Tan Kin Lian's Blog: Regulation of financial products

Sunday, November 11, 2007

Regulation of financial products

VIEW POSTED IN MY BLOG

There are two sides of a coin and it's not always fair to say that this company or product or agent is bad or good without considering the context where the event took place.

By the way, since MAS is the regulatory body, if such practices are not condoned, how come never shut them down?

MY REPLY:

For the past five years or more, the regulator (i.e. MAS) has taken the approach that the product issuer is required to disclose certain specific details of the product. Each consumer should take his or her own financial decision.

This has led to the following situation:

1. Many financial institutions design products that offer poor value to the consumer.
2. The life insurance or structured product is disclosed in a document that cover 30 to 100 pages.
3. The document is difficult to understand, even for an expert.
4. The agent who markets the product makes a verbal summary that is different from the written document. The customer is misled, but does not have any evidence.

Many consumers invested billions of dollars in these types of products that make huge profits to the distributors and issuers, but give a poor return to the consumer. My friend said that ten of thousands consumers have been "taken for a ride".

I hope that the regulator will review its approach and ensure that the financial products are fair to consumers. It is difficult for a lay person to be able to look through the complex product and know about its drawbacks.

On my part, I will do my best to educate the consumers, by writing in this blog. .

4 comments:

Anonymous said...: Hi Mr Tan

I agree with your friend. I am one of the many consumers who have been taken for a ride, and with our own trusted local bank.

I invested $50,000 of my hard earned savings in a product marketed by my bank and get a very poor return after waiting for 5 years.

I wish the MAS has been more vigilent in protecting the interest of the ordinary people.; November 06, 2007 11:07 AM
Anonymous said...: Like some of the consumers, I have my fair share of complex products.

Consumer education is important but more importantly they have to take ownership of their investments and not just rely on the regulatory bodies. The Singapore government mentioned that Singaporeans should not have a clutch mentality; in a similar context, consumers owe it to themselves to be financially literate.

Due to my hectic schedule, my preference is to outsource my investments to professionals. I have no intention of knowing the finer details of how this financial product work or probabilities of this and that but I would like to know the performance of my portfolio on a regular basis, for e.g., every quarter or half yearly.

When I engage the service of a financial professional to work with me, I expect him to keep me updated on my portfolio and KPIs on my financial objectives regularly. Good or bad investments are part of the game and at least I can make decisions with timely information and minimize surprises. I prefer not to wait till the end of X numbers of years to discover something has gone wrong.

Mr Tan, you are doing good work here, please keep it up. It is interesting to see things from different perspective.; November 06, 2007 9:14 PM
Anonymous said...: MAS adopts the supervisory role and lets the industry to self regulate.
As far as financial products are concerned there is only one side and that is the seller and his or her principal.
Their sole responsibility is to produce and sell products that are to the benefit of the buyer. The buyer is always right even they are wrong. The principle and its sales representative are professionals and whatever they sell they MUST NOT HIDE from the buyers. Unfortunately, the sellers collaborate with their principals to provide half truths and and half falsehoods to delude the buyers. Today there are many products. Revosave is one of them. The agents or the sellers devise confusing and meaningless presentation to waylaid
and trap the buyers into buying.
The product must be exposed and Dr. Money has done that on a few occasions. Pay heed to Dr. Money and he is pro buyers.; November 08, 2007 12:35 AM
Anonymous said...: Financial advisers have the duty of diligence and care to ensure that the products recommended to the clients must meet their needs to the BEST available within the company .If there are alternative products which best suit the clients' need they must be recommended and not products that yield high commission to the agents.
Example: Agents should recommend simple endowment for coverage and saving; for liquidity ,for availability of cash anytime, it should be money market or in regular ILP. If these plans are packaged they together give SUPERIOR return, liquidity, protection and flexibility.Talking of life style this way is definitely even better. But why agents instead sell( they don't recommend) revosave; it is because of higher commission and incentive trips. This is despicable
and it is done at the expense of the clients' needs and future.; November 08, 2007 10:01 PM