Low public opinion of financial institutions

Mr Tan

There is a recent newspaper report that show that financial institutions, especially life insurers, have a low level of trust among the public. Why is this the case?

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My reply:

Many financial institutions design products with the aim of making profit for their shareholders. In many cases, their products do not offer good value to the customers.

They employ advisers to sell these inferior products to the customers. The advisers do not present the honest facts about the products.

As the products are difficult to sell, they have to pay high commission to the advisers. This makes the product even less attractive to the customers.

The customers learned, many years later, that the products give a poor return. It is too late for them to change. They are also locked into the product, as a high cost have already been incurred upfront.

This makes the customers loss trust in the financial products, the financial institutions and the advisers.

What is the alternative?

The financial institutions should design products that give fair value to the customers. They should also reduce their marketing and other cost. They can still make a fair margin on the products, but they have to serve their customers well.

Business can be runned honestly and ethically. This will win over the trust of the customers.