The Care You Deserve
If you buy things you don’t need,
soon you will have to sell things you need.— Warren Buffett
Channel News Asia recently reported about how the neighbourhood of Sengkang faced the issue of abandoned NTUC shopping carts on a daily basis. When the reporters went down to survey the area, they noticed that there were many areas where these trolleys were abandoned, with up to 12 trolleys chained together in a row. Despite implementing a $1 temporary “charge” for taking a trolley, a spokesman from the supermarket chain highlighted that they receive over 3,000 reports of abandoned carts on an annual basis.
You could argue that Singaporeans are wealthy enough to discard their $1 for the convenience of wheeling their heavy groceries home. But could this behaviour be linked to something else?
Sometime in the middle of 2020, social media erupted with a concept that went viral. An individual shared a concept called the Shopping Cart Theory where he suggested that a person’s morals could be determined by whether they return their cart to the designated area.
Based on the theory, returning a shopping cart is a relatively easy task requiring little effort, apart from the few extra minutes it may take. It is also the right thing to do, as it makes it easier for the next person who needs to use it. Apart from an emergency which prevents someone from returning a trolley in that moment, there are not many situations that would prevent someone from doing so. However, there is no legal obligation to return the trolley; neither fine nor jail sentence is meted out should you choose not to. The theory concludes with the statement that the decision to return the cart ‘presents itself as the apex example of whether a person will do what is right without being forced to do it.’
The argument provides food for thought. From anecdotal evidence it would appear that the majority of our population are socially responsible, often choosing to do the right thing. However, the “black sheep” in our midst are not few either.
Whether or not the theory presents a valid measure for morality, the fact remains, that not everyone will do the right thing when there’s no one watching. From an investment and wealth management perspective, the advisors, relationship managers, and front-line staff who deal with your money should have a duty of care to you, the client. After all, banks or financial institutions were created to provide a valuable service to customers. Unfortunately, whether from pressure to constantly report positive growth to shareholders, or the fear of losing their jobs, some in the industry may have lost sight of their duty to put the client first.
A few years back, you may recall when many “wealthy” investors lost large amounts of money when the bonds of locally listed Oil & Gas companies defaulted. There was a public outcry when it was found that many of these investors were not necessarily wealthy at all, but that local banks had classified many of such individuals as accredited investors due to the value of their home, which had risen tremendously post-2008. On paper, these investors may have appeared to be wealthy, but in reality, had very little liquid assets.
During the market melt-down of 2020, many investors lost money when their fixed coupon notes (or ELNs) declined in value tremendously. A lot of them had borrowed money to amplify their returns, only to be forced to sell when facing margin calls. The issue of an investor buying the “wrong product” and losing significant amounts of capital as a result is not a new one.
Why does this continue to happen? There have been numerous reports of individuals who work at large financial institutions being censured for acting against client’s best interests. The Monetary Authority of Singapore (MAS) regularly issues prohibition orders to salespeople who have been deemed to have sold products irresponsibly — mis-selling products. Whilst the punishment represents a slap on the wrist for these advisors, the outcome for clients could be devastating — clients could lose their life savings. Additionally, many such cases fly under the radar and go unreported.
Like in the shopping cart theory, not everyone acts in the best interests of others without incentive. Do you know whether your advisor is committed to working in your interest? Unlike the US, Singapore has yet to adopt a fiduciary standard — which places the client first — for financial and investment advice. However, working with an independent financial advisor is a good place to start.
Don’t get short-changed. We have a comprehensive range of questions which you can ask to suss out whether you are getting what you deserve.
