Are financial institutions offering financial management products that are conducive to people's asset-building efforts? They are open to question in this respect.
Through its research on the performance of investment trust funds marketed by 29 major and other banks, the Financial Services Agency has found that 46 percent of customers were suffering losses at the end of March this year.
Why did many customers have to take losses at a time when stock prices remained firm as a whole? The financial institutions should inspect their own marketing approaches.
Half of personal financial assets totaling more than 1.8 quadrillion yen are held in the form of cash and deposits. As deposit interest rates are close to zero, such a means of possessing money cannot be called a profitable tool for asset management.
Investment trust funds are distinct from deposits as the former does not offer a principal guarantee. Nonetheless, they can serve as a viable choice with which to manage one's assets when interest rates are extremely low.
If there is an increase in purchases of investment trust funds, it will increase the amount of personal money flowing into stock and bond markets. This will also help revitalize the economy. The trend for shifting from savings to investments should be accelerated.
The FSA's latest research has pointed to a tendency in which the longer investment trust funds are retained, the better their performance will become.
However, there seems to be no end to cases in which financial institutions frequently make customers buy new financial products to replace their old ones, in what can be called "rotary replacement purchases."
Many customers may have taken losses in the performance of their investment trust funds after having had to pay commissions repeatedly.
Make comparisons available
The FSA's latest survey, coupled with its efforts to make the performance of investment trust funds "visible," will likely restrain financial institutions from selling investment trust funds just to earn commissions.
The values of investment trust funds vary from day to day, responding to stock and bond market prices. If the FSA's latest research is the first and last to be done, it would have no meaning. It is desirable for the FSA to regularly release its survey results.
If it becomes easy to see which financial institution's products have achieved good performances, this will serve as a useful reference for customers regarding how to invest their money.
Some financial institutions, such as Mizuho Bank and Sumitomo Mitsui Banking Corp., have started voluntarily disclosing the performance of their investment trust funds.
It is important for such a move to further spread. Other banks and securities companies should positively act on this.
A case in point concerns investment trust funds that pay dividends regularly -- once a month, for example. In some instances, an excessive amount of dividends were paid by using a portion of the principal.
These investment trust funds are unsuitable for long-term asset-building, but their realities were not sufficiently known to customers. Financial institutions need to carefully explain their products and devote themselves to customer-first service management.
Financial institutions sell savings-type insurance products, but such products entail even more complicated contract details and commission structures. The FSA should lay down some sort of guide with which the performance of each product can be compared with the other.
(From The Yomiuri Shimbun, Aug. 26, 2018)
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