Posted on September 17, 2009 - by Tan Kin Lian
Common sense approach towards investment products
Photo by priagovindh
Several people have posted comments that they have lost trust in investment products. They are not impressed with the recent announcement by the Monetary Authority of Singapore in improving the regulatory regime on the sale of investment products. They lost their trust in financial institutions after losing a lot of money on the credit linked notes.
I wish to advise these investors to learn from the lessons from the sad episode. It is important that consumers should be educated. The key lessons are:
a) Invest some time to understand the fundamentals of investing. Join FISCA (Financial Services Consumer Association).
b) Stay away from any product that you do not understand. Although I can be considered a financial expert, I have to stay away from many complex and opaque products, such as dual currency investments, land banking, credit linked notes, time sharing, etc.
c) Use your common sense. Ask a few questions about the financial product. What do I get from the product? How much do I pay? What is the chance of making a profit or a loss? How much do the seller earn by selling the product to me? These are simple questions, but they cannot be answered. Even the seller does not know the answers. So, I stay away from these products. Read more…
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September 21, 2009
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Phillip Tan said:
Hi, I agree with TKL’s pointer 3. In line with the recent MAS move on Fair Dealing for Consumers, financial institutions need to be obliged to help to make transparent on the costs/incentives/profit margins that are made on each product (bond, Dual Currency Investment etc). This will help to inform consumers on the cost(risk)-benefit analysis and avoid buying high risk-low return product that can be low risk-high margin to the seller.
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September 24, 2009
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Derek Lim said:
Several thoughts come into my mind.
Is this MAS move mandatory that all financial institutes will have to follow?
Even if the sellers do manage to provide us with the answers, how can we validate that what they say is true? More often then not, they will just give a verbal explanation. Even if there’s some printed material to show you, I’m pretty sure that there will be a clause somewhere that will protect the seller.
Nevertheless, it is good to ask and see how some will stumble to find you the answers.