One of my client bought a number of structured product from one of the big three banks in Singapore a few years ago. She showed me the brochure and materials. The name says that it is “XYZ Guaranteed Fund.” It was offered to her and was told by the bank officer that it is the same as fixed deposit. When I check the details, the guarantor was Banque AIG. I know who is AIG but Banque AIG, who? Later I found from the Internet that Banque AIG is a subsidiary of AIG Financial Products Corp. I find that the bank officer was clearly misrepresenting.

Many man-in-the-street will think that the product is guaranteed by the bank. But if the guarantee is provided by another company, the adviser must explain to the customer’s satisfaction the identity of the guarantor and whether can it be trusted. No explanation was given as to who this guarantor is and in fact many would have assumed it was guaranteed by the bank selling it.

Singapore reputation is rapidly being tarnished by such unprofessionalism. Singapore is well known to be a “clean” city with zero tolerance against crime. Yet, the financial industry is in such total mess.

Some people may think that putting all money in fixed deposit is safe. Well, that is true provided that the entire amount is guaranteed by the full faith of the Singapore Government. However, the blanket guarantee will end one day. After that, the amount being guaranteed by Singapore Government is only a small amount. Any amount above the guarantee is subjected to the credit worthiness of the bank. If banks continue its unprofessionalism, frankly speaking I don’t have much confidence in such banks. The last thing I want my retirement money is to be subjected to the credit worthiness of the bank. That is why I advice clients with large amount of cash to park the bulk with the Singapore Government Bonds. Do not trust any financial institutions that do not treat their customers honestly. The common complain is that the Singapore Government Bonds’ interests are too low, much lower than the banks’. Well, take it this way – the higher interest rate that the fixed deposits come at a risk: the risk of you being sold a unsuitable product. If you want to take risk, it is up to you.