How a higher claim limit and MAS guidelines can help you invest safely

You should expect more transparent discussions when investing your money, thanks to two recent measures that will keep financial institutions on their toes.

The first is in the form of enhanced fair-dealing guidelines from the Monetary Authority of Singapore (MAS), which expects all players to adopt best practices when dealing with customers.

While the guidelines may not have the force of law, recalcitrant parties should think twice about not playing by the book because any breaches will provide ammunition for aggrieved customers to lodge claims at the Financial Industry Disputes Resolution Centre (Fidrec).

This has become a bigger risk for financial institutions because consumers can now claim for losses of up to $150,000 if they have been sold unsuitable investments – that’s 50 per cent more than the previous claim limit of $100,000.

The second change, which applies to Fidrec claims filed from July 1, 2024, is significant because aggrieved customers do not need to hire lawyers to lodge complaints and the fee for seeking adjudication is only $50.

Those with higher claim amounts can still seek help from Fidrec because they can request a mediation and this service is free.

Fidrec chief executive Eunice Chua says the MAS guidelines clearly set out the expectation required of all financial institutions in promoting good conduct among their employees.

Fidrec adjudicators will scrutinise employees to judge whether they had “a reasonable basis” for selling certain products to customers. “The guidelines will be relevant in considering whether the financial adviser’s recommendation is reasonable in all the circumstances,” she adds.

For instance, employees at financial institutions who push products without highlighting key features and risks will find it tough to justify that their sale processes are fair. Similarly, extending loans to retirees to invest is a bad practice, especially when nothing is done to assess whether they can afford the repayments.

No wonder some financial institutions have expressed reservations about the increase in adjudication limits, as they fear it may prompt more customers to lodge claims.

But Fidrec’s position is that the higher limit will benefit all parties, as the process is more cost-effective compared with normal lawsuits.

The enhanced safeguards will help many customers because most Fidrec complaints relate to policies and practices of financial institutions, transactions done by employees, service standards and scam-related cases.

Fidrec received close to 8,000 inquiries in the past year alone, with about 2,200 people eventually filing claims.

Ms Chua says financial institutions can prevent disputes from occurring in the first place if they have good processes to deal with customers fairly.

For instance, the MAS guidelines state that all financial products and services should be designed with the interest of customers in mind, and not just for making profits. This is especially so if the products are meant to be sold to the man in the street.

The training and compensation structure for sales representatives should also encourage good practices, such as giving regular and clear information to customers.

“Should a dispute arise, financial institutions have another chance to handle customer complaints in an empathetic, effective and prompt manner before the matter is escalated to Fidrec,” Ms Chua adds.

But the changes will not allow you to file a complaint just because you incur losses on your investment. After all, investments always carry risk, and you should understand what you are getting into before putting your money in.

This is why Fidrec will not entertain claims from investors who are dissatisfied with the performance of investments they had bought willingly and through no fault of the vendors.

Similarly, complaints relating to standard commercial decisions and pricing policies, such as higher interest rates and fees, will also not be entertained.

Here are three tips to guide your financial planning while avoiding unsuitable products.

Consider your needs

In the hope of earning more money for retirement, many people tend to focus on the projected yield and forget to look at the tenure of the products.

Many products that generate long-term income have equally long holding periods and may not work like fixed deposits, which allow customers to withdraw the interest after short maturity periods.

So it pays for elderly customers to stick to fixed deposits and not sign up for any higher-yield insurance plans without checking whether these can guarantee a monthly cash flow for their retirement.

If you are approaching 55, look no further than the CPF Life national annuity scheme because it provides a lifetime of stable and decent monthly payouts that are risk-free, unlike private annuities.

For instance, those who hit 55 in 2025 can opt to put up the enhanced retirement sum of $426,000 so that they can receive about $3,300 a month from the age of 65.

Those who are older can also top up their CPF Retirement Account to enjoy more payouts: They can use the online CPF Life estimator to check their payout based on their age and savings, or visit the CPF Board to find out how they can benefit from the scheme.

Check investment costs and details

You should never take a lax attitude when making an investment because your financial, and even mental well-being, will be hit if you make a wrong choice.

So don’t be shy when it comes to asking questions about risks, payment terms, fees and charges. If you have zero tolerance for losses, check whether your initial investment will be capital-guaranteed and if it is so, make sure that such terms are stated in the agreement you sign.

You should also check if the fund pays returns regularly, or if you get cash only when you terminate your deal in full or partially.

Find out the procedures for termination and whether there is a minimum lock-in period because you could end up losing a part of your capital if you cash out early.

If you are still unsure about the product, consult trusted family members or friends.

Never be swayed by quick profits

There is no shortage of people claiming on social media that they can teach you the secrets of making lots of money. The reality is that they can get rich only from the money they collect from people who think it is possible to learn shortcuts to success.

There are many good resources online that are free. For instance, MoneySense, the national financial education website, has tips on investing and being prudent with your money.

MAS says there is a difference between providing general investment information to the public and running courses that invite students to invest in the course providers’ in-house schemes.

Course providers do not need to apply for a licence but selling investment schemes requires approvals. Indeed, if you sign up for courses that offer investment opportunities, you are encouraged to report them to MAS.

MAS adds: “It is an offence to run a fraudulent or deceptive business in Singapore. If a consumer has reasons to suspect that there may be criminal wrongdoing or fraud, he or she should lodge a police report.”

What this means is that while there are ample safeguards to protect your interests, financial planning remains a personal responsibility and so it pays to be diligent when dealing with money.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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