Views from an ex-private banker

Dear Mr. Tan

I read with interest your good work to investors on the recent debacle. I have more than 15 years experience in investment and private banking, I have quit this line as I was disillusioned with the wealth management industry.

Not only at retail level, even private banks are mis-selling products, putting bank's interest above clients interest. At the start of the credit crisis, I had foreseen the seriousness of the US credit issue, and gave a recommendation that clients sells all their money market funds. My rationale is that its no point earning additional 10-20 basis point but exposing themselves to underlying commercial papers that may default.

I was badly rapped for this recommendation, for the fact that this is not to the interest of the bank. All I could argue was that I was doing for clients' interest, but of course you can expect management's answer to me. A few months later, the US money market fund "break the buck".

Many products are mis-sold. Right from the start, these minibonds/dbs high note products are positioned wrongly - how can a credit link note be deemed as an alternative to deposit.

Is a bond the same as deposit, be it corporate or govt? Everyone knows the answer is no. Bond investor take the risk of the bond issuer, risk on default of that single name.

In this case, these products are linked to 5 credit name, which is even higher risk than straight bonds. If its higher risk than a straight bond, then why is it sold as an alternative to deposit?

Banks position these products wrongly, taught their RMs to speak the marketing story wrongly and ended up, of course, selling it to the wrong group of clients and the wrong risk profile.

Credit link notes, bonds, structured deposits, equity link notes, capital guarantee/capital protected notes, they are all not the same as deposit.

Even if Lehman's default is almost impossible at the point in time, this kind of products could never been sold as a deposit alternative. Just like a bond can never be sold as deposit.

And not just at retail level, even at the so-called more sophisticated Private Banks, the same mistakes are being made. Its time for a overhaul in banking practice and compensation scheme, may this be the last and most bitter lesson to banks

I wish to remain anonymous as I still have many friends in private banking. But being an insider, I feel for clients and investors.

regards