Investor Education vs Investor Test- Easy Way Out?
It bears all the fingerprints of the examination psychosis of the scholar bureaucrat who thinks that everything can be measured by a test or exam. Someone who knows the measure of everything but the value of nothing.
Another way to think about this is that the authorities are using the easy way out. Instead of implementing a compulsory two days financial education on say, school leavers. The put one more test in the life of a Singaporean.
Investor Test
If you put the test, it will just pass the buck to the Singaporeans again. You will have to pay to take the test, for sure. Will it be one centralised body or will it be decentralised to the financial institutions? Will the bank staff be coaching the investors just so these people can buy their products straightaway.
Will the passing mark be 50%? What in the world are they going to ask?
Which stocks does the DBS ETFs comprise of? When did the Singapore Stock Exchange first started operations?
Or stupid questions like: Can a stock suffer total and permanent loss? Can a stock ever go down in price? Does historical prices provide a guide to future prices? (the last question will have Technical analysts up in arms if the answer is a “no”)
I have a feeling it will be stupid questions because they are, in a manner of speaking, covering up their a**.
So in the next structured deposit meltdown or a scandal like unscrupulous unit trust selling happened, the banks can point and say that the investor is educated of the risks and had passed the test.
Investor Education
If there was compulsory financial education to teach school leavers about planning for retirement, credit card excesses, budgeting, investing etc. that will have a better impact on the quality of life for all Singaporeans.
Coupled with stricter regulations for all financial products in terms of procedures to follow before a sale can take place. For example, the internal audit staff calling customers randomly to make sure that the financial needs analysis of the customer was completed properly.
This should be backed by more draconian enforcement of the regulations where financial advisors found to have flout such rules will be barred once they are found to be lax in these procedures.
Financial institutions found to have too high a percentage of such advisors should be suspended for a longer time, instead of the recent slaps on their wrist by the MAS.
What do you think? Is investor testing more effective than investor education?
January 30, 2010 at 1:10 AM
Hi Lemizeraq,
Well, put it this way, the Govt has to cover their arse, so they implement this so-called "test" to show that they are doing their job. Never mind if the investor is not doin theirs, as long as the Govt is seen to be "handling" the situation and not letting another Lehman blowup occur, then they have covered their backsides.
Of course, I agree with you any test would probably be just academic (mind the pun). Investing is about real-life situations and reacting to fear and greed and is basically a life experience; one which cannot be properly distilled in words. One has to learn through knowledge, experience and sadly, mistakes!
So yes they can implement whatever they want to, but the ultimate test for an investor is time and life itself.
Cheers,
Musicwhiz
January 30, 2010 at 10:48 AM
Good news for me :)
Maybe I can start a class to teach investing so that pple can buy their 'sexy' products, hoho!
January 30, 2010 at 8:01 PM
Financial education sounds more important to me but there should not be an examination to make people study it for the sake of studying.
Financial institutions will continue to introduce fanciful investment products that "suit" their customers need. I doubt there is anything that can stop people from getting lured.
February 1, 2010 at 10:30 PM
Hi MusicWhiz,
The best lesson is life itself. The government is over-reaching itself, putting limits on OA account before investment, trying to increase medisave contribution rates, implementing tests for investors before buying.
All these are measures to dictate to people what can be done. A better way is through education.
I even read a ridiculous comment that says that if you buy only two times a year, you are not an investor.
Lemizeraq
February 1, 2010 at 10:33 PM
Hi La Papillion,
Yeah, that is what i was thinking of. Until i realised that they probably want to keep the money for themselves as in NTUC Investor Testing Centre, or charge all the banks for a test that runs via their servers at MAS etc.
So I don't have much hope of that.
Lemizeraq
February 1, 2010 at 10:36 PM
Hi Thien Rong,
Thanks for visiting again.
I agree that no measure can prevent fraudulent or fanciful investment products. But the punitive punishment for financial institutions that sells such products should be prohibitive so that it forces them to check for such and decreases the chances of this happening.
The punishment in terms of fines can then be used to reimburse the victims partially.
Lemizeraq
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