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
Yes, I agreed as I have the same experience dealing with the private banker. They only one to turns your account. My friend let one to manage US$250,000 and at the end of 1 to 2 years, only few thousands left in the account after the tech bubble burst!
ReplyDeleteI feel Mr. or Ms. Ex Private Banker probably wanted to get his/her clients to sell their money market funds so that he/she can get them to buy into other funds (thus earning a fee from there).
ReplyDeleteJust my feel. I may be wrong of course but generally disillusioned.
Mr Ex Private Banker,
ReplyDeleteYou should make yourself known and testify to MAS (in private), if you realy want this to be the last lesson. Lest not our next generations fall into this kind of traps again. Your experience will carry weight compare to layman like us crying father and mother on the poor Mr Tan's blog but nobody in the authority believe us or tell us to take it in perspective.
11.10PM, don't push too far. you should be grateful that he shared to provide some insights into the world of private banking.
ReplyDeletethis is not america. his testimony is not going to count much against mr big muscles..
ReplyDeletethose are common knowledge of the industry. i have seen too much of. that's why maybe I am not suit as a banker as well..
hhaa..
DT
the difference this banker is from the others, is he actually spoke up.
ReplyDeletehowever the context spoken made no difference becos it ISNT surprising. it is but an open secret for gods sake.
then again, he could becos hes detached from the rest. So this sure doesnt count as heroism.
this is called survivalism
Dear Mr/Ms ex-private banker,
ReplyDeleteThanks for opening up and sharing with us your valuable insider views on these products. It must have taken you some courage to do so and I do understand and respect your wishes to keep your identity anonymous.
Anonymous 10.59 PM. pls do not discredit others.
Hopefully there will be more ex or current bank experts coming forward with their honest assessments and to lend weightage to this serious issue.
It is not right to ask him/her to testify but rather for the relevant authority to do an indepth investigation. One person can be wrong, ten can be wrong but not the hundreds or thousands.
Thanks for opening up. We need more RMs etc to come forward and write. Maybe a blog on RM story could be created - confidentiality assured by Mr Tan of course. At this juncture I am sure those RMs who sold minibonds need to express their regrets. No point testifing to MAS. Your good deeds may cause your your career as I guarantee MAS will definitely barred you.
ReplyDeleteIn this materialistic world what is lacking is integrity and responsibility. While every body has the right to purse their own goal of success one have to learn that it can be done with upmost integrity with real action but not only by talk only. It also can be done with great caring and loving knowing that they are many many people who wish to increase their wealth by putting trust on you people call Banker.
ReplyDeleteBoth the Bankers, Investors and the Regulators should learn this lesson hard and find way to improve the system. Without the courage to admit once is at flaw we most probably could not improve our self.
Dear Ex-Pte Banker
ReplyDeleteThanks for sharing your comments. Another point i would like to add is that the Remmuneration / compensation scheme of RMs should be transparently dislcosed to the Client / investor. In this way, the client / investor would be alert to any potential conflicts of interest in any product recommendation.
In Singapore, there is a complete lack of transparency in this respect across all banks - local or foreign.
regards
Michele
My wife used to be a sales manager with DBS. once, she suspected her sales staff of misselling and wanted to block the sale. she asked the RM to go with her and go through the presentation with her and the clients all over again. she confirmed that the RM missold the product and thus, she stopped the sale from going forward. after that, she filed this matter with the compliance department but needless to say, the dept covered it up instead of referring the matter to MAS for disciplinary action.
ReplyDeletewhen DBS got into trouble with this Lehman bro thing, she told me that 'it was only a matter of time.'
The remuneration structure for the financial advisers, whether they are RMs , planner or insurance agents has to be changed. This trade should not be commission driven because eventually conflict of interest, mis-selling will become the modus operandi of these greedy people.
ReplyDeleteMAS must not say we leave it to the FIs to reward the salespeople. MAS knew conflict of interest and other malpractices will result.
No company in their right mind will report their own employees. There's no motivation to do so.
ReplyDeleteAnyway, I believe these RM who have insider stories to tell really can't do so openly. I remember there are some lines in Company law that prohibit them from spilling secrets from their own companies.
Errm...Can I disgree with mr/miss private banker? How can he/she insinuate that the banks have not done their job probably by suggesting that the products are mis-positioned? That would mean that management possibly driven by greed and regulators hiding behind the hood of caveat emptor could possibly be the cause of this oversight?
ReplyDeleteWell, guys' lets get a grip on the the whole Lehman fiasco...Its clearly the RM's fault. This group of retail RMs are people that were the top of their cohort in school, of course they would understand the complex financial products that they are selling,this plus the the hours of onerous training and compliance courses.....is there anyone else to blame? Management and regulators have done their part... we should just start the witch hunt on RMs, be focused and targeted.. discuss the remuneration they received..etc,but ignore the details that sales of $1m may only ripe them say...a few thousands dollars of comm, glad the media is doing an excellent job highlighting the key points...
This is Singapore....where leaders are responsible and the citizens are never hoodwinked into assigning blame to minions...we are always focused and targeted.
I think Ex-banker did the right thing to share. I hope more will do so to let us better understand the real going-on in this world
ReplyDeleteThink about it.
ReplyDeleteIf ministers have performance bonus linked to economic growth, is it any wonder that Minister Mah says growth should be the way to go, no matter what the social fractures that will occur in singapore!
And that is why none of the banks will be told off even after this saga is over. Can you imagine the DBS - owned by Temasek Holdings - being censured by MAS? No - DBS will need to censure itself hahaha
I know a lot of sales mgrs are themselves contribute to the mis-selling environment. Some insurance agents keep on failing the CMFAS tests (even though many of you confirmed it is a no-brainer test). So they are not supposed to be selling, not approved. But many sales mgr ask them to just proceed with selling, and longpang their colleagues who had passed the tests.
ReplyDeleteTechnical sale pitch vs scenario sale pitch, which one you prefer? I believe alot of the RMs are using the scenario sale pitch to present the financial products. Maybe, its time for a change in the FAA regulations. Make technical sale pitch a mandate as well.
ReplyDeletedo read an exchange between a current DBS RM and a ex-RM. (this rm left for the same reasons highlighted by this entry by the ex-private banker)
ReplyDeletehttps://www.blogger.com/comment.g?blogID=7798724025558674084&postID=2491443117274341183
Read more of the US investment banks here:
ReplyDeletehttp://www.futurefastforward.com/component/content/article/388
Up to you to believe whether the worst is yet to come.