There is no free lunch
The first night race in the world is coming to Singapore in a few days’ time. Many High Net-Worth Individuals (HMWI) are coming to Singapore for the race, at the expense of banks. It was reported in today’s edition of The Straits Times that banks can set aside up to US$20 million for the F1 race to ’reward’ their top clients. Sometimes, it just makes you wonder, what does all this money come from?
What is the one thing you find under the facade of posh furnishings, fine wine-ing and dining, exclusive events, prestigous branding and high salaries - cost? No. Its super high cost. Simple logic tells us that in order for a business to survive, the product or service must be able to cover the cost and provide a profit. So, with super high cost, what will happen to the cost of the product or service?
Now, in order to maintain the viability of the business facing constant pressure of having high cost, what must be done to overcome such fixed high cost? Is constantly buying and selling the products and creaming off the commission that comes with each transaction a possibility? This is also known as churning. Is constantly selling products with high margin with little or no risks to the seller (as the risks are passed on the buyers) another way? Remember the ‘minibombs’?
HNW clients might be able to afford high cost, but are they made aware of the real cost of sales or commission? If such information are made known, would successful HNW clients, many whom are business savvy, still prefer to engage such product or service?
There are service platforms with transparent cost structures. Clients would know what they are paying for. However, some clients might still opt for the platform with unknown high cost. Not knowing what they are paying for might look and feel like they are not paying much. However, in reality, this is often not the case. Burying your head in the sand certaintly does not make the cost go away.
Remember, there is no free lunch. As the chinese saying goes: 羊毛出在羊身上. You are paying for whatever perks you are getting.
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