We will help unpack it. Submissions are confidential. With your permission, we may quote an anonymized version in a future post.
Please note: Submissions are reviewed for educational purposes only and do not constitute personalized investment advice.
Structured notes—sometimes called structured or derivative products—are contracts issued by banks or financial institutions. Their performance depends on how certain markets behave, but with specific features built in.
For example, a note may be linked to the S&P 500, offering returns up to a maximum (say 9%) while limiting downside risk. If the market declines, you might receive your principal back. If the market rises, your return is capped at the maximum.
These products typically combine bonds with options. The bond portion provides stability or income, while the options alter the return profile with added features such as caps, buffers, or payouts tied to specific outcomes. Importantly, they do not create new investment opportunities; they repackage existing securities in different ways.
Structured products are often designed and priced by the issuing institution. A simple illustration:
- Package bonds and options that may be worth slightly less than the purchase price.
- Market the package in a way that addresses an investor’s concerns (for example, fear of loss or desire for enhanced returns).
- Sell it at a markup.
The difference, though it may look small, represents revenue for the bank. Like insurance, protection, or enhancement features come at a cost, which is reflected in the structure’s design and pricing.
Structured notes are not “free.” For every feature that reduces downside risk, there is typically a tradeoff in the form of reduced upside potential. For example, capping gains in strong years may limit long-term growth.
Other considerations can include:
- Complexity: The payoff formulas are often difficult to evaluate without specialized knowledge.
- Liquidity: Notes may be hard to sell before maturity.
- Taxes: Some structures can create less favorable tax treatment.
- Transparency: It may be difficult to fully assess all costs and risks.
These factors mean that outcomes may differ significantly from expectations, and actual results depend on market conditions and the structure itself.
At Hill Investment Group, our philosophy is that portfolios should be built around a client’s unique risk profile using tools that are transparent and cost-efficient. Instead of relying on complex products, we focus on combining equities and high-quality fixed income in a way that is diversified, tax-aware, and grounded in decades of academic research.
This approach does not promise to eliminate risk or guarantee returns. Rather, it seeks to create a risk/return balance that clients can understand and commit to over the long term.
Structured notes can sound appealing because they are often presented as solving two problems at once, offering upside with protection on the downside. In practice, they involve tradeoffs that should be carefully weighed. For many investors, a straightforward evidence-based portfolio may provide more transparency and better alignment with long-term goals.
Hill Investment Group is an SEC-registered investment adviser. This material is for informational and educational purposes only and should not be construed as personalized investment advice or a recommendation to buy or sell any security. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. References to structured notes or other investment products are for illustrative purposes only and should not be interpreted as a guarantee of outcomes. Please consult your financial, tax, and legal advisors regarding your individual circumstances.
Introducing Griffin Lewis
We’re excited to introduce the newest member of our team, Griffin Lewis, a proud University of Texas graduate (like two of his teammates here at HIG). In the past, we prioritized hiring by location. Today, we focus on finding the best possible person for the role: people whose values match our own. That’s true across the board, from full-time team members to interns. Though we differ in many ways, the qualities we share—being old souls, a connection to the outdoors, joy in serving others, and a deep commitment to our craft—make us, in short, a team of caring nerds.
Griffin embodies these traits fully. You will see him jumping in wherever he’s needed—whether that’s supporting service, trading, or operations—so that you experience seamless care from our entire team. His “utility player” mindset means he’s always looking for ways to make your life easier.
Shaped by a family that taught him resilience, inspired by a sister who set a high bar early on, and sharpened by experiences as both a behind-the-scenes problem solver and a door-knocking entrepreneur, Griffin brings both grit and heart to our work. Outside the office, you’ll likely find him logging long runs or cycling laps around Lady Bird Lake, or chasing down sunrises and spontaneous adventures.
We’re thrilled for you to get to know him. Are you a “caring nerd?” or do you know one? Check out our career opportunities here.
We Work for You
This is an ad we’d be proud to run in the Wall Street Journal, or anywhere, for that matter, because it’s the truth.
However, we’re only seeking to help a handful of new, special families each year…not tens of thousands. So, rather than charge higher fees to our clients to pay for expensive ads, we’ve been blessed with your help in achieving over 20 years of highly successful, selective growth through your heartfelt and warm introductions to family, friends, and those you care about who’ve become part of the Hill Family. Thank you!
As you celebrate along with us, if there’s someone special you’d like to help and think might be a good fit, please reach out to me.
Not ready for that? We’d be happy to send them a copy of Odds On so they can learn more about our “Take the Long View” philosophy, evidence-based investing, and values.
Hill Investment Group is an SEC-registered investment adviser. This material is provided for informational purposes only and should not be construed as investment advice or a solicitation to engage our services. Past growth or success should not be interpreted as a guarantee of future results. References to client introductions, relationships, or experiences are not intended to imply that any client or prospective client will achieve similar outcomes. All investing involves risk, including the potential loss of principal. For additional information, please refer to our Form ADV, available upon request.