~~| Track currently on "Beautiful Things" (Andain)
The recent and ongoing saga of Mini-bonds / Jubilee Notes / High Notes have struck a cord with me. In fact, I was given sales training on Jubilee Notes before I left my ex-company. I remembered distinctively my manager telling a group of us that it's an alternative to fixed deposits and target audience are people who have spare cash on hand eg) retirees, older folks. I did not bother to promote that product at all, as I could not even understand how the whole thing works. It sounds too good to be true and it turns out that way. My dis-trust on my manager's product competence and his habit of focusing on the up-side and ignoring the down-side makes me very skeptical of whatever comes out of his mouth. Luckily for me, I never sold any products that I don't understand at all and that turned out to be a good principle that I live by. I'm an IFA rep, so I get the liberty of not promoting products that I don't want to. The actions by the Banks to shift the responsibility to the RMs are somewhat unethical in my opinion. RMs have sales quotation to hit and that includes the above mentioned toxic products. Who sets the sales quota? Now that things have gone horribly wrong, it's totally unethical to shift the blame solely on to the RMs.
I was hoping that MAS would do the right thing when the news first broke out in Hong Kong. However, the muted response from them is highly disappointing. Instead of talking to the investors first, they spoke to the banks first. It's akin to talking first to the robber instead of the victim first to find out what happened. An unlikely hero turn up in the figure of Tan Kin Lian. I remembered him from my poly days whereby he frequently comes to my poly to talk about financial planning and the importance of it. Though I disagree with some of the stuffs that he preached, esp that NTUC is the Best....I gave him the benefit of the doubt that he has to fulfill his fiduciary duties as CEO of NTUC. So have to say good things about them. In this fiasco, he is the beacon of light that many investors look to for guidance and make a collective effort to get the banks to compensate at least some of their losses. My high regards for our financial system somewhat took a beating after this fiasco. How could MAS approve such products to be marketed to the mass public and when things goes wrong, claim "Caveat Emptor". If that's the case, why bother to have a regulatory body when everything I buy need to be based on "Caveat Emptor" principle. I'm not trying to say that we should not think before purchasing stuffs, my point is that these products are totally unfit for the mass majority of the market.
Some friends I've spoken to argued that "those people deserves it la, so greedy. Now kena losses then make noise want compensation". Oh well, it's normal for people to make such comments when they themselves aren't exposed to it and don't know the whole story. What's worse, is that most of them don't even know that such a thing is actually happening. Anyway, I explained to them that the investors stand to lose all their capital for a measely 5% return? My own portfolio gives my average 7% return without such high risks. I don't see how a collapse of one company within my portfolio can reduce my capital to $0. How could they be considered greedy? Furthermore, the products were represented by the F.Is as alternative to fixed deposits. That couldn't be further from the truth. The response by F.Is to handle complaints case by case basis is appalling, both on the ethical and market perspectives. The long term damage on their brand name could be in the millions. Seriously, I've lost a lot of confidence in the F.Is involved. I forbid my mother to go to the bank alone unless I'm there with her. The last time she went to a bank alone, she ended up buying a 15 year endowment plan. Best of all, she only told me after the 14 days cooling off period. She was enticed by the Frying pan offered as an incentive, with promises of capital guaranteed. Well, the capital is guaranteed provided the entity giving the guarantee is still there. Anyway, that product isn't all that bad, just that it doesn't provide for liquidity.
Enough of the banks. I want to focus on Financial Adviser Representatives themselves now. We've all heard about how lucrative the business is. I've been personally in the line before and it's pretty lucrative if you can close your eyes and ears to a few ethical issues. Maybe that's why I don't have as much money as I should have. I was pretty appalled by the advices that my friends have been getting from their "trusted" advisers. One friend of mine, asked me about Regular Investment Linked Policies. It was recommended to her by her best friend, which I happen to know and don't really like her as a person. I don't know if she doesn't know about the pitfalls of regular ILPs or she simply is omitting telling her best friend the truth. I'm being cynical here is because that adviser could have given her best friend an alternative plan with the same amount of budget, while giving her flexibility and more value for money. Regular ILPs typically don't contribute 100% into your first few years of the policy, most ranging from 0% to 35% the last time I checked. That means, out of 100 bucks of premium, $0 could be going into investments for the first few years. I personally believe it's a very lousy product, another time bomb waiting to happen. Back to the adviser, I personally believe that she is withholding the truth from her friend....for she's pretty experienced in the line. If she doesn't know the pitfall, then there must be something very wrong with the industry itself. She could have advised the friend to invest in unit trusts with a term policy. However, this alternative would cause her commission to drop from 50% to 1% for unit trust and around a few more percent out of the term policy as it's pretty cheap. Now imagine the premiums being $1,000 per month. Would you want to earn $500 dollars per month by selling ILPs or less than $100 selling term and unit trust. Now tell me, isn't that conflict of interest? My manager even told me sometime back that I could have earned more if I sold ILP........I simply ignored him. Reason is that I personally would not even buy an ILP let alone selling it. If you think you will not buy the product, don't sell it. I think the bank management have to understand this point too.
I personally believe that the advisers should be compensated not by the commissions from the products that they sell, but by the advises that they give to the consumers. Commission based remuneration system would only bring the question of objectivity into question. I rather pay a lump sum on a yearly or bi-yearly basis to an adviser to advise me on the plan and products to buy, with no vested interests in the commissions paid out. Practitioners of the industry would say that "Oh, Singaporeans are not willing to pay". Please la, they are still paying you indirectly through the commissions rite? You're just saying it coz it's more lucrative to earn from commissions rather than from fixed fees. From the above scenario, the adviser can stand to earn up to 50% of the premiums per month, lasting a few years, with the commissions reducing after each year. So tell me, more lucrative for commissions or fixed charges? Practitioners will argue that sometimes the small amount of money / premium involved, it's not justifiable to pay a fixed fee to advisers. Come on again la, you can vary the charges if the case is a small one / non-complicated rite? Don't come up with so many execuses just to maintain the status quo. By charging clients for the setup or review of their financial plan, it not only brings more objectivity, it also makes the clients more committed to the plan set forward, as they perceived that they have to pay for it. I reckon that the financial advisory industry would be reformed in the next few years as more and more people are aware and educated about such matters.
On an ending note, though I'm not a practising financial adviser representative anymore. I'm helping my friends to calculate how much they need to accumulate by their retirement age. I simply can't stand it to hear advisers saying that it's a very complicated process, therefore I'm going to help my friends know more about retirement planning so that they will not get misled by the so called "professionals". I've never considered any financial advisers as professionals and I doubt they'll do anything to change my mind in the next few years. I've seen way too many bad apples during my time in the industry for 3.5 years. I cannot take it when I see "successful" advisers who drives big cars, living it up as they call it, when I know deep down that they are being unethical and some of them downright incomptent in product knowledge. I had enough of all the bullshit, politicking, rumors in the industry. It's time for a change of environment. Am I being a sourgrape? I don't think so personally as time will tell when these "successful" advisers will get complains by their clients. A lot clients simply don't bother to understand what products they bought until things goes wrong. That's why it's imperative that MAS regulate this industry heavily. However, recent information on their handling of complaints isn't really what I thought it would be. So "Caveat Emptor" rule again. Use your brain to think and ask questions. Don't just rely on trust alone. Sometimes, the other party may be ignorant of the pitfalls as well. So drop me an sms if you want me to help you calculate how much you'll need to save for retirement and the products to avoid. Help me to look out for jobs in the banking sector in the meantime. Hopefully the people retrenched from DBS will switch to other industries, if not, it's going to be an uphill struggle to land a job of my choice.
~~| Greed is good if you subscribe to the Free Market theory |~~
