|
Order! Please.
AS AN INVESTMENT BANKER, I get to meet all sorts of people
in the street. There are long-time clients who believe in
the institution I represent, as much as I do. There are those
who cast a normal pattern of doubt about the new products
that we sell, thus, subjecting us to countless Q&As until
they finally buy. There are also some who generally relate
trust and confidence vis-à-vis one’s status in
society.
Thus, I couldn’t blame one client who, after investing,
had to subject me, and my officemate, to personal questions
such as what are our family names, our religion, and our spouses’
jobs. Too bad I was single so he couldn’t ask me further.
Oh but he did! Was I still living with my parents? What are
their jobs? He did his scrutiny while looking at my bracelet
(sorry, beadwork at only P150) and my watch (not a Rolex,
sorry again!) I’m so low cost, so to speak.
Paranoia is the precursor of a tirade such as this. They
just want to feel that their funds are safe with us. I couldn’t
blame them after all the corporate scandals that have unfolded
in the newspapers. Urban Bank was rumored to have been mismanaged
by its directors. It was alleged that even their top Chinese
clients in Manila were given word of advice to withdraw their
placements before the thrift bank declared a bank holiday.
US-based Enron and some other corporate biggies like WorldCom
also had CEOs who cashed out their stock options before the
dwindling companies shattered into bankruptcy. The higher-ups
stashed millions of dollars while the employees get a stash
of papers representing only stock options that are undervalued.
Similarly, social responsibility is the biggest challenge
that CAP (College Assurance Educational Plan) is facing right
now as it suffers in a P2.5 Billion under-funding of its trust
fund. Add to this its over-exposure to real estate, and you
get a pre-need company that is financially constrained to
service its maturing educational plans. It is interesting
to note that of the eight pre-need companies in the country
facing a total of P4 billion in trust fund deficiencies, the
P2.5 Billion is charged to CAP alone.
The Securities and Exchange Commission (SEC) suspended CAP
from further selling its educational plans last July 18 but
conditionally lifted the suspension last July 24, allowing
CAP to commit fund infusion in order to cover the deficiency.
Among other things, it was proposed that CAP should remit
80% of its collections to its trust fund and limit its administrative
costs (commissions, etc.) to 20% of its collections.
It is understandable that the sharp decline of interest rates
must have cut the earnings of the pre-need companies’
income into half of what it used to earn during the greater-than-10%-interest-rate-regime
two years ago. This calls for an actuarial revaluation of
their funding costs.
There are three recommendations I would like to make out
of this scenario. As an investor, one should consider getting
pre-need plans from different companies in order to spread
the risk - the proverbial not-all-eggs-in-one-basket is my
favorite motto. Regulatory agencies in the Philippines should
keep their vigilance whether the economy is having a smooth
ride or not. And if corporate responsibility can be given
a measure to be demonstrated to the public, let it be scaled
now so that middle managers and frontline salesmen will be
spared from the paranoia of public distrust.
That would make me feel free to buy my own automatic Omega
by then. *
Back to top
Renzi is a graduate of Economics with a
Masters Degree in Business Administration from the University
of St. La Salle. While working full-time in the Trust &
Investments Division of one of the 10 largest banks in the
Philippines, she dabbles into writing and does mountain biking
as her weekend hobby. You may email the author at renzijuarez@philippinestoday.net.
|
