Tan Kin Lian's Blog: Bank staff do not understand financial products

Wednesday, October 01, 2008

Bank staff do not understand financial products

Hi Mr Tan,

I used to be an institutional dealer(equities,bonds & futures) for two local banks but quit many years back because I was very disillusioned with what I was seeing everyday.

Personally, I feel that the local banks (can't comment on the foreign ones) are not out to misrepresent and/or mis-sell their credit link products to retail investors. I think the bank sales people simply do not have the training & background/experience to understand their derivatives themselves.

Perhaps, some incidental encounters of mine would be illuminating.
I am a very conservative investor.
I've only invested in Singapore government bonds (SGS), local bank preference shares & a small portion of my portfolio in REITs.
I regularly purchase SGS through 2 local banks but every time I make a purchase, I have to "teach" the bank's sale staff how to calculate accrued interest (ie. buyer must compensate the seller daily interest earned), help them identify which is the correct SGS series and other matters related to filling up the purchase/sales forms!

It really makes me wonder, if they cannot handle something as simple & direct as Singapore government bonds, then what of more complex derivatives ?

5 comments:

zhummmeng said...: You have made this observation correctly of the bank RMs ,consultants or personal bankers.As far as their standard of advice and knowledge there is much to be desired.
How could MAS allow people with very poor knowledge and competence to advice the consumers and to fool around with their personal finance. I am sure MAS had sent out mystery shoppers to guage the standard.I am sure they don't measure up.
This can be observed of the insurance agents too.
I have made this statement many times that insurance agents ,bank consultants are NOT qualified.95% of the insurance agents need to undergo intensive training especially insurance. If you think that insurance agents know about insurance, the very area they are SUPPOSED to be very good and competent you will be shocked to know that they know nothing. This is the very reason why many consumers feel miss-sold, misrepresented and short changed and under insured. Not that they are dishonest or unethical, it is that they are NOT competent. Sincerity and caring are NO substitutes for competence.But I don't think they are sincere or caring even.If I may use a strong word to describe them, they are liars and not truthful . If they are they would have upgraded themselves to give their best advice to their clients if that is their concern. But I doubt. That is why I say that 95% of the consultants, insurance agents or advisers are NOT qualified if you lumped them all together.
MAS must look into this seriously if they want to see a minimum level of competency in financial advisory. Currently these people the insurance agents are NOT ADVISING but selling and PUSHING PRODUCTS. Miss-selling and misrepresentation arise from this approach. Selling lends itself to a lot of unethical, unscrupulous, manipulation and illegal practices.
The current debacle should open up the eyes of MAS and to send them back to the drawing board. Malpractices are so rampant in the industry and if this crisis
is not enough to push their butts into action to nip them in the buds.
Product selling and pushing must be banned. Product advice as an option in the KYC must be banned.
Section 27 of the FAA must be enforced stringently. We need some heads to roll to make the industry sit up. We must send a very strong message to the industry players, the banks and the insurance companies that the financial market is NOT created to enrich them by dumping rubbish products on the consumers,or to help the insurance agents to qualify for MDRT or TOT. This is created in the interest of the consumers for their financial well being.
I hope MAS will put their acts together with this end in mind.; October 01, 2008 11:59 AM
Anonymous said...: The real reason why they gave you bad experience on buying SGS is because they want to discourage you from buying SGS.
You earn more commissions by selling other products.; October 01, 2008 12:04 PM
nhyone said...: I read that many bank staff are not familiar with SGS because it is not popular. (Well, banks do not have incentive to encourage it.); October 01, 2008 1:45 PM
Anonymous said...: Think not many bank staff taught about SGS. If more people know (their family, relatives, friends etc), very few will buy other products.; October 01, 2008 4:42 PM
Anonymous said...: SGS bond is not offering attractive yield for the past few years and even today!

in view of 'Creditbility', singapore gahment is highly rated, and that would spur more demand and compress the yield, though it sound safe and it is indeed very safe, the reward is still not attractive enough.

And after the credit crisis is over, the price of sgs bond would likely to go against the holder who purchase them during this period.

and indeed, this product is not profitable for the banks, and in the past, they only sell in tranches of $250,000, thus not many people would even ask for it; October 01, 2008 9:03 PM