Dealing with Relationship Manager

Back in April 2008, the world did not realise that we were at the dawn of a financial crisis of global proportion. By September that year and much of 2009, the world was in a frightening recession that was nearly as scary as the Great Depression of the 1930s. Luckily, the worst case scenario did not materialise and we witnessed economic growth in 2010. Singapore grew 14.5 per cent in her Gross Domestic Product last year.

In April 2008, we approached a Relationship Manager (RM) of a local bank and sought her advice on investment opportunities in unit trusts. She recommended a few and Schroder ISF Middle East (S$) fund (The Fund) was one of them. (I wrote a post on this in 5 March 2011, and I am continuing from that post.)

The Fund was first set up on 31 January 2008 with a launch price of S$10 per unit. At the time of purchase, the price had moved down to S$9.83.

RM mentioned in the course of the conversation that buying unit trust through the bank had a distinct advantage, in that she will monitor the Fund’s performance for us. That was some assurance and we bought $50,000 worth of the Fund.

The Fund lost 40 per cent of its value during the recession of 2008/09. However, it recovered to a slightly lower loss of 24.6 per cent after the recession. Then the Middle East and North Africa (MENA) political crisis erupted at the start of this year and the Fund took a second hit losing 42 per cent as at March 2011.

All these times contrary to her promise, our first RM and subsequently another new RM replacing her did not call to advise. We were left alone to make our own decision.

On 24 May 2011 (after three years), we decided to cut our losses and sold the Fund at S$6.69. This was a loss of 31.9 per cent. If I include the upfront sales charge by the bank, we incurred a loss of 34.8 per cent (S$17,418). This is no small sum.

What have I learned from this episode? First, we should not have placed a large sum in one particular unit trust at one go. Second, we have to continue to monitor the investments on our own and not to hope that the RM will do so for us with diligence. Finally, investments carry risks and we have to accept the losses as they occurred.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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2 Responses to Dealing with Relationship Manager

  1. btcx says:

    You’ve got a really interesting blog here. I agree with you about the relationship managers. Relationship managers probably earn a commission from selling products to investors, and they have no incentive to monitor your investment thereafter.

    My family’s investments at numerous banks (DBS, ANZ, OCBC, HSBC, amongst others) were never monitored and some never gave us updates (even performance reports) for years (despite premier membership @ all these banks)! I suggest that investors buy securities themselves. We don’t even know how credible or capable are the manager of these products in the first place!

  2. NewAgeSg says:

    Totally agree with comments abt RM. There are good ones .. but very rare. My first encounter with a good RM was at CITI. But the trouble is they get promoted, transfer or they resign. So every year since 2006, CITI has change my RM. With every change of RM, they would make an effor to call especialy when you have cash in the bank. They would try very hard to get you to invest the cash balance in the bank account. The CITI RM does not even show up with the prospectus. And if you asked should I sell this away to cut loss, they hesitate to answer your question. And asked why shld I buy this as compared to a similar one from another Fund, they do not have a good explaination for you. Ask many questions the RM will stop calling you. It is always best to monitor your investment personally.

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