Tan Kin Lian's Blog: Greedy for profits

Sunday, October 12, 2008

Greedy for profits

Financial institutions should recommend Government bonds to risk adverse investors. However, the distributor earns only a commission of 0.5% when they sell the bond.

The distributor preferred to push the credit linked securities because they can earn a commission of 3% to 5%. Their representative were not properly trained on the product. They did not explain the product properly and caused the investors to invest in a high risk product that caused the loss of a substantial portion or nearly all of their hard earned savings.

Surely, the financial institution should understand why the issuer gave a high commission of 3% to 5% to market the product. By being greedy for a bigger profit, these financial institutions have caused big loss to the customers that trusted them.

8 comments:

Donaldson Tan said...: Retail investors in UK can only buy mutual funds. I don´t understand how come banks can market products riskier than mutual funds to retail investors in Singapore in the first place.; October 12, 2008 12:34 AM
C LH said...: I cannot understand how and why did staff of banks being able to access our bank details such as amount we have deposited and renewal date of FD. These staffs would call to ask if we are interested to invest our FD which is due for renewal into some fund, dual currency etc in order to have a higher interest as compared to a normal FD rate. In my case, I am based overseas and yet receiving calls advising that my FD is due for renewal and offer all kinds of investment plan. I am a simple person who works all my life to save my money in FD and of course when these staffs sell so hard that you simply give it without thinking so much since they assured me that it is risk free. etc and it is a waste having the money sitting in a FD with low interest rate. I lost $30K over such assurance and I am just asking why did these people working for the bank has the right to check our information and target people having a FD in their bank. If the banks are not interested to get people to open a FD account then don´t offer any. I am really surprised that my information with the bank is not that confidential afterall and it is being mis-used in this case.; October 12, 2008 5:08 AM
Anonymous said...: This is call cross selling; October 12, 2008 7:11 AM
Anonymous said...: No wonder whenever I ask the RM for the price of SGS, they were so reluctant, and asked me to look for something else instead.
Is this conflict of interest?; October 12, 2008 7:59 AM
Anonymous said...: Banks, like many other business, always think of ways to make more money out of clients, as long as it is convenient (clients' money are right there) and within the law. In the light of what had happened there is a strong case to change the law to make it stricter to sell or even ban such products. However Tharman has said that this will limit the options for investors who want to go beyond safe ones for better returns. And Singapore wants to be a free, open economy for economic growth so the less restrictions, the better. Unfortunately, when a once in a blue moon bad event occurs, thousands of ordinary folks will be left licking their serious and painful wounds. So this is the price to pay, and I think MAS accepts it, for economic growth. Growth at all costs, including through casinos! On balance, the gahmen decides that the pros (economic growth and financial hub, etc) outweigh the cons (losses of folks, economic hardship, overcrowding, etc). This also reflects in the way they are handling the situation, to the extent that people (like Mr Tan) have to tell them strongly what to do. Sigh!; October 12, 2008 8:45 AM
Anonymous said...: u can try going to any local banks and ask for buy a Spore Govt Bond and almost all will give u a blank look. I'm an investor of govt bond and each time i go to the local bank i hve to teach the staff how to fill up the form and call their dealer for the bond prices. But these staff are quick to sell their other products that are boldly displaced at their counter.
So local banks, pls teach ur staff how to adminster Spore govt bond, it is the next best safe bet after FD.; October 13, 2008 1:57 PM
Anonymous said...: they use greedy RMs or insurance agents to hoodwink the public.; October 14, 2008 1:30 AM
Anonymous said...: hahah...u tink bankers are STUPID? ok lets say you go into LV bag retail store,and you say you want to buy GUESS bags.Of course the staff at LV won't keen to help you! Same thing..if you go into banks,they only want promote their stuff. and promote those which can suck the highest weighted margin off you poor,uneducated investors..so u ask for SGX price,who cares?they represent their own banks,for goodness sake..they won't help you..FOr FREE..; October 14, 2008 2:41 AM