Friday, March 29, 2013

Are Personal Bankers Qualified Enough?

Personal Bankers / Personal Financial Consultants / Personal Wealth Managers are the sales people in a bank branch who promote all kinds of banking products which include unit trusts, insurance, loans, structured deposits, etc. Walk into any bank branch and you will see young and driven personal bankers dressed in corporate wear soliciting walk-in customers or sitting in their cubicles servicing the mass market customers.

Since personal bankers are on the front line of a bank recommending financial products to potentially ignorant consumers, we naturally assume they have adequate financial knowledge or at least a degree in finance or other related majors. However, a simple search on JobStreet will reveal that the minimum qualification for personal bankers is a degree or diploma in any discipline. In addition, candidates are required to have a minimum 1 year of sales experience.

Personal bankers are required to pass the CMFAS exams (all MCQs) and go through some form of sales training for about a month before they are eligible to start selling banking products. I personally have taken the CMFAS HI, M5, M8 & M9 exams and I can say that the exams alone are insufficient to equip a person with sufficient financial knowledge. The bulk of the CFMAS syllabus is on rules and regulations rather than finance topics.

From what my personal banker friend told me, there are a number of personal bankers who have non-finance related degrees such as geography, engineering, etc. With insufficient financial knowledge, personal bankers might not be able to fully comprehend and explain the inherent risks of certain products to customers. In a desperate attempt to hit sales target, some personal bankers start using past performance to paint a bright outlook on a fund's future performance or comparing interest rates on savings deposits with potential returns of a bond/equity fund without emphasizing on the risks involved.

The Lehman Brothers saga in 2008 exemplified this problem. Investigation findings on the sale and marketing on structured  notes linked to Lehman Brothers released by MAS stated that there were insufficient steps taken by some financial institutions to ensure that all their financial advisory representatives were properly trained before marketing and selling the product.  Also, from the many descriptions given by investors with regards to the information the received from sales representatives, it is clear that there were misrepresentation of this product.

Banks should have more stringent requirements on hiring personal bankers and have a more detailed and extensive training program. The sales target of personal bankers puts them under such high pressure that closing the deal overrides everything else. It is well known that retail banks have a high turnover rate for front line staff as many of them are unable to hit ridiculous sales target. For example, bankers of local bank XXX are given monthly sales targets which are denominated by 'revenue points'. Each dollar of sales charge or revenue earned equates to 1 revenue point. Monthly sales target could be to achieve 30,000 revenue points or more. This means that a personal banker will have to sell at least $20,000 worth of unit trusts everyday!

So are personal bankers considered finance professionals? Or are they just typical sales people? Many of my friends in university have applied to retail banking programs such as UOB Personal Banking Associate Programme or Standard Chartered Consumer Banking Fast Track Programme. What they might not understand is that it might not be as prestigious as it sounds and the chances of moving from retail banking to private banking are slim.