The so-called investment profiling test offered by banks to customers appears to be nothing more than a marketing tool that allows people to feel good about investing in some products.
The tests are supposed to establish whether a certain investor has the experience, ability and knowledge to invest in riskier products such as the infamous Lehman minibonds.
But from White Collar's experience such profiling is next to useless. When I visited one bank a few years ago to organise a time deposit, I was asked to consider an alternative that could give me a higher return - I was being pushed down the road of riskier investments.
I was also asked to do a profiling test. White Collar did the test - which asked you how many times you have traded stocks, as well as where you go for holidays. On the basis of that I was labelled as a medium risk taker - and they attempted to sell me a type of structured product that just happened to be the bank's promotional sale of the month.
Risk profiling is a sales kit meant for salesmen and conmen to peddle a fund or financial product.It is a quick fix for conmen to justify pushing premixed portfolios.
ReplyDeleteIf structuring an investment for specific needs is that easy why need a salesmen and pay him or her a commission when it can be done online without a load.
Is it a wonder why CPF is littered with losses until today?
If portfolio management is about answering some questionaires there is no need for any middlemen.
Worse, in the industry alot of insurance agents become investment experts overnight after passing a tikam tikam ILP exam.What rubbish!!!!Some agents had to tikam tikam until they passed. After passing they suddenly become 'certified' and are licensed to prowl the streets to prey on victims.
Some of these agents have fortune telling ability to forecast and time the market for their clients.
They are strong believers of active management. They are able to advise when to buy and sell.
These insurance agents make a mockery of finance and MAS
Who decides the accuracy and legitimacy of the risk profiling?
ReplyDeleteIs there any research or paper that show that the risk profiling actually reflect the risk appetite of the investors?
Even the risk profiling is accurate, sometimes investors want to put portion of their investment in safe envinronment like bonds
A few years ago when I asked the Relationship Manager on buying Minibonds, "what are those forms for?" He told me that those are the requirments by MAS and then he proceed to tick those items as quickly as possible. Do MAS read those forms? Answer: definately no because there are thousands of those forms to be fill everyday and one set of forms can goes from 8 to 10 pages. You need a warehouse to store those forms and to go through those forms will take a few full time staff. Is the RM interested in the risk profile of the investor. Answer again no. Why, RM needs to sell a minimum amount of investment products every month and also his reumeration is dependent on this monthly sales. Fill in those risk profiling forms as quick as possible so that the RM can attend to the next customer.
ReplyDelete