An elderly person told me, "Long ago, many people can trust their bank to give them a fair return on their savings. Nowadays, the banks make a lot of profit by selling bad financial products to their customers. Many customers now distrust the banks".
What has happened during the past ten years, that makes the banks lose the trust of their customers?
Long ago, the banks are tightly controlled by the regulator. They have a few common products that their customers can understand, such as a saving account, a current account and fixed deposits. The customers can compare the interest rate paid on these savings and deposits. The banks have to offer competitive terms to attract and retain their customers.
The situation changed in the past decade. Banks started to offer complicated financial products. They employ marketing officers to sell these products, such as high cost life insurance products. Later, they sell structured investment products.
There is a change in the role of the regulator. They are not concerned about ensuring fairness to the consumers, and decide to leave this matter to the market. The consumers are left at the mercy of the issuers of these products. The issuers have the objective of maximising their profit and do not mind "ripping off the consumers". Business ethics disappeared.
The banks market these products to their consumers. They make a handsome profit from the commissions paid by the product issuers. But the poor consumers are given poor financial products. They only realise it after 3 to 5 years, but by then, it is too late.
This is how banks lose the confidence of the customers.
Those were the good old days with banks with decent interest rates and risk free. And also for those who bought property, which was very affordable even though income was much lower then. Small businesses can also survive or even prosper much better than now. Students were also less stressed compared to now. Overall although life was much simpler (no internet, computers, mobile phones, LCD TVs etc) but people were also less stressed compared to today.
ReplyDeleteSometimes ordinary folks wonder whether they have really progress in their quality of life in the big areas of housing affordability, savings returns, cost of living and even starting a family.
When the CEO and his team of senior managers are paid millions of dollars, the money has to come from somewhere. Yes, from you and me...
ReplyDeleteOur commercial banks are now like products selling banks. Is there any bank who is giving a fair interest rate to its customers? The interest rates these banks charged on loans are higher than the interest rates they paid to the regular or long-standing depositors. I really hope that none of our banks will end up like the USA top-leading banks in years to come.
ReplyDeleteI would like to share my experience with the banks nowadays which led me to believe I may even be better off putting my money under my pillow in spite of the high inflation rate.
ReplyDeleteI recently found out that the more than 2% interest that I am supposed to earn in my account became 0.05%. I put my money in a multi-currency account and I proportion some into NZ$ earning me a good interest. This was in the beginning. I just checked two days ago and found that the interest rate has been adjusted to 5.75% without my knowledge. For Singapore currency, the initial interest rate was over 2% but was now only 0.05%. Furthermore, interest on my NZ$ was not paid for the last three months and I have called the bank and the call centre staff was also shocked that it was not reflected since March 08. He promised to get back to me within a week.
What I found was that there are various charges, one for having the account, another for not having the minimum stipulated. If I want to convert my US$ to NZ$ it will first be converted to S$ then to NZ$. If I wanted to TT US$ out to my US$ brokerage account, I will be charge a TT fee, an in-lieu of conversion to S$ fee, and another fee which I forgot what name they call it. If I want to take out my money at the counter, there is another fee. The spread is also very bad, e.g. if I wanted to buy NZ$ the exchange rate is over 1.0495 but if I wanted to change NZ$ back to S$ the exchange rate is only 1.018. All this is very confusing and in the end I find that whatever interest earned is insufficient to pay for all the fees and I am actually worse off putting my money in the bank.
If you are ntuc income policyholder, you can put some of ur money in the capital plus. only 12 mth with 2% guaranteed yield, not great but better than what the bank offer for fixed D.
ReplyDeleteYou still lose 3-4% due to inflation, of course you will lose less than putting in the bank. Bank is NOT the
ReplyDeletebenchmark....it is comparing to the worse to make it look better.
What about money market fund? It is as good as guaranteed. It may give you less than 2% but it may also give you more than 3%.
What about those indexed inflation hedged bonds?
money market fund is good, but there are still alot of uncles & aunties who opt for capital guaranteed, return guaranteed & short-term frame product.
ReplyDeleteMr Tan offer alot of capital plus product when he was ceo with ntuc income, he knew that it necessary to cater some product to specific market. ( i believe ntuc income do not made much profit from capital plus plan since his time)