The Other Side
What bugs meOne thing that bugs me is the "what-did-we-do-wrong" attitude of the financial and insurance sectors when replying to issues about the imbalanced messages being put out to the lay investors.
One favourite recourse is to seek refuge by explaining that they are not infringing any regulations in doing what they did. With all their in-house resources to pave the way to better understand customers, it is surprising that it has not occurred to some of these institutions to get the emphasis right, that is, in presenting a message that is balanced and with the interests of the customer in mind. A recent article about investment link products illustrates this point.
In the April 2006 article in the Business Times, the feature shows how lay investors are subject to paying for another ‘layer’ of expenses when they invest in investment link products or ILPs. Apparently, these products essentially feed off existing unit trusts where already attract management and other ‘fees’ which are charged as part of the transaction process. No prizes for guessing who makes the money before any change left goes to the poor investor.
Take away the often complex way in which the financial instruments or schemes are structured and the bottom-line to bear in mind is that these institutions have to make money for themselves in the first instance. The approach in which some of these schemes are sold can be attributed to the weakness of investors. Sometimes three-quarter of an advertisement is devoted to the ‘freebies’ for investing in a new financial product. For obvious reasons, I’d rather more space be devoted to the product rather than on the terms and conditions to qualify for the ‘freebies’!
Such organizations have a selective way of presenting interests and returns. An example is the interest for personal credit which is often presented on monthly basis to make it appear lower. While returns on investments are totalled up over a period of up to five years, or more, to look bigger than they really are.
I look forward to the day when these organizations aspire to meet information needs beyond that prescribed by regulations, and adopt ethical standards in putting forward information that is fair, and which place the interests of lay investors, above all else
posted by Ek Heng @ 4:22 PM
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