Ensure high-risk investments are a deliberate choice

I agree that further safeguards should be put in place and enforced by government watchdogs for high-risk investments targeted at individuals ("Saving S'pore's rich from bankers, and themselves"; last Thursday).

This is because there exists a conflict of interest for the financial institutions, which hope to attract the maximum investment. This may mean that their customers are not fully aware of the implications of their investments.

The Lehman Brothers minibonds saga highlighted that there are a number of investors who have limited formal education and are misinformed about the risks.

While there have been stronger regulations since then, the recent Swiber case shows that there is further room for improvement.

This is especially true as the property boom in the past few years has led to the rise of many newly asset-rich Singaporeans who do not fall within the protection of these regulations.

It is even more important now, as record low interest rates in Singapore and other developed countries mean that the savings of ordinary people are getting eroded by inflation. This may have pushed previously conservative investors to put their retirement savings into higher-risk investments.

These are not greedy investors, but they have taken these drastic steps just to preserve the value of their savings and beat inflation.

It is essential to underline to all investors the real risks of losing their entire principal.

Financial institutions may downplay this message, as they seek to persuade customers to sign up for their investment policies.

To deal with this problem, changes to our regulations should be explored to make sure that these high-risk investments are a deliberate choice rather than the default course.

Investors themselves also have a role in finding out the true risks of any investment before parting with their hard-earned money.

It would not be a fair or healthy financial system if the customers are happy to rake in the high yields but rush to push the blame on financial institutions at the first sign of a crisis.

Lionel Loi Zhi Rui

A version of this article appeared in the print edition of The Straits Times on September 26, 2016, with the headline 'Ensure high-risk investments are a deliberate choice'. Print Edition | Subscribe