It is easy for consumers to be rip-off by bad financial products. Sometimes, the young people who sell the products are themselves not aware that they are selling products that were designed to cheat consumers. To avoid being rip-off, read this artcile in
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When a financial institution allows its employees to sell products that make the employees lots of commission and the firm tons of profits, these add to the country's GDP. When many other financial institutions (local and foreign) see this opportunity to make money, they set up units/companies and employ employees to sell thise products. These add more to the country's GDP growth.
ReplyDeleteThe country has to make the tough decision to forgo these growth and opt to be on the side of the consumers.
If financial institutions treat all stakeholders fairly, they wouldn't create products that do not benefit their customers.
ReplyDeleteFrom what I see, many financial institutions are only interested in maximizing shareholders' wealth. They don't care about their other stakeholders. Stakeholders are customers, employees and of course the salespersons.
The only way to cut out all these cowboy practice is to BAN COMMISSIONS for retail financial sales. Even for corporate banking, commercial banking and high-end investment banking, the TOTAL commission is less than 1%.
ReplyDeleteAll FIs don't even dare to publish their commission rates for their various products. 99.99% of consumers don't know that financial salesman like insurance agents and bank RMs are OBLIGATED to tell you their commissions & pay structure if you ask them. If FIs publish their commission rates, their retail business will drop by at least 50%.
Think it wistful thinking for Authorities to forgo GDP growth.
ReplyDeleteIt is growth by all means, never mind the consumers being sacificial lambs. Our Govt is the collaborator, not the regulator, for selling financial products that impact GDP growth.
"The country has to make the tough decision to forgo these growth and opt to be on the side of the consumers."
ReplyDeleteDream on!
Not when your performance related bonus and salary depends on GDP growth.
More and more Americans going for fee-only advisers who are legally obligated to put the interests of their clients first.
ReplyDeleteSome excerpts:-
While O’Brien is a drop in Vanguard’s $1.6 trillion bucket of assets, he is part of a surge in fee-only consultants who have changed the way Americans invest.
“The fee-only adviser has an incentive to keep overall costs low and that makes ETFs much more competitive.”
The advisers, who must register with the U.S. Securities and Exchange Commission or state regulators, carry the legal duty to put clients’ interests first. Brokers need only promise to sell products that are “suitable” for customers, according to SEC rules. All RIAs, except those dually registered as a broker-dealer, are barred from taking sales commissions or other payments from the fund companies whose products they pick for investors. Most charge a fixed annual percentage of the client’s money, typically 1 percent to 2 percent, so their incomes rise and fall with the fortunes of their customers.
“I have no incentive to sell someone’s product,” O’Brien said in a telephone interview. “From a consumer-protection standpoint, that’s a sea change.”
Why insurance companies continue to push those traditional par products knowing that they so rotten? It is the only source of cheap capital the insurers don't need to promise to pay high return to the policyholders. They use the policyholders' money to invest to pay their CEO's own huge salary and senior managers' salaries. That is why.That is why the insurance companies are resisting change, to give more protection to the consumers.
ReplyDelete