Nov 12, 2008
DBS overhauls sales tactics
Customers will be asked tough questions before investing, says chairman
By Ignatius Low, Money Editor
DBS Bank plans to ask more detailed questions about a customer's background and how he got the money he is investing.
SINGAPORE'S largest bank is making big changes to the way it sells investments to customers, as it continues to battle criticism over losses suffered by those who put money into its High Notes 5 product.
DBS Bank plans to ask more detailed questions about a customer's background and how he got the money he is investing. And it will turn away those who are not suitable for a product, even if they insist on buying it.
The bank has drawn flak for arranging and selling structured products that have been rendered worthless by the collapse of American investment bank Lehman Brothers.
Some customers claim that the risks were not explained to them.
The bank has pledged to look into every complaint filed and resolve them all by the end of the year.
'It's a very encouraging move by a financial institution, certainly for retail investors like retirees,' said Mr David Gerald, chief executive officer of the Securities Investors Association of Singapore (Sias).
Sias has spoken out against the mis-selling of investment products and issued a guide for investors last week.
'It puts some of the responsibility back with investors, but then there is also a cooling-off period too, should they make a wrong decision and change their mind,' added Mr Gerald.
ignatius@sph.com.sg
This article seems to be very heartening indeed since investors will be asked tough questions before investing. However, this system is still flawed in my opinion.
Firstly, one must understand that the objectives of banks, just like any companies is to make profits. It seems to me that they can earn profits through several channels. This can include the initial sales charge when one buys the product and subsequently, a cut of any profits in the event that the product turns out to be profitable. In the event that the product is in the red, the investor will likely have to bear all of the losses. So in both events, the banks will still stand to make a profit. So in order to increase their profits, they will try to sell more products to the investors. Thus this overhaul of sales tactics only mean that the bank will try to sell the 'right' product to the investor if such a product exists but it does not change the fact that banks are for profits. Let us not forget too that such products being sold by the bank is likely to have a poor yield due to sales charge and the cut of the profits that the banks take if the product is profitable.
Secondly, investors must be able to understand what type of products that they are buying. Given that the objective of banks is to churn out profits, it is unlikely that they will put the interest of the investors as their priority. Thus even if the bank recommends the 'right' product, investors must be able to discern about the risks of the product and not leave everything else to the bank.
In short, it is not advisable to entrust your investments to the bank without knowing what is going on since the objective of the bank is to churn out profits. Caveat emptor !
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