Structured Financial Products + A Banker Friend + What Army Taught Me

The current issue with the DBS High Notes is an interesting one for me because I did consider buying similar products. A few things stopped me from buying though.

1. One of the first things I learned during my NS days is that if you cannot convince someone, confuse them. And reading the prospectus for the products definitely confused me. And when I’m being confused, I don’t trust the other party.

2. Over a dinner with a bunch of acquaintances, a banker was talking to another acquaintance in government service. The government official asked the banker his opinion on structured products. The basic gist of the conversation was that the banker advised the government official not to buy the product and if he really knew what he was doing, he (the government official) could get better returns from his own investing efforts without having to give the bank a cut. He also explained that the products only worked if the markets behaved within a certain range – it was only safe within a range.

Think about this for a moment. A banker advising someone not to buy his own company’s product. Of course, the situation here is slightly differently. The banker assumed the friend could do better as opposed to the banker thinking his bank will just mess things up. Last takeaway – the banker didn’t think it was worth paying the bank anything for the product.