Customers exploited by unrealistic interest rates - Indrajith Fernando

by Lalin FERNANDOPULLE

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Banks and financial institutions are exploiting customers by offering unrealistic and low interest rates, said CEO, Bartleet TransCapital Ltd., Indrajith Fernando.

“By offering 8 per cent interest on savings accounts Banks are not doing justice to their customers who have taken a huge risk. With the staggering growth in inflation people cannot make both ends meet with a low return on investments”, he said.

Professional investment services in Sri Lanka are non existent and there is a grave need to educate people on proper financial management.Impulsive purchases of assets do not help in optimising the yield. A systematic method is vital to build wealth through investments.

“Authentic financial planning can create and preserve wealth for an individual. The task of professional investment services is to help people to secure their future by starting to generate wealth”, Fernando said.

Balancing work and family leaves little time to concentrate on personal financial planning. A financial plan will help people to reach their goals such as planning for retirement, allocating money for the future or hoping to secure a better lifestyle for the family.

Asia ranks high in domestic savings and it is close to 28 per cent of the disposable income but it is not a region that is wealthy. The key to the problem lies in people working for money and not letting money to work for them.

In developed countries financial services are popular and serve to guarantee that professionals enjoy their rightful return. The sector is lucrative for practioners. Professional investment service is new to developing countries.

Fernando said there is nothing called best investment. It is only the ‘right mix’. This ‘right’ is dependent on the person’s ambitions rather than the attributes of the product.

People need to have money not to be ultra rich but to have it when they need it most. The basic needs of life alone are not sufficient but people need to have wealth to secure their future. A well diversified investment will reduce risks and maximise returns.

Various types of investments will perform better at different times. Shares tend to perform well at the upturn in the economic cycle, while fixed interest investments tend to perform better in the latter part of the cycle.

He said it is better to invest in government securities and stock markets than in institutions that pay low interest. Today many institutions are offering high returns but there is no security for investments.

Most institutions are concerned about promoting their products. They are not educating the customers on the benefits and what the competitors offer.

The Colombo Stock Exchange is the best performing market in South Asia this year with 5.1 per cent growth in the benchmark index of ASPI up to April.