Don’t forget this lesson
The recent uproar over the alleged mis-selling of structured notes vindicated my fears in the blog Worry for heartland uncles and aunties. Stores of how retirees lost their life savings and how their children were were saddened by the fears and resentment that their parents go through are everywhere. Some RMs complained that customers never spoke a word when things were fine but made so much noise when things went wrong. I wonder if they would still think in the same way if they themselves or their parents were the victims.
To be fair, just 2 years ago, few would have expected the kind of financial turmoil we are seeing now. What are the chances of a 158 year old top investment bank going bust? And for that matter, any of the other top corporations going belly up too? Having said that, these notes were still sold as recently as July/August this year! There are now accusations of financial instituations offloading the risks to retail investors.
By any measure, these structured notes are no ordinary fund and is so complex that even financially savvy professionals are baffled. Inside these labyrinths of financially engineered notes are chances of losing most if not all of your capital. Naturally, with complexity comes the unknown and the associated risks.
Not all of structured notes carry prominent warnings of the risks. Some that does have it are still sold as low risk product. Why is that so? How did situation of retirees putting down all their lifetime savings into these notes occur? Is there any form of fact finding done? Aren’t there suppose to be diversification? Maybe buying different tranches of notes is considered as diversification in their eyes…
Finger pointing now may be futile from the way the authorities seems to be handling the case. Hopefully, the retirees can get some form of reprieve as they do not have time and resources to build up their retirement funds again. We have repeated mistakes time and time again. Most forget about the past mistakes when everything seems fine and the only way for the stock market to go is up. Let this be a lesson that will not be forgotten. For if there is a next time, you and I or our love ones could be the victims. And there may not be any way out of the predicament.
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Tags: Mis-selling
