Tuesday, October 14, 2008

Ignorance and greed

TodayOnline - Tuesday, October 14, 2008

AS HONG Kong investors took to the streets, seeking redress for the failed Mini-Bonds series structured by Lehman Brothers, about 1,000 Singapore investors gathered at Hong Lim Park over the weekend.

Their plight triggered memories of my previous job, and it dawned on me that I could have been responsible for their indignation, either directly or indirectly.

You see, I used to work for a bank, selling similar structured products, unit trusts and insurance to the bank’s customers. Among them were retirees, housewives and professionals — some with high risk appetites, others not at all. And it was my job to convince them of the benefits of the products the bank was promoting.

The remuneration package was structured such that sales performance received a significant weightage when my performance came up for review.

Also, there was a quota of financial products to be sold, so that I did not incur a huge penalty in commissions. For example, if there was enough revenue clocked from unit trusts, but not enough insurance or housing loans revenue,I would lose a sizeable sum.

There was always the pressure to meet any shortfalls in the designated monthly quota, so that both career and salary did not suffer.

There was also external pressure from management. I was hounded daily by my superiors on the shortfalls and sometimes, in order to fulfil the cluster’s overall target, I was told to concentrate on certain products that were not moving. Often, these were dangled with attractive incentives to ensure that I would be more willing to sell them over others.

But with the carrot also came the stick: There was a ranking-list flashed at meetings, with the names of staff who did not meet their sales targets. It was a public shaming routine, and to meet the targets, my weekends were usually spent at roadshows.

Operating in such a high-pressure environment meant that some sales staff resorted to employing strong sales techniques to get the customer to sign on the dotted line.

One senior manager even said that customers were only interested in benefits, so it was advisable to come up with a pitch that maximised these benefits and minimised the costs.

At times, scripts were handed to frontline workers. We were forced to memorise them for a flawless presentation.

Perhaps to avoid accusations of “mis-selling” in future, the time is ripe for financial institutions to review their procedures for assessing sales staff. They should tweak the promotion criteria, which relies heavily on sales results. Benchmarks like service attitude and turnaround time — such as attending to customers’ mundane requests promptly — could be given greater weightage. Customer feedback in the assessment of their relationship managers could be another criteria — after all, most banks covet customer loyalty.

On the other hand, consumers must be aware of what they are investing in. This could be done through more investor-education programmes. Proactive steps should be taken by financial institutions to work with MoneySense, a national investment education body, to acquaint customers with risk management, instead of just concentrating on product-pushing.

As the adage goes, it takes two to tango. If consumers are befuddled by the complex nature of some financial products, they should seek clarifications, or not invest at all.

After all, stable low returns beat sleepless nights, any day.

The author was a financial consultant for two years.



david said...

Much as I sympathise with those who had invested in minibonds, I am inclined to believe that at the point of sale, most RMs would have explained such products are not 100% guaranteed even though they could be regarded as "quite safe". And honestly without the benefit of hindsight, who would have imagined just a few months ago that big names like Lehman Bro, Morgan Stanley will be embroiled in the current financial mess? Hence the destruction of these products is almost akin to an "Act of God", totally unpredictable and just pure bad luck. But I guess it's human nature to cry foul and start blaming others when things go wrong. I think the truth is, the financial institutions including the central banks are all on this learning curve, where sophisticated financial pdts borne of complex engineering bring us all to a world we are all quite unfamiliar. In the end, greed prevails, that's why many went into unchartered territory, resulting in today's financial debacle. Many questions will be raised and answers sought with regards to pdt risk profile,regulatory,audit if we were to build a more resilient financial system. If one were to rewind memory back to 10yrs ago, banks were mostly engaged in the business of lending and RMs role is quite minor. The prevalance of RMs came at the same time as MAS wanted to develop Singapore as a financial hub, which involves introducing sexier products (rather than just Fixed Deposits). Let us all think about it, why was it so easy to convince the old folks to part their money intended for Fixed Deposit into Structured Deposits? I think the answer lies in interest rates. Our savings/FD interest rates have remained low for the longest period and retirees are concerned they can't beat the inflation rate currently standing at ard 3-4% p.a. Hence it was easy for RMs to convince them FDs is just a way to deplete their savings via inflation. Should we not question why is interest rate in Singapore so low? Is it truly justified when compared to other similar economies? Or perhaps to put it bluntly, MAS may be in cahoots with the banks, to set the saving/FD interest rate artificially low in order to encourage investment in other instruments? That will be quite a scary thought then... Perhaps it's a good thing to introduce a sort of minimum FD interest rate only for senior citizens/retirees, almost on par to current inflation rate. This way, they won't be so easily coerced into parting their savings into some investment schemes.

Anonymous said...

"There was a ranking-list flashed at meetings, with the names of staff who did not meet their sales targets. It was a public shaming routine, and to meet the targets, my weekends were usually spent at roadshows." & "Operating in such a high-pressure environment meant that some sales staff resorted to employing strong sales techniques to get the customer to sign on the dotted line."<--------true!!! I also was embarrassed by my entire network and labelled stupid repeatedly by my manager for not selling enough high risk products...

sigh~some financial consultants(my colleagues) are worse..the plan is 15 years but they sell as 5 year plan..but consumer at the point in time didn't know its a REGULAR PREMIUM, she thought SINGLE PREMIUM..the 30,000 she put in is now worse 5000 after 5 years..the bank "volunteered" to investigate for a month but she said,wat for? they are losing side as she already signed on the financial needs analysis..I don't understand why staff like me who sell honestly are labelled stupid but all my colleagues who sell without honestly are promoted so quickly and got fat commission every time..they are praised and if anything goes wrong,MAS sure shield them.

Anonymous said...

These stories are too familiar in the insurance industry. The honest advisers penalised and the unethical agents given more incentives and sayang by superior and the company. What do you think of those agents who qualify for MDRT, COT or TOT? Are they ethical? If you examine every case these people sold , 9 out of 10 cases are questionable.They should have been charged by MAS or even can be considered police case.These so called 'achievers' are actually crooks and scammers beneath a respectable looking woman and man .Don't judge these by the cover. They are good actors and would stoop to anything to get you to buy their rotten products.They could suck up to you and in some cases if it is a woman could give anything you ask.
They get promoted to titles like senior or executive financial consultants but the truth they are anything but consultants. They have brought disgrace to the consultant title.Soon title like consultant will have same meaning as crook, conman and cheats.
They seem to have the protection of MAS and the company.If not, how come there are these people on the loose. MAS should check those agents who appear in the annual paper advertisement.They are 100% scammers.

Anonymous said...

The idea of paying slightly higher interest rate to senior citizen is good. some bank do that on their non-promotional rate. still very little.
so it was v easy for RM to persuade old people to go for higher interest rate. now of course we know we have been fooled. for more interest n to lose all savings, wat sort of deal is it?

Anonymous said...

Agreed with Davids point. I think what needs to be done is to make it easier for common folks to buy govt securities. Currently the application process is cumbersome and overly complex for the common man. OR govt can structure an instrument that mirrors the I/R of 10 yr sgs bonds. much like setting the cpf rate for Special Account. Instead of adding an additional 1% if put in CPF, it can simply be the raw average without the 1% p.a. It will work out to be around 2.77% p.a. CPF can administer this one year term "government bond FD". When the economy is good, govt can add 1-2% p.a. to 'reward' savers. It should be available to all to encourage a thrifty society. cheers

Anonymous said...

I was previously working in a Financial institute providing clients with financial advices, and even before "sub prime losses" were uncovered last year, I have long felt this position should NOT be a sales position in order for staff not to experience the dilemma between hitting sales target or representing correctly to clients.

Don't you agree something should be done to to convert this position into a non-sales position so as to safeguard investor's interests?

Anonymous said...

I tink..our views are not heard..why not we write in to ST? I think in order for us to win, we must let more people in the other countries know of our plight..then those bank RMs in banks like DBS,POSB,OCBC won't dare to mis-sell..you know la,if we don't do anything,they will continue doing and might misled our future generation or parents...We cannot let evil prevails..! They are complacent because got MAS backing..Just go ask around branches in Pasir Ris(I stayed there),recently I want do some fixed deposits..some RMs almost brainwashed me to put into some investment linked plans without telling me it is NOt capital guaranteed..Then I told them about the financial crisis but they said the bank is not affected by Lehman's Bros. Sigh.you see..Trying to push the blame to DBS but didn't know they are also at fault(try to mis-sell to me-an elderly uncle)

If we continue to press on and gather more support,we might even cause a restructuring in their banking management system. Because what they are doing now is downright unethical...We must put a stop to such nonsense..

Anonymous said...

It is not in the interest of MAS if sale drops because of clients' interest. For MAS, the market is to serve the salespeople and FIs and not the consuming public. That is why it is taking a supervisory position and bochap what the FIs and their accomplice are doing so long they don't recieve complaints.
In this current debacle how many actually complained or knew how to complain if not for Mr. Tan.These poor victims would be swimming in deep sea infested with sharks. Their so called consultants are actually sharks in disguise.
If MAS is sincere and caring and serious about protecting the consumers it should do away with selling for financial products, whether they are structured products or whole life or endowment. Calling these salesmen financial consultants is misleading and misrepresenting their role. These salesmen are products peddlers with one objective to con the consumers of their hard earned money. Product advice should be stopped as an option in the KYC fact finding. All insurance agents or consultants, RMs or planners MUST conduct need analysis and be responsible for the recommendations and live up to the title they carry. Section 27 of the FAA MUST be enforced when the need arises and when breached and not looked over. If MAS is really interested to see a more conducive market place for consumers it must start doing house cleaning. Public's confidence is badly dented. Malpractice , miss-selling and misrepresentation are so rampant and blatantly committed by insurance agents and RMs in all the companies.The retirees, the Ah Peks and the aunties have lost confidence in the FIs and in the regulator for doing nothing when they need it most.
If they start from the top from mdrt or tot agents they bound to find a lot of malpractitioners.
This group is well known in the market that they got up there from fleecing and unethical selling to the consumers.
The question is , is MAS serious about all the guidelines and notices and directives and the FAA?
Are all these for show ?

Anonymous said...

"All insurance agents or consultants, RMs or planners MUST conduct need analysis and be responsible for the recommendations and live up to the title they carry."<----- needs analysis are for show la..If a swindler want to cheat people's money, they got their hooks and crooks to do it. ONCE BITTEN, TWICE SHY..to ALL singaporeans down there..LEARN from the experience..This rally is to create public awareness..SO OPEN your eyes and take home read prospectus etc for at least 2 days before you buy anything ok. IF don't understand, ask your grand-children or children who are more financial savvy to read. Don't get cheated and then later cry and beg MAS to listen to your woes. They won't.BE WISE.=)

Anonymous said...

Reading the prospectus for you requires one or two days. I bet you cannot understand even I give you one month.But the old folks were not given more than 30 minutes let alone let them bring home for the children to read.
Don't think you are that smart. Yours will come soon.
MAS will be brought to its knee

Anonymous said...

the old folks are not being forced..but BRAINWASHED..and they easily trust people..who expect those wealthy bankers want suck old grandfathers,grannies money..they trust the banks,the local banks..

Anonymous said...

Since the implementation of FA Act and the revamping of the industry, our regulatory authority have very very long way to go...maybe they do not know how to revamp even with expats in their payroll. if they know their roles well, such things would or may not have happened. hv we heard of such problems in countries like Australia. Currently our regulatory authority are 'scared to make decisions and have the old mindset' very sad. if only they listen to the forum 2-3 years ago and act on it, this would not have happened. banks are the main culprit

Anonymous said...

Banks suckz..especially local banks!!!DBS, OCBC, UOB..we should move our funds into banks like HSBC or MAYBANK..at least those irritating bankers won't keep asking me put my money into investment products when they know like 1% of it?features N benefits..paint such a nice N beautiful picture..Never talk much about risks..they are no less than a swindler..downright despicable..!Everytime I want to deposit money into any local BANK,they go check my Fixed Deposit and try to cyco me put into some plans..Think I old uncle don;t know about financial news ah..I not stupid k..

Anonymous said...

they should have implemented the 14 day free look clause for these products like it is done for insurance.
You're right, in order to read and understand the prospectus you definitely need more than 1 day!

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