you pay 4% to have credit risk to the bank for 5 years invite additional liquidity risk into your life while the bank places a side bet at the bookies on the price of some chocolate coins (gold).
If the price does well over 5 years you don’t participate in the fun. If it doesn’t you should have probably just bought stocks anyway.
that about sums it up
These guys are a great place to study how structured products are actually constructed and marketed in the USA.
They have surprisingly little positive to say about structured products.
They have published research papers
for example this paper concludes that if you pick a structured product at random and you almost always will be better off with a properly constructed stock and bond portfolio
This paper augments the current literature by analyzing the ex-post returns of nearly 18,000 individual structured products issued by 13 brokerage firms since 2007. We construct our structured product index and sub-indices for reverse convertibles, single-observation reverse convertibles, tracking securities, and auto-callable securities by valuing each structured product in our database each day.
The ex-post returns of US structured products are highly correlated with the returns of large capitalization equity markets in the aggregate and individual structured products generally underperform simple alternative allocations to stocks and bonds. The observed underperformance of structured products is consistent with the significant issue date under-pricing documented in the literature