DBS overhauls sales tactics
Customers will be asked tough questions before investing, says chairman
By Ignatius Low, Money Editor
SINGAPORE’S largest bank is making big changes to the way it sells investments to customers, as it continues to battle criticism over losses suffered by those who put money into its High Notes 5 product.
DBS Bank plans to ask more detailed questions about a customer’s background and how he got the money he is investing. And it will turn away those who are not suitable for a product, even if they insist on buying it.
‘We have learnt something from this and I believe that we will do things differently. Not all of it is going to be popular,’ said DBS chairman Koh Boon Hwee in an interview with The Straits Times.
The bank has drawn flak for arranging and selling structured products that have been rendered worthless by the collapse of American investment bank Lehman Brothers.
Some customers claim that the risks were not explained to them.
‘We are just going to have to work extremely hard to re-earn their trust.
‘We’ve taken a hit but we will overcome,’ Mr Koh said.
He described changes on three fronts.
First, DBS will ask more questions to find out whether a customer is right for an investment product.
‘We will become more intrusive in terms of our customer qualification process. In good times, when you ask a customer too many questions, they can sometimes get insulted,’ he said.
‘But going forward, the amount of assets you have, the amount of income, your source of funds…we will want to know.
‘Because if you tell us later that it was all from your CPF savings, it doesn’t do you or me any good,’ he added.
So the bank may go the way of American banks which have accredited investor questionnaires.
‘They are very intrusive, but it’s something we probably must consider,’ he said.
A second change is that DBS will now preface every investment it sells with a summary sheet customers must affirm that they have read. It may be inconvenient, but the bank will insist.
‘The truth of the matter is that even when you hand a prospectus over to the customer, it is very hard to force him to read it,’ said Mr Koh. ‘And he’s going to come back later on and say that he didn’t.’
Finally, Mr Koh wants to step up training and introduce a cooling-off period to let customers change their minds about investments.
‘You decide that you want to invest today and I’m going to ask you to re-affirm it three days, five days or seven days later.
‘Enough time so that you can actually read whatever we’ve provided to you,’ he explained.
Mr Koh said he is so serious about these new safeguards that he will instruct the bank to turn away customers who do not qualify under its suitability rules.
And it will make no difference if customers opt to sign a waiver - as is the common practice now - giving up their right to a close investigation of their financial affairs.
‘We will not accept your waiver,’ Mr Koh said emphatically.
‘If you aren’t suitable by our books, you aren’t suitable.’
DBS said it will start to implement this new way of selling investments no later than Jan 1, as soon as it has handled all complaints related to High Notes 5.
The bank has pledged to look into every complaint filed and resolve them all by the end of the year. Mr Koh reaffirmed that this remained the top priority.
Investor advocates yesterday welcomed DBS’ proposals, particularly its resolve to turn away customers unsuitable for certain products.
‘It’s a very encouraging move by a financial institution, certainly for retail investors like retirees,’ said Mr David Gerald, chief executive officer of the Securities Investors Association of Singapore (Sias).
Sias has spoken out against the mis-selling of investment products and issued a guide for investors last week.
‘It puts some of the responsibility back with investors, but then there is also a cooling-off period too, should they make a wrong decision and change their mind,’ added Mr Gerald.
Source : Straits Times - 12 Nov 2008
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