Do you still trust your bank and banker with your money?

I have just read an article on Business Times entitled "Restoring Trust in Financial Institutions" (FIs) reflecting the views of Mr Simon Newman, Managing Director, AVIVA Singapore.

To restore something means you must have lost it first and then looking to find and put it back. So have we the investing public lost trust in FIs? And the FIs are now trying to restore or regain the public's trust and confidence?

The collapse of structured products amid allegations of massive mis-selling by FIs and their commission-powered sales representatives was the main contributor to that loss of trust.

Can FIs regain that trust of the consumers by simply requiring them to print the sales brochures in all 4 languages (which of course, will be peppered with tons of disclaimers in all 4 languages) and to follow MAS-issued Guidelines on Fair Trading? Mr Newman said FIs need to go beyond merely fulfilling their legal obligations (yes, I agree), (but also) to truly engage consumers and meet their evolving needs in this challenging and volatile economic climate (blah, blah blah). Huh? Is this the panacea to people who have lost millions of dollars of life savings? Let me share with you a parallel example.

The travel industry too was generally in doldrum in the last few months due to the financial crisis. It was later compounded by the outbreak of H1N1. Many who have pre-booked their holidays wanted to cancel and seek refund. Some travel companies are ok to refund but with heavy penalty. The question here - what would you have done if you were running a travel agency?

An industry player opined the industry as a whole should have adopted the position to refund. Otherwise the consequence would be consumers would be more fearful of future early commitment (thus impairing your long term business viability) and prefer last minute self-arranged travels.

Bottomline - When self interest is the foundation of every party's action / decision, the debate will continue. Or given time, the pain will ease and trust will return.

Two Singapore icons

Could the two Singapore corporate icons be around at the end of this financial storm?

At this rate that they are going, I really don't think so.

One is a retailer (a premium one, it called itself) selling health-related equipment that other people make and had tried to play the M&A game with the Americans using mostly other people's monies. In yesterday's BT, the last of few hundred millions invested in that foreign land has been erased from its balance sheet.

The other has lost its way since its signature sound card. The company is burning away the USD$100mio won from Apple a few years ago trying to produce and sell products that the whole world knows how to make. After closing down its online initiative, they have just closed down their retail initiative. Sold and lease back their HQ. Sold their online music store.

Come on, guys. Are you running out of ideas? The market will punish harshly!

Who is vulnerable?

part of Shenton Way's history

We are hearing that the banks and other financial institutions are doing the right thing by compensating the vulnerable group ie. defined as illiterate, elderly people.

A bank said they are prepared to do that as their investigation has shown that their sales staff have failed to live up to their "high" standard of selling and marketing financial products. Such well crafted marketing communication punch line indeed AS it suggests that the sellers have "high" standards but some may have failed to deliver according to standards.

When a plane crashed, the investigators would look at how the pilots were trained and pre-qualified for the job.

Couple of questions in my mind:-

1. How do the banks/FIs approve a product before being "sold" to their respective custoner base? I notice some FIs are deeplyly involved with these ill-fated products but other FIs are not involved at all.
2. What are the profiles of their sales staff? How are they remunerated? Are they qualified to advise?
   
3. Are these sales staff personally liable?
4. Do the FIs really think the elderly and illiterates are the vulnerable groups and thus the compensation? Or the FIs are most vulnerable to additional liability given their "miselling" to these "vulnerable" groups?

So who is actually vulnerable here?

2 months ago

About two months ago, I received a sms from an ex-colleague, who had been quiet for quite some time, with an invitation to meet up for a meal.

I accepted the invitation. During the dinner, we ended up talking about investment. I got a feeling after the whole thing that she could be sizing me up for an introduction to her boyfriend working in the investment line.

She mentioned about this investment talk that she has attended where the instructor was teaching about how to make money through some investment technique that he has become aware of.

Edgar's response then - Did you ask the guy why he is sharing with a whole bunch of people in class after class the secret to making money?

She said then she has just invested some Singapore/Malaysia funds.

Edgar's response then - I am looking to build up a sizable war chest (by opening credit lines) to buy when the market crashes.

She said she would be very interested to take on the position of marketing for investment houses.

Edgar's response then - Why?

The lean years could be here and we must know that money may no longer be easy to come by.