A key proposal of Obama's Administration is to set up a Consumer Protection Agency on financial products. It will encourage financial institutions to offer "plain manilla" products that meet their needs.
Critics said that it will stifle innovation. I disagree with these critics. My view is that consumers are best served by buying simple products. They do not need "innovative" products, which were created to make profit for the financial institutions, at the expense of the unwary consumers.
Another interesting proposal is for the products to be offered on an exchange. For example, the Administration is working on a health insurance product to be offered by the Government, which will be offered on an internet exchange together with private sector products. This will allow the consumers can make an informed choice on the available products. In my view, this is a major step forward.
I read that Paul Vocker, who is an adviser to the Obama Administration, is strongly in favour of all derivative products being transacted on an exchange, rather than over the counter. This will ensure transparency and fair pricing. I agree with this approach. If it had been adopted earlier, the world would have avoided the global financial crisis.
Free market and innovation have been misused by the proponents to act unethically and to take big risks, which has caused the downfall of the global economy.
We need new foundations to rebuild the global economy, namely:
a) plain manilla products
b) transacted through an exchange
c) consumers to be protected
My best wishes for the success of the financial reform that is being promoted by the Obama Administration. They have the courage to do the right thing.
Tan Kin Lian
MR TAN
ReplyDeleteVery enlightening article. It becomes more clear to me that politician are not just there to do upgrading projects and town council work only. More importantly, politicians are there for the people through policies and projects for the good of ordinary people, who do not have the means to do it on their own.
FROM. CASHEW NUT
Could we set up a plain vanilla bank in Singapore, for the benefit of the plain vanilla Singapore citizens?
ReplyDeleteWithout a highly paid CEO and executives, this vanilla bank can offer simple loans at a fixed spread to benefit both depositors and borrowers. It also do not need to bring interest rates down to artificially low levels in order to create demand for its financial products and services. The artificial low interest also trigger asset bubbles in property and the stock market.
How about our MAS?
ReplyDeleteMaybe they don't worry so much about the people. Because they know there will always be 66% who will vote for them, no matter what.
We used to have a "plain vanilla" bannk in the form of POSB. However after its takeover by DBS, it is behaving no different from the other banks.
ReplyDeleteDo you notice the insurance products are complicated and not plain vanilla. Eg. ntuc revosave. Why have casghback , kickback , options to save and invest and other craps. If the objective is to save why not go straight into a plain vanilla endowment which gives HIGHER return and HIGHER protection instead of beating round the bush.
ReplyDeleteWhy? Is it meant to confuse, to con and then to cheat the customers into buying and make the customers think it is a new product? Or is it to create opportunity for insurance agents to con the customers into buying a vivolife with the cashbacks to make it look like it is buy one get one free?
It is dishonest if the intention is to con the customers to spend more premium to benefit the insurance agents with 2 commissions.It is breaching the FAA. It is switching, twisting or churning.
The question or the test is whether customers' benefits are enhanced more than proportionately.
If no enhanced benefits it is better for customers to buy plain vanilla products separately instead of being locked together.
This is unethical practice and dubious.
June 26, 2009 10:54 PM
ReplyDeletea compliance issue here...How come there is no whitsle blowing?
I thought MAS has encouraged insurance agents to report their peers for unethical practices? This is provided in the MAS consultation paper.
This is more than meets the eyes.
ReplyDeleteIt is rampant and the above is just the tip of the iceberg.
The public should come out to blow the whistle if they find the agents at roadshows peddling products
Those agents at roadshows that harassed passersby and representing big name FIs, may actually not even be FI staff or agents.
ReplyDeleteFIs outsource these to companies like event organisers and the like. Some of these are run by "Ah Beng" types.
So sometimes you may even have encountered hooligans at these roadshows, rude and uncouthed if you turn them down, etc. I read about someone who complained to the press about an encounter with these hooligans and why the FIs employ such people. The FIs said they were not their staff.
So much for professionalism and conduct in this business.