A fool and her money

SKETCHES - Ana Marie Pamintuan - The Philippine Star

In this horrible year, when I lost my life partner and several dear friends and I caught COVID while waiting for vaccines, I learned last week that I have also lost a chunk of my life savings that I had parked in one of the country’s banking giants.

Because of my long years of otherwise happy relations with the bank, which started almost as soon as I began working shortly after graduating from journalism school, I am holding off on identifying the bank and its Europe-based multinational insurance / investment partner.

The guy who cajoled me to put my hard-earned money into something with a higher yield than a boring bank savings account talked to me and largely blamed my loss on the pandemic.

I was told that I invested my life savings in a four-year plan. So if the savings hemorrhaged for an entire year, shaving off a hefty 10 percent from the amount instead of yielding even a modest return on investment as I had been made to expect, the banking giant and its partner still have three years to turn things around (they hope) and give me a decent ROI.

My hard-earned money was invested, according to the end-of-year report, in “Chinese bonds.” There are some glowing reviews about “Chinese government bonds” – I’m not sure if they are the same thing – but I’m no bond trader and I have no way of gauging the reliability of the reviews.

I wasn’t promised an unusually high yield – I know enough not to fall for too-good-to-be-true spiels, and I don’t want to put my life’s earnings on highly speculative investments. But I was made to believe that the yield would be a bit higher than normal interest on savings, and would accumulate the way interest on savings deposits do.

Instead, from Day One of my investment 12 months ago, according to the summary that I received recently, everything kept going south. Even with Beijing’s COVID-zero policy and the Chinese economy recovering after giving the world its worst pandemic in a century, I guess “Chinese bonds” have been largely worthless junk throughout 2021.

In addition, I have belatedly realized that I was made to buy a life insurance plan with a quarterly dollar premium that is sure to deplete my entire foreign currency savings account, small as it is, by the time the premiums are paid in seven years.

I have canceled the insurance plan, and am giving the investment plan half a year to recover. Otherwise I am also cancelling it and ending my relationship with the bank.

I would want the person who put my hard-earned money into the Chinese bonds subjected to tokhang, but it’s doubtful that anyone would give me the identity of the cretin.

Admittedly, for putting so much trust in the bank and its investment partner, I am the bigger cretin.

*      *      *

In the meantime, I am narrating this story to warn people about banks and their investment / insurance schemes especially in a crisis period.

The country’s regulatory environment provides little protection for micro investments. Only up to P500,000 in bank deposits per account holder can be protected by the government in case the bank runs into trouble. As for the pre-need industry, remember the College Assurance Plan? It took ages before many holders of the CAP education and pension plans recovered their money.

Losers can write off their experience to stupidity, as I am now doing. Others, unfortunately, can be driven to suicide, or homicide.

On the other hand, our rules are designed to protect the .001 percent who own and run the country. You can see, for example, the weakness in the enforcement of laws and rules governing financial loans to DOSRI or Directors, Officers, Stockholders, and their Related Interests. You can see the same weakness in going after anti-competitive business practices.

The government should provide lessons to the public on financial literacy at various stages of life, from high school when kids can open bank accounts on their own, all the way to retirement age.

Such lessons are indispensable especially with the government allowing bank accounts to be opened with a minimum deposit of just P100. The accounts can be opened for children.

It is hoped that by the time the kid grows up, the P100 would have accumulated into a considerable pile, with guaranteed interest – enough at least to put a child from a low-income household through college.

Such savings deposits can be more reliable than a pre-need education plan. Education and pension plan holders were left holding the bag when CAP, a pioneer in the pre-need insurance industry, went bankrupt.

CAP-Education, which had 800,000 plan holders, reportedly invested heavily in real estate. Did any CAP executive go to jail when the plan holders’ investment in their children’s education went down the drain?

*      *      *

According to reports, the pre-need industry in the country already registered a net loss of over P700 million in 2019 because of bigger liabilities despite higher sales.

This was pre-pandemic. If COVID is being blamed by the banking giant, my partner for decades, for my investment loss this year, surely the pre-need industry has also been badly hit.

Already, several pre-need companies are reported to be offering substantial margin discounts to their plan holders because of their pandemic-induced financial woes.

People get pre-need plans, blindly allow their trusted banks to invest their assets, or maintain savings accounts as insurance for a rainy day.

In the COVID typhoon, it’s dismaying to find out that you have actually lost 10 percent of your hard-earned money instead of turning an iota of profit for parking it in your friendly neighborhood bank.

At the end of this horrible year, I woefully understand the meaning of the proverb about the fool and his money being soon parted. I hope others don’t end up in the same sinkhole.

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