Sponsored article

Sometimes, a financial or insurance product is covered in a newspaper. It purports to explain the product, and usually highlights its benefits. Most readers may think that the article is written independently by the journalist.

I learned that in some cases, the space for the article is sponsored by the seller of the product. It is really an advertisement (as the seller is paying for the space).

As the sponsor has some say in the way that the article is written, it will usually play down the negative aspects of the product. The consumers may not get a balanced analysis of the product.

In recent years, the frequency of these sponsored articles has increased. The reader should be careful.

Rating of assets backing financial products

I saw an advertisement that a specific financial product is backed by CDO (collaterialised debt obligations) with at least a rating of AA.

Normally, a AA rating is considered to be strong, in the case of a rated bond or a corporte entity.

I learned that AA rating for a CDO follows a different set of criteria. The AA rating for a CDO is weaker than for a bond. It does not have the same level of financial strength.

If you read a financial product that is backed by AA rated CDO, you have to be aware that it is of lower quality than a AA rated bond.