FINANCIAL LITERACY OF SINGAPOREANS (Improvement and education)

Column No : 3121

FINANCIAL LITERACY OF SINGAPOREANS:

(Improvement and education): 4.

Mrs Lim Hwee Hua asked the Deputy Prime Minister and Minister for Finance, given the increasing concerns over financial agents acting on consumer's ignorance to market investment products and financial services, whether the Government has any plans to improve the financial literacy of Singaporeans and to educate them on how to better manage their financial resources, make sound investment choices and plan for their financial future.

Mr Lee Hsien Loong: Mr Speaker, Sir, over the past few years, we have been progressively liberalising the financial markets. This has led to greater innovation in the financial services industry, with institutions offering more complex and varied products. We have also moved away from a prescriptive approach to a disclosure-based regime. Amid these changes, we have experienced an economic downturn and have made changes to our Central Provident Fund.

In this new and changing environment, Singaporeans need to become more self-reliant in their financial affairs. They must acquire the knowledge and skills to manage their day-to-day finances, make prudent investments and plan for their long-term needs. They must also be equipped to exercise their rights as consumers, so that financial institutions will treat them fairly, or else lose customers. This makes it important to educate Singaporeans to be knowledgeable in financial affairs.

In February this year, MAS formed a public sector committee to recommend ways to increase the effectiveness of financial education in Singapore. Chaired by MAS, the committee comprises representatives from Ministry of Community Development and Sports (MCDS), Ministry of Education (MOE), Ministry of Manpower (MOM), Central Provident Fund Board (CPF Board) and People's Association (PA). The committee found that over the last few years, public sector agencies such as the CPF Board and MCDS, as well as industry players, had made a significant effort in financial education. They had produced educational guides and organised various investment seminars and workshops. However, while resources had been put into financial education initiatives, there had not been close enough coordination, resulting in some duplication and gaps in content and reach. The committee has therefore recommended a coordinated national financial education programme that brings together current industry and public sector initiatives. I will share some details of the programme today.

The programme is called "MoneySENSE". It aims to take a more structured and comprehensive approach to increase the level and effectiveness of existing financial education programmes, and to enhance the basic financial literacy of consumers. The MoneySENSE programme will cover three tiers of financial literacy:

Tier I - Basic Money Management - which covers basic money management skills such as budgeting and saving, and tips on the responsible use of credit;

Tier II - Financial Planning - to equip Singaporeans with the skills and knowledge to plan for their long-term financial needs; and

Tier III - Investment Know-How - which imparts knowledge about the different investment products and skills for investing.

Over the next few months, the Committee will work closely with industry groups such as the Association of Banks in Singapore (ABS), the Financial Planning Association of Singapore (FPAS), General Insurance Association of Singapore (GIA), Investment Management Association of Singapore (IMAS), the Life Insurance Association of Singapore (LIA), and Securities Investors Association of Singapore (SIAS) to develop activities to support the national financial education programme. The Committee will also work with consumer bodies such as the Consumers' Association of Singapore (CASE) and other community organisations to ensure that consumer issues are adequately addressed through financial education.

Public sector agencies such as MCDS, CPF Board and PA will help to organise regular workshops and seminars at CDCs and other neighbourhood venues. These will provide practical advice on how to manage money, evaluate financial products, and avoid financial scams. MoneySENSE programmes will also be delivered to working Singaporeans and young adults through MCDS' network of almost 800 Family Life Ambassadors and institutions of higher learning. MOE will look at ways to deliver financial literacy concepts through the economic literacy messages that are currently infused into the school curriculum.

MAS will be launching a new Consumer Portal on its website, which will serve as a central repository for all financial education materials, including activities and events that are organised under MoneySENSE. MAS will also be developing consumer guides to explain financial regulations or policies that impact the consumer. These include guides on what to look out for when seeking financial advice and how to seek redress in the event of a dispute with a financial institution.

To kickstart the MoneySENSE programme, the Financial Sector Development Fund will be setting aside S$1 million per year over the next three years to co-fund financial education initiatives. This will provide seed money to develop the MoneySENSE programmes, and ensure a steady stream of activities in the initial years.

Financial education will require a sustained effort by the public sector, the financial industry and consumers. The "MoneySENSE" programme will launch this effort. But its success depends ultimately on individual consumers realising that they lack financial knowledge and making the effort to seek advice and information. Consumers should be aware that they are responsible for their own financial decisions and that it is in their own interest to have a working understanding of financial matters. This is what self-reliance means.

Mrs Lim Hwee Hua (Marine Parade): I would like to know whether these initiatives will also be extended to the other languages other than English alone, for example, in Chinese, Malay and Tamil, and also how would the DPM guard against an expectation of Government protection by the public against individual bad investment decisions as opposed to a lack of experience.

Mr Lee Hsien Loong: Mr Speaker, Sir, yes, the programme will be in many languages. We are going to go down to the grassroots. So we will have to have materials in many languages too. The first requirement is to get people to have a basic literacy to understand money, how to save, how to put aside for the future, and how to budget. The next step beyond that is to have some knowledge of financial markets, some ideas of what are the risks and the possibilities, if you invest.

The whole idea of the programme is to get people to understand and therefore take responsibility for themselves. If we work on the basis that the Government will guard you, and if we allow you to invest, that means it is safe, I think we have a very serious problem of moral hazard, which means that there is no incentive for consumers to look out for themselves, and they will depend on the Government. If things go well, they congratulate themselves on their good fortune and high skills. If things go badly, well, the Government should have prevented them from being foolish. I think this is a very dangerous situation. One of the major objectives of this MoneySENSE programme is to get people to understand that they have to make their own decisions. It is their responsibility, it is their money, it is their savings and investments, and they decide what risk they can bear. And if they commit and it turns out well, good for them. If it does not turn out well, they knew what they were going into. That is what we have to aim for.

Dr Amy Khor Lean Suan (Hong Kah): Sir, I would like to ask the Deputy Prime Minister, besides having the MAS portal to centralise the information and programmes available on financial education, if the Ministry would also consider other ways of dissemination of the availability of such programmes, for instance, even through Rediffusion, because of the segment of people who are less educated and they may not access the portal and so on.

Another question is this. Besides giving educational programmes, could the MAS, for instance, also give guidelines as to the comparison of different financial products, because the large variety of financial products may be very confusing and there may not be full disclosure of information to the potential investors?

Mr Lee Hsien Loong: Mr Speaker, Sir, we will use many avenues. We have roped in many agencies - PA, CPF Board, Ministry of Education. So we will try all avenues. The MAS website is only one of them. And we will try Rediffusion too, if I can persuade Mr Phua Chu Kang to lose some money and learn a lesson that would be helpful.

As for comparison of products, there are many, many products on the market. So I am not sure if you can find one comprehensive compendium or encyclopaedia where you have all of them put down with all of their characteristics and ups and downs. But we will make sure that each time somebody sells a product and markets a scheme and says, "This is marvellous! 10% over 15 years" or some number like that, there is full disclosure and, hence, there is a comprehensible disclosure, not just dozens of pages of small prints and legalese, but something in plain English which you read and you understand what it is.

We have gone for a disclosure-based regime. We have gone for caveat emptor , which means "buyer beware". I think there are all sorts of investment schemes, unit trusts and structured products on the market. I sometimes receive some of these blurbs too, and I look at them, and I need to read it three times to figure out what it is first; secondly, whether it makes sense - usually it does not - and thirdly, what to do with them next, which is either to send them to the staff to look at and ask what are all these about, or put them away and think about something else. But I think it is a learning process. If we clamp down and say, no, you cannot offer products like these, because I decide that individual savers or depositors should not have such products, I think we are doing the wrong thing. We have to take that responsibility.

Mr Sin Boon Ann (Tampines): Sir, since the Deputy Prime Minister has said that investors are basically on their own lookout for investment making decisions, is it possible for the Government to go beyond just informing investors on the types of products available by allowing them the opportunity to participate in Investment 101 type guidelines, where they can better understand basic strategies in making investment decisions and therefore make better informed choices as to what they are letting themselves into, what the trade-offs against returns are, and what kind of returns they are looking at? I think that would then give them a better approach towards making a decision rather than just telling them these types of investments that are available.

Mr Lee Hsien Loong: The idea of the MoneySENSE programme is to raise awareness as well as offer the programmes. But if you are talking about a nation-wide audience, a very wide range of people, the sort of education which you must provide will depend on each person's background, his ability to absorb and what his needs are. If he is investing $5,000, that is different. If he is investing $50,000, or he has half a million dollars because he is a professional who puts some nest-egg away, his needs will be different. But we will make the programmes available to them. And if we are talking about Investment 101, maybe that is a good alternative name for the MoneySENSE programme.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, in view of the number of new IPOs coming in during this bull market, what is MAS' position with regard to ensuring that the aspiring companies waiting for listing are wholesome and economically viable, and that they are not some fly-by-night-time operations to milk the ignorant investors during a bull market?

Mr Lee Hsien Loong: Mr Speaker, Sir, the answer is we have to go on disclosure and listing standards where certain listing standards which SGX requires and which companies must comply with before they are allowed to list, either a track record, growth potential or a certain amount of shareholders' funds which are publicly known. So before they can be listed on the Stock Exchange, they have to comply with these.

Secondly, there has to be full disclosures or the risks, what are the business prospects, what sort of business you are in, what are the problems, what are the potential legal issues which may come up. All these have to be fully disclosed in a disclosure document in the prospectus before you can go for an IPO.

Thirdly, of course, there is a process for the IPO. The Stock Exchange has to agree, the IPO has to be posted publicly, MAS has to register it, and if all that passes, finally, the IPO can proceed. And you would have seen that there had been a couple of cases where this process had not gone through to completion, but somewhere along the way, some issues had popped up and the IPO had been withdrawn, or something else had to happen.

So these are precautions which we have in place to make sure that the Stock Exchange is a place to raise equity capital and not a casino. But the final safeguard, as I have said several times, is disclosure and consumer responsibility. In other words, before you invest in a stock, whether it is an IPO stock or any other stock listed on the Exchange, make sure you know what it is about, what is this company doing, what are the risks, can you or can you not accept the risks of putting your money there and maybe losing part of it or all of it. It is not an easy lesson to get through. But it is something that we have to get people to understand because an IPO is not a sure-win thing.

When you read the newspapers and each time the market is hot, IPO becomes exciting, and people say 200 times over-subscription was the last number they saw, something fabulous like that. They do not say that the denominator is very small, it is a few million dollars and everybody is putting in. It is a market which is excited without being knowledgeable, and that is worrying.

An IPO is not an opportunity for retail investors to get rich. It is an opportunity for companies to raise equity capital, to raise shareholders' funds, or to sell part of their holdings. And that is something which people have to learn.

Ms Irene Ng Phek Hoong: Sir, it seems to me one good indication of how money-wise Singaporeans are is how they invest using their CPF money. Can I ask the Minister whether he can give us a sense, from studying how the returns have been from the investments made from CPF, whether Singaporeans are, by and large, prudent or in need of more hand-holding and whether we can use the data to target certain groups which might be more vulnerable, in terms of investing unwisely?

Mr Lee Hsien Loong: This is a question which should of course be addressed to my colleague, the Acting Minister, at the next parliamentary Question. But I should say that, by and large, most Singaporeans with CPF money have been quite conservative because they have just left their money in the CPF. They bought a house, they are living in it, and the rest they have just put in the CPF earning 2.5%, or 4% on a Special Account, and feeling quite happy that is rather a lot of interest in this current environment. Some people have taken the money out and invested mostly in stocks and shares, some unit trusts, some investment-linked insurance products. They have performed variously, not all have out-performed, leaving their money in the CPF. But we have felt that, as a matter of public policy, we should not lock up their money. But if they feel that they can do better, we should allow them avenues to do so, and this is what we have done.

We have adjusted the rules as we have gone along and cut back on the proportion which you can put in stocks and shares directly. So you cannot take your life savings and go and buy one company's stock. If you had bought Pan El, 15 years ago, you would be feeling very sad. And we would continue to adjust these rules. But I think, even with CPF, the general approach should be that the individual is responsible so long as he is investing the money and not spending it. We should give him latitude to do so with both the upside and the downside to be taken into account.

Mr Steve Chia Kiah Hong: Sir, in view of the hot IPO market, does the MAS place restriction on the amount of shares given out for the public offer versus the private placement? As in most IPOs, the amounts are currently given out in a private placement. Would that effectively lead to another Mid-Continent's case where there is a cornering?

* *Mr Lee Hsien Loong: Mr Speaker, Sir, that is really a different subject, but just a very brief answer. No, we do not intend to have guidelines to have a certain proportion given out to a private placement. We do have guidelines to ensure that there is a reasonably wide distribution of shares and not all of it is given to a small number of purchasers. In Mid-Continent, there were lapses which, I think, have been identified and are being put right. The solution is to continue to watch vigilantly to see how the present rules work, rather than to go back to a formula where you require a certain amount of public placement, where you are just transferring the problem, because a public placement does not guarantee a good market. It just generates a different kind of excitement and more enthusiasm frenzy for the next round.