It is easy to be cheated (8) - Your private banker

Wealthy people have private bankers. These private banks are welll trained to convince the customer to invest in exotic products that are created by the financial institutions. These products are quite complicated and are not well publicised. It is easy for the unsavvy investor to be conned into investing in products that have high profit and expense margins for the financial institution.

When the investor found out that the product made a big loss, there is nothing that they can do. The private banker will explain that the market has gone against them. But in reality, the products usually would not give a corresponding return when the market goes in their favour, as a large part of the profit would have been taken away by the financial institution.

The private banker may encourage the customer to invest in certain currencies, shares or other assets that are traded in the open market or exchanges. As the prices of these products move every second, it is not easy for the customer to know if they have been given the fair prices. It is possible for the prices to be inflated or deflated, to the detriment of the customer.

The customer has to rely on the honesty of the private banker or the financial institution in giving the correct price. But, in recent years, there is lack of honesty as financial institutions searched for higher profits.

When times are bad, and financial instituions make losses on their own portfolio, it is easy for them to find some way to push these losses to their unsuspecting customers. The customer does not know if the transactions are properly audited.

Many people have lost large sums of money by acting on the recommendations of the private bankers or wealth managers. They are not sure if the losses are just due to the market or to dishonest practices of these intermediaries.

Tan Kin Lian