Lay(wo)man's Guide to Personal Financial Planning

A quick check in the newspapers and on the websites of financial institution yields numerous advertisements with grabbing lines such as “x% p.a. return on your S$ fixed deposit”, “enjoy potential regular income of x% p.a. with investment”, “potential returns in both bullish and bearish stock market conditions” etc.

These statements are made not without the fine print, which often makes up a quarter page of the advertisements. Such exaggerated financial advertisements can also be found on posters, flyers, and brochures which mostly highlight the good points whilst the risks are often mentioned in smaller than font size-8 fineprint.

While I believe most of the advertisements have been scrutinised and approved by the financial institutions prior to publication, there is still a very fine line between what is acceptable and what is a potentially misleading advertisement.

While financially savvy people will examine the small print carefully before making any financial commitment, those who are not could misconstrue some of the advertisements, which may lead to expensive mistakes.

It irks me to see elderly people (my own parents included) being approached in the bank branches to buy sophisticated financial products such as structured deposits, unit trusts and equity-linked notes promoted by the banks. It is not hard to imagine that many of them will be attracted with statements such as "100% principal protected" and "potential yield of xx% per annum". And often, many elderly people and the non-financially savvy get committed without having a full understanding of the risks involved.

It is hard to fault the financial institutions because legally they have proper disclosure (in the fine print filled with jargon) of the products they sell, and there is the caveat emptor. So, despite repeated appeals to the financial institutions not to abuse the use of the fine print in their advertisements, I’m not sure how much has been accomplished in that area to date.

Consumers will still have to exercise great care when committing their money to any financial products. Do make an effort today to educate and warn your parents/grandparents/children against placing blind faith in the financial institutions before someone unknowingly commits to some financial products during his/her next visit to the bank or to the MRT station (where some financial institutions have set up roadshows to peddle their products).

For the financial consumers, a word of caution: When it sounds too good to be true, it probably is!

# posted by cookingmonster @ 4:57 PM