Do You Trust Banks and Insurers?

There was a Straits Times article over the weekend which reported that the reputations of local banks and insurers are recovering, after suffering a dent in image during the financial crisis. This was the result of a poll surveying 341 people.

Personally, I’m not so sure what kind of image they are talking about.

“Horror” stories of errant relationship managers or unethical insurance agents are not uncommon, but such incidents do not usually have a wide reach. Even fiascoes that do, like the mini-bond saga, will eventually be forgotten over time.

Apart from blatant regulation breaches that get reported in the news, what I feel is not apparent to the general public is the fact that transgressions are being committed on a daily basis and yet are considered legally compliant practices. While everyone knows that financial institutions are of course profit-making entities, I’m not too sure they know what extents supposedly reputable organisations go to in order to bleed them dry. Products are getting increasingly complex with all kinds of unnecessary charges layered in and features added that are more frivolous than beneficial. An insurance policy can now have more than 20 – 30 pages of technical jargon and numbers in its Benefit Illustration, which it claims to be transparent. Sure, it can be very transparent which is meaningless to the layperson who will not be able to decipher the information given to him or her.

I am also not sure how they can be said to have a positive image. When I return home from work, I will walk past people distributing flyers, salon staff trying to sell packages and of course, the ubiquitous bank staff promoting financial products or insurance agent doing a “survey”.

I believe that a healthy sense of sceptism is important, but I guess the market of consumers has now been polarised into mainly two types – those that will readily trust financial institutions just because they are supposedly reputable, and then those who have become utterly cynical about all things finance. Either way, both have a very determined one-way path to financial doom.

Thumbs up to keep me writing more!

2 responses.

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  • Reply
    Bert said 2645 days ago:

    i believe responsibility has to be taken at both sides, while FIs and RMs are now obligated to disclose all risk inherent. the non financially savvy would need to take the extra effort to clarify and not purchase blindly. As mentioned, there’s increased complexity, which leads to tradeoff between risk and return. Many get so intrigued by the returns and obliterate the presence of anything unfavourable. When things go wrong, they blame everything and everyone else but themselves. End of the day, id say the problem lies with the average man on the street and not the FIs

    • Reply
      Seth said 2644 days ago:

      Thanks for your comment, Bert.

      You say responsibility should be taken by both sides and yet you end off blaming the layperson. Most financial institutions and their staff will not change for the better so I agree that the layperson has to brush up on their financial literacy, but it’s not fair to chalk up everything to caveat emptor.

      As mentioned, financial products can be quite complex. Real financial consultants are supposed to give proper advice to their clients much like how doctors are entrusted to give proper medical care to their patients.

      If the case was that a doctor gave ethical and suitable treatment to his patient and the patient ignored such advice, I would agree with you. However, the situation in the financial industry is not this way. Most practitioners abuse their positions of trust. I know of clients who are milked dry who very happily recommended more friends to their “financial adviser”. Is it the fault of the person being deceived? Perhaps, but the one deceiving others has a much greater moral culpability.

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