The Trust Deficit in the Financial Sector – Our First Hand Experience

Hello Money-Makers,

Mr Money here. My first post will be about a recent event Mrs Money and I encountered with regards to purchasing Amanah Saham Nasional Berhad (ASNB) fixed-price funds. Let me start with a brief introduction to myself to add some context to the events that played out.

My experience in investing in equities and interest rate products go back around a decade to when I was a university student in Europe. I dabbled in the stock market then without any prior knowledge or understanding of the markets. The consequence of this was felt in the crisis at the time and left me uninterested in equities for a long time until I started working.

Fast forward 10 years and I have now been active in the financial sector during this period and consider myself quite well versed in financial products. My experience in this sector has led me to avoid products I do not understand and allergic to high sales and management fees. I would categorize myself as a conservative investor. My target has always been 7% per year, leading to a 100% (96.7%, to be precise) increase of the principal within 10 years.

Mrs Money’s investments in the local mutual fund market was my first insight into the real costs involved in investing in mutual funds in Malaysia – although I was at the time already aware of the unusually high sales and management fees (in my opinion, this is a sector ripe for disruption). This was hard for me accept with my exposure to the financial products offered elsewhere, where index funds are often offered with next to nil management fees, and sales fees barely exist.

This brought me to highlight ASNB funds (under Permodalan Nasional Berhad) to Mrs Money. There are several fixed funds (expect a comparison of these and other comparable investments in a later post) that offer stable returns well above Malaysia Government Securities (MGS). These funds have outperformed MGS consistently – in addition to not having any form of sales or management fees, i.e. aligned with my investment criteria of stable returns with low cost.

PNB
PNB 118 under construction – soon to be Malaysia’s tallest building and home to Permodalan Nasional Berhad, a Malaysian government-linked investment company

Earlier this month, I explained to Mrs Money that I was considering moving some liquidity into these ASNB funds to diversify my holdings. After doing some research online, including forums like Lowyat.com and financial dailies, we got a tip that these highly sought after funds have very limited quotas available, but that the likelihood of obtaining units were much higher prior to a festive season (with the logic being that people would sell of some units prior to the celebrations). This prompted Mrs Money and I to quickly decide on opening ASNB accounts in view of the upcoming festive season.

The ASNB funds can be purchased over the counter at any major local bank in Malaysia. Since Mrs. Money has had an account with RHB Bank for over 15 years, we ventured into their branch in Bangsar the day before a festive holiday. The front counter immediately directed us to a personal banker. The banker started by describing the variable (as opposed to fixed) ASNB products. We were very clear in that we had no interest in purchasing variable ASNB (higher risk mutual funds) products that moreover carried management and sales fees. The variable products described to us had also underperformed the fixed products returns. The banker continued to discourage us in looking into fixed products and emphasised that the quota was full and there was zero likelihood of us obtaining any fixed products units. It was disheartening to hear that we had missed the train, so we left RHB Bank quite disappointed but also with a sense of something not being right. We felt that we should double check with Maybank’s branch in Bangsar despite the advice we just received.

While Mrs. Money waited in the car, I entered the Maybank branch in Bangsar Baru and was informed by the front counter to fill in a form and proceed to the counter (a very different approach from RHB). Once at the counter, the bank clerk processed my application and informed that there were fixed product units available and that I could go ahead and open account! I directly called Mrs Money and she parked nearby and also opened an ASNB account through Maybank.

Although we were excited, we also felt a sense of being deceived by RHB Bank. We had tried to open the same account through RHB barely 15 minutes earlier and received information on no units being available (despite no formal check of units). We would have not been able to get any units had we listened to the first advice from the personal banker at RHB Bank (who called Mrs Money two days later to follow up about our interest in purchasing variable ASNB products).

Being in the financial sector myself, I understand that banking is based on trust. This incident clearly shows the trust deficit that exists where a banker with more knowledge than the potential customer chooses to push a product with presumably higher internal incentivised bonus, over what the customer actually requests. The whole experience with RHB Bank left Mrs Money and I with a bad aftertaste. We decided to report the incident to RHB Bank’s customer complaints department before escalating it to Bank Negara if no satisfactory explanation in given.

I strongly believe that there should be greater integrity and accountability within the financial sector. This compounded with increased financial literacy amongst consumers can only benefit the investment eco-system in Malaysia.

We’ll keep you posted on their response. In the meantime:

Do any of you have any negative (or positive) experiences with financial advisors to share?

7 thoughts on “The Trust Deficit in the Financial Sector – Our First Hand Experience

  1. RHB did the same for me but for PRS account. Instead, they ask me to open an account on their investment linked medical account

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    1. I didn’t even know there was such a thing! I hope you stood your ground and managed to get a PRS account. So important for us to be aware of unscrupulous sales tactics out there. Thanks for sharing your experience!

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