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There was an advertisement in “The New Paper” in which the ad says “min. 5% returns, call handphone xyz”. My colleagues and I were looking at the various ads but this one caught our attention. Partly because it is big and partly because the ad gives a hint that the return is guaranteed.
So I immediately pick up the phone and called the handphone stated. I asked the person whether is the 5% guaranteed and is it annualized. He told me that the 5% is guaranteed and it can be achieved in 2 to 3 months! Wow!! When I asked what instrument is used, he said it is unit trusts. Then he asked me how much I had and asked me to show him my CPF statement. Strange, why CPF statement? Cash not interested? Apparently my other colleagues had tried calling such ads before (seems that I am not the only one who was curious) and it seems that such people are targeting CPF money. When I asked which firm the person is from, he told me he is representing a particular unit trust firm. Obviously I know he was lying. That firm does not have any representative doing direct sales. He is merely using the firm as a front and using their platform as a means for transacting. In fact, sometime ago I recall that the firm had sent a circular warning of such misrepresentation used. For those who are not savvy, it is impossible to guarantee 5% return over 2 to 3 months in today’s interest rates. To provide risk-free (or near risk-free) guarantee, only Singapore Government Bonds and bank deposits can be considered. As we know, the interest rate environment can never be 5% at this point in time. Therefore, the man over the phone was misleading his client and secondly misrepresenting another firm. From my grapevine, it seems that are syndicates going around misleading people out of their CPF money. Typically guaranteeing returns and/or practicing churning. Very often, these syndicates also offer commission rebates to the CPF member. How does this work? Say the syndicate charge 3% on unit trusts but offer to return 1.5% back to the CPF member in cash – this means that the CPF member has effectively withdraw some money from the CPF. This practice is illegal in Singapore. But from my grapevine this practice is widespread. Also there is an illegal practice of using “sub-agents”. Sub-agents are unlicensed financial advisers going around trying to make financial product sales to unwary clients. These clients think they are dealing with licensed financial adviser but in reality they are dealing with unlicensed advisers. They will sign all the forms but as the sub-agent is unlicensed, they cannot sign on the form. So these sub-agents will pass the forms to the licensed financial advisers to sign it. In other words, at the top of the pyramid is a licensed financial adviser and at the bottom of the pyramid are unlicensed “runners”. For these to happen, no single person can act alone but it is likely done as a syndicate. I am not surprised if there is any connection with secret societies or loan shark syndicates. Well, coming back that “5% min return” guy, the fact that he can openly advertise in the newspaper means that at the moment it is likely that nobody or very few people has been caught. This means that the authorities are not doing or not doing enough to stop these illegal practices. I hope that the industry does not descend into cow-boy industry and I hope MAS will do some enforcement. Give your comments |
