Banks get guidelines on treating customers fairly

4 April 2009

The Editor
Forum Page
Straits Times

I refer to the article “Banks get guide on treating customers fairly” (ST 4 April).

I congratulate the Monetary Authority of Singapore for taking the appropriate steps to address this issue. However, may I raise a matter of public concern?

Does this imply that in the past, it was all right for the banks to treat customers unfairly? For example, was it all right for a bank to design a complex financial product that give a poor return for the risks embedded in the product and sell the product to an unwary public, without disclosing the relevant information that are available and known by the product issuer?

Were there already laws in place that were supposed to protect the consumers against unfair or predatory practices?

I recall that there were specific requirements under the existing section 199 and 200 of the Securities and Futures Act and under Section 27 of the Financial Adviser’s Act.

A petition was signed by 983 people who alleged that they were misled into investing in several credit-linked notes, such as the Mini-bonds, High Notes, Pinnacle Notes and Jubilee Notes. This petition was lodged with the Monetary Authority of Singapore on 8 October 2008. It requested the MAS or the Attorney General to investigate if there were breaches of relevant provisions under the existing law.

To my knowledge, there was no announcement on the outcome of the investigation, or if such an investigation had been conducted.

If the investment banks that created the products or the financial institutions that sold the products had failed in their duty under the existing law, surely it is the responsibility of the authority to charge them in court and allow the matter to be decided by the court?

If the court had found that the law was vague, then a subsequent step should be taken to clarify the law through new legislation or regulations.

Let me illustrate with this example. Someone broke into a house and took away an expensive notebook computer. The owner lodges a report to the Police. Should the Police now issue a new guide to explain what is house-breaking and theft? Surely, it is the duty of the Police to charge the culprit, with sufficient evidence, and let the court decide on the matter, based on the existing law?

Tan Kin Lian

Fat fees for speaking engagements

A reader pointed out that the leaders of the advanced democracies earn modest salary when they were in public service, but received fat fees for public speaking after their retirement from politics. There is an article in the Straits Times about the speaking fees received by a former politician.

These fees were paid by the commercial conference organizers, who were able to get the participants to pay the fees to make it viable.

They also get big corporate sponsorships It is likely that the big corporations, which made huge profits from the free market policies, now expect to assistance of the retired politicians in their lobbying. This is unsatisfactory, but is quite unfortunate.

We need a world, and leaders, that are more honorable. They should take care of the ordinary people, rather than for personal enrichment.

Honesty and rationalisation

We think of honesty in terms of financial dealings. We also need to think of honesty in terms of speaking the truth.

If we make a mistake, we should admit it. We should not try to find some angle to explain it away. We should not "rationalise" our action, which is what smart but dishonest people are quite used to do.

If we do not know the answer, we can state the fact. We can seek advice. Or just give it a try.

In an artilce in the Straits Times today stating that Franklin Roosevelt was not sure about how to bring America out of the depression in the early 1930s. He took some bold steps, but admitted that he did not know if it would work. Barrack Obama is now taking the same approach to overcome the global financial crisis 80 years later. 

There are some people who have never made a mistake in their lives, because they are able to rationalise it, and explain it away.  

Tan Kin Lian

Wealth managers

Do they do a good job? Read this article.

Health care reform in the USA

Will insurers once again scupple the health-care reform? Article in Economist. 

SCMP: Details urged on Minibond saga

Lawmakers are still seeking Monetary Authority chief executive Joseph Yam Chi-kwong's disclosure of its full report on the Lehman Brothers minibonds saga, after he cited reasons of public interest in not revealing it. Raymond Ho Chung-tai, chairman of the Legislative Council subcommittee investigating the matter, said if Mr Yam insisted on his position at an April 14 hearing, he and deputy chairman Philip Wong Yu-hong would arrange a closed-door meeting to ask for an explanation.

MY COMMENT

It seems that the authority can hide the truth, by citing public interest. This seems to be the practice in Singapore as well. I hope that we can have a more honest, open society, with greater transparency.

Survey: MAS guide on treating customers fairly

MAS has issued a new guide to banks on treating customers fairly. The yardsticks are:

1. Customers have confidence that they deal with financial institutions where fair dealing is central to the corporate culture

2. Financial institutions offer products and services suitable for their target customer segments.

3. Financial institutions have competent representatives providing customers with quality advice and appropriate recommendation.

4. Customers receive clear, relevant and timely information to make informed decisions.

5. Financial institutions handle customer complaints in an independent, effective and prompt manner.

What are your views on the existing situation and the new MAS guide? Survey.

Public Service

I respect the political leaders in the democratic countries, especially those of Europe and North America. 

They entered politics as a public service. They desire to make life better for the people. They have strong  values and beliefs (whether leaning to the left, right or center) and wish to influence the future of their nation. 

They are happy to receive a remuneration of 3 to 10 times of the average wage of their ordinary people. They do not expect a remuneration that is 100 times or more (i.e. the salary paid in the private center for top exectives). 

By accepting the modest remuneration of the public service, they are able to exercise some moral control over the excessive and unjustified salaries paid in the private center.

Tan Kin Lian

HK: Relief appears to be near for Lehman minibond holders.

There are sufficient grounds for disciplinary action against some bank staff accused of misselling the minibonds, according to the Hong Kong Monetary Authority.

And market sources say the Securities and Futures Commission is pushing big banks to follow in the footsteps of Sun Hung Kai Investment and settle with disgruntled customers.

HKMA executive director Raymond Li said yesterday that "a few cases are already at a very advanced stage of investigation,'' he said adding, "Should any case be concluded we would definitely tell the public."

According to procedures, anyone accused of misselling will have at least 30 days to make a representation and another 21 days to appeal if their explanations are rejected before their case goes public. As of yesterday, the HKMA had got 20,642 complaints, and 20,443 had cleared initial assessment.

So far, files have been opened for just 5,772 cases, of which 4,178 have gone through a preliminary investigation. Only 418 complaints relating to 16 banks were referred to the SFC.

Li blamed the slow progress on the reluctance of complainants to provide useful information in most of the cases.

But he reiterated that the authority will complete investigating at least 70 percent of complaints by March 2010.

"We are recruiting more staff both part-time and those on secondment to accelerate the process," he said. About 200 staff will be involved.

Li said a client's interest was the HKMA's priority, and if a settlement without punishment was the best solution it would get the authority's support.

The Whole Truth

Dear Mr. Tan,

Some people play with words to an extent that it is difficult to know the difference between the truth and lies.

If a business reduce the benefit significantly last year, can they now say that the action has benefited the customers, because they do not need to reduce the benefit further this year?

Similarly, can the government, after increasing tax and levy,  now give a smal rebate and say that they are benefitting the taxpayer with the rebate?

REPLY

I agree with your view. It is now quite difficult to tell the difference between honesty and dishonesty. Mr. S Rajaratnam once said that there are difference between "the truth, the whole truth and nothing but the truth". We have to learn what is the "whole truth".

Submitting Income Taxi by e-Filing

I submitted my income tax returns for 2008 by e-filing.

IRAS has designed a sophisticated and expensive computer system for e-filing. It must have cost a lot of money. It was supposed to make e-filing easy for the tax-payer.

Unfortunately, it was very difficult - even for an internet savvy person like me. Why? It is a matter of mindset. The experts in IRAS designed a system that is convenient for them. They forget to make it convenient for the ordinary people.

What is a system that is convenient for ordinary people? Just provide a simple form to ask me to submit the details of my income and claim. Use a format that is convenient for the tax payer to fill in - not a format that is convenient for IRAS to do their workflow.

But, I have to commend IRAS for one excellent aspect of the system. They display the information that they have, taken from various sources, that are relevant for my tax computation. This includes my chartiable donations and topping up of CPF account for family members. I appreciate it very much. 

I hope that IRAS will take my suggestion about making it easy for me to submit their annual return, especially for items that are not captured by IRAS.

Tan Kin Lian

Additional comments

It is easy to use e-filing, if you do not need to provide additional sources of income or other charges. However, it is quite troublesome to provide the additional information, for example on property, life insurance policies and deductions, as they are designed to be helpful to IRAS and not customer friendly. It is also difficult to search for the right places to provide the information, as they are placed all over several web pages and tabs.

Buy Term Insurance

Dear Mr. Tan,
May I know which company you'd recommend for buying "Term", "Decreasing Term" and "Living Benefit" policies you described in your FAQ: http://www.tankinlian.com/faq/choice.html

REPLY
You can buy Term insurance from NTUC Income (they call it i-Term). But do not allow them to convince you to buy other life insurance policies.

You can also buy i-Term from Philips Securities. They sell i-Term offered by NTUC Income. You can find out from their website. All the best!

Relief loan is similar to early withdrawal from CPF

I have proposed that retrenched workers should be allowed to take a relief loan, offered by a Government agency,  at an interest rate of 2.5% per annum. This should also be available to workers who suffered a drop of earnings due to a reduction in working hours.

This relief loan is similar to an unemployment benefit, but has to be repaid in the future. Interest on the loan can be accumulated with the principal. The borrower has the incentive to repay the loan earlier, to avoid incurring interest charges.

My proposal is similar to early withdrawal from the CPF. The loan incurs interest charge of 2.5%, which is similar to the interest earned on CPF savings.  There is no additional cost to the borrower under my proposed relief loan scheme.

My proposal is intended to protect the integrity of the CPF as a saving plan for retirement.  There is a reminder on the borrower to repay the relief loan. However, if the loan is not repaid, it will be repaid from the CPF savings at the time of its withdrawal.

My proposal will also offer relief to the retrenched worker in the case where there is no CPF savings to withdraw from, e.g. where the savings have been fully used to buy a property.

Tan Kin Lian

Ready Pool of Part Time Workers

To employers. There is a ready pool of part time workers. They are willing to work for $6 to $9 per hour. You can choose a worker that stays near your place of business, and likes the type of work that you do. Go to this portal. 

Click on employer. Sign up and select your workers. You can send a SMS for them to call you.

Intelligence Quiz

You can buy my book at $7.90 at the bookstores mentinoned in this website.

You can also view other applciations here.

Compensation for Credit Linked Notes

If you have not been offfered or have rejected an inadequate offer of compensation, and you wish to lodge a complaint with FIDREC or take legal action, please provide your particulars in this survey.

10 highest paid politicians in the world

Report.

Annual salaries in USD

1. Lee Hsien Loong - Singapore   Salary in dollars - $2.47 million
2. Donald Tsang Yum-Kuen - Hong Kong Salary in dollars - $516,000
3. Barack Obama - United States Salary in dollars - $400,000
4. Brian Cowen - Ireland Salary in dollars - $341,000
5. Nicolas Sarkozy - France Salary in dollars - $318,000
6. Angela Merkel - Germany Salary in dollars - $303,000
7. Gordon Brown - UK Salary in dollars - $279,000
8. Stephen Harper - Canada Salary in dollars - $246,000
9. Taro Aso - Japan Salary in dollars - $243,000
10. Kevin Rudd - Australia Salary in dollars - $229,000

Where to get financial advice

Here are some general tips, but written for the UK situation.

A sense of loss for a Singaporean

Hi Mr Tan,
I have been following with interest your blog on and off especially during the period of "minibonds". I respect your sense of social justice and your courage and willingness to fight for the underdogs.

I myself have always been neutral to politics. I only write today because on the spur of the moment, I want to pass a few observations about the passing away of the Singapore I grew up in.

I am in my 30s. When I am young, I felt that the government was willing to develop us Singaporeans. Life was simple, relations with people were sincere.

That Singapore is no more. In almost any job I have worked, foreigners equal Singaporeans in number, sometimes they exceed. Even when you interact with people, the locals don't care for and about the locals. Money is all everyone thinks about. Perhaps it is because we are all forced to struggle with the influx of so many FTs.

When we need employers to give us a chance, we find that the job has gone to some more experienced FT. But they were given chances, even sponsored to take courses, back in their own countries to hone the skills that they have today. 

All familial ties are no more; we have became disposable entities to our companies and our bosses. It is a very lope-sided system where the employer is king. Even some bosses, used to maids, treat employees in the same disposable manner. Forget about receiving any training, you are paid to serve them. Retrenchment and dismissal is sometimes the excuse of poor senior management. The same goes for the present government.

I am neither bitter nor resigned. I am just sad that I cannot identify this country with the one I knew and grew up in. You might tell me I am being sentimental, we must all adapt to the world, there is no free lunch. Yes I have heard that many times. And home-grown Singaporeans are largely a docile bunch willing to bend over backwards with the govt. But why does it seem that the govt makes our problems worse instead of better?

You are very capable man. By writing to you, I don't dare to aspire for anything. I have signed your petitions and I have written encouraging messages on your blog. I just want to share with you, Singaporean to Singaporean, the loss of the soul and essence of my country.

High charges give poor return

A participant at the CASE forum gave this statement. He said that he had invested in unit trusts for the past many years. Two years ago, on his retirement, he calculated the return on these unit trusts and found that it gave an average of about 3% annually. This is a poor return, considering the long period of investment. He has decided that to avoid all types of investments.

If he had invested for such a long period, his return should have been more than 6% annually. It is likely that his fund was badly managed, e.g. in speculative investments, or had high charges that are taken away from his return.

There is a segment of the fund management industry that behaved unethically. The fund manager takes away big fees, but were not able to achieve a good return to the investors.  The fees take away a large part of the return and gave a poor net return to the investor.

Many life insurance products also offer a poor return, of 3% annually or less. Considering that inflation must have been around this level, the poor return is just able to match inflation. For investors who took our their money earlier, the high front end fees led to a big loss of their savings.

Be careful of bad financial products. Many financial products fall in this category!

Proposal to solve the global economic crisis

We are facing a global economic and financial crisis. People are scared to spend. They want to save money, in case they lose their job and need the money to spend at that time. 

The reduction in consumption is causing the economy to slow down badly. Businesses are hurt. They are not able to get encough sales to pay their expenses. They have to close down and retrench their employees. This will lead to a downward spiral.

The collapse of the value of property and other assets cause people to feel poor. They also cut down their spendings. 

Actually, the people still own the same houses and assets. They now believe that these assets are worth little, when one year ago, they thought that the assets are worth two or three times more. 

All this is just a matter of the mind. It is also called confidence. If we can get people to believe that they are rich, that their assets are worth more than they can fetch today, we can revive the global economy. 

Read this proposal.

Tackling the credit crunch

Many small businesses find it difficult to get credit from the banks. Here is my proposed solution.