14 Apr 2012, 1.31PM
THE Monetary Authority of Singapore should extend the fee-based model of charges it is considering in its review of the financial advisory sector to the banking industry
The charges for buying investment products such as unit trusts are too high. If a person invests in a unit trust offered by a bank, he will incur an immediate sales charge of 3 per cent to 5 per cent, which is too steep and means an immediate
loss for him. He may have to wait for a number of years just to recover the loss.
In addition, if the personal banking adviser is interested only in earning the sales charge and commission, he may not advise the client on the cheaper investment avenues or products the
bank may have.
Personal banking advisers often meet walk-in clients who are relatively ignorant about investing and investment products.
To protect these investors, personal banking advisers should not only strive to recommend investment products that
generate returns in accordance with their clients' risk appetite, but also ensure that their clients' initial cost outlay is minimal.
Commission-based rewards will not encourage
this practice among personal banking advisers; a fee-based structure is more likely to do the job. Commission only robs the customers of the right to responsible advice. Eg. Recently it was reported the banks were pushing endowment products and they used the banks' low deposit rates to justify and make the endowment products look good. It is misleading and misrepresenting the endowment products which in fact are also rotten products which can't increase your saving above the current 5% inflation. MAS must stop these banks and fine them heavily.
The industry has become a fly by night industry.