$180,000 - that’s how much investor loses in foreign exchange trades in 3 months
By Elysa Chen 15 December 2008
High-risk investments can make or break an investor, especially during the current troubled times.
If the investor makes the decision to invest, but also expects his bank’s relationship manager to watch out for him, who should be blamed if the investment turns bad?
This question was raised in the case of a 30-something Singaporean investor who lost more than $180,000 in foreign exchange trades in just three months.
John, who did not want his real name published, works as a technical consultant in an investment firm.
He claimed that he was not aware that he suffered so much in losses until it was too late.
The reason: He had trusted his bank’s relationship manager and the bank’s services, and had relied on that to keep him posted on his investment.
However, one investor coach we spoke to said that it can be hard to pin blame on the relationship manager. The investor is responsible for his investments. (See report on facing page.)
John said that every time before he made a transaction, he would call his relationship manager to check on his account balance.
On top of that, the bank would usually post a notice to him to let him know how much he had made or lost in a particular transaction after it was completed.
He would receive it in about a week.
However, it now appears that these were insufficient measures.
The coach investor we spoke to called such manual tracking ‘primitive’.
But for John, this had worked well since 2006, when he started investing in foreign exchange trading through his ABN AMRO wealth management account.
He had set aside $50,000 of his savings to open his account. Over time, he traded in higher amounts as his returns from each trade increased.
Then, things started going wrong in August this year.
From August to October, John, who had hoped to get bigger returns with the volatile markets, placed several trades of more than US$100,000 ($149,000) each time in the US dollar and the Australian dollar.
‘I wasn’t told’
On 15 Aug, he said that his trades made a US$129,000 loss, and John is now claiming that he did not know about this until a month later.
He claimed he did not receive the weekly notice on that transaction, and found out only in the monthly statement, which states the profits and losses made during the month.
He also claimed that he had been calling his relationship manager before he found out about the loss, but was not given the information earlier.
He said: ‘When I called, I wasn’t informed of the losses. I presumed that the profits from my other transactions had managed to cover my losses. I was told there was still an excess in my account.’
This led him to mistakenly believe that he had more money in his account than he really had, John said.
After the loss in August, he placed another trade, which resulted in a US$190,000 loss on 19 Oct.
He said he knew the risks of forex trading, and he had a ‘stop-loss level’.
‘I had a buffer amount of losing no more than US$150,000,’ he said.
‘By neglecting to tell me that I had made such a huge loss, the bank exposed me to a very risky situation and caused me to over-extend myself.’
Affected behaviour
He said: ‘If I had known I had to top up my account with US$129,000, I would have lowered my trading limit.
‘What was the possibility that they missed out such a huge transaction? I even called them regularly to check.’
Frustrated, he wrote in to the bank demanding an answer.
He said the bank apologised for the error, but he was not satisfied.
When approached, a spokesman for ABN Amro said: ‘As (part of) the bank’s policy, we do not comment on individual client matter due to client confidentiality.
‘We have taken the issues raised very seriously and conducted a thorough investigation and review.
‘We believe that our current processes and the steps we have taken are in line with market’s best practices. We will continue to actively address any further concerns the client may have.’
‘Investors must take responsibility’
Mr. Aaron Sim, CEO of Wealth Mentors, has spent five years coaching investors, and he has seen his fair share of investors who have had their fingers burnt.
He said: ‘In cases such as John’s, it is difficult to point the finger at the relationship manager.
‘The investor should take the responsibility for the investments. After all, he was the one who made the choice to invest.’
Here are some do’s and don’t’s for retail investors:
• Get an online trading account
Mr. Sim said: ‘You should not try to manually track your investments or rely on someone else to do so for you.
‘Getting a bank statement sent to you once a month is really primitive.
‘I am sure there are many avenues for investors like John to open an online trading account instead,’ he said.
• Understand your level of risk
Mr. Sim said: ‘Always ask yourself what is the worst that could happen if things go against you?’
If you are able to tolerate that risk, then go ahead, Mr. Sim said.
He added that investors can make use of stop-loss levels and their currency account’s automatic One-Cancel-Other settings - which would automatically stop trades once the threshold is reached - to further protect themselves.
• Get educated
Since John was investing in foreign exchange for his personal wealth management, he should have done some research and education, Mr. Sim said.
‘He needs to understand the pairs of currencies well. It would also be useful to know when the market is most conducive for trading.
‘The market is most active when the Asian market is trading.
‘He can think of doing trades where he can get in and out of the market within a few hours, instead of just placing his order and leaving it there for months.’
1 comment:
$180,000 - that’s how much investor loses in foreign exchange trades in 3 months
By Elysa Chen
15 December 2008
High-risk investments can make or break an investor, especially during the current troubled times.
If the investor makes the decision to invest, but also expects his bank’s relationship manager to watch out for him, who should be blamed if the investment turns bad?
This question was raised in the case of a 30-something Singaporean investor who lost more than $180,000 in foreign exchange trades in just three months.
John, who did not want his real name published, works as a technical consultant in an investment firm.
He claimed that he was not aware that he suffered so much in losses until it was too late.
The reason: He had trusted his bank’s relationship manager and the bank’s services, and had relied on that to keep him posted on his investment.
However, one investor coach we spoke to said that it can be hard to pin blame on the relationship manager. The investor is responsible for his investments. (See report on facing page.)
John said that every time before he made a transaction, he would call his relationship manager to check on his account balance.
On top of that, the bank would usually post a notice to him to let him know how much he had made or lost in a particular transaction after it was completed.
He would receive it in about a week.
However, it now appears that these were insufficient measures.
The coach investor we spoke to called such manual tracking ‘primitive’.
But for John, this had worked well since 2006, when he started investing in foreign exchange trading through his ABN AMRO wealth management account.
He had set aside $50,000 of his savings to open his account. Over time, he traded in higher amounts as his returns from each trade increased.
Then, things started going wrong in August this year.
From August to October, John, who had hoped to get bigger returns with the volatile markets, placed several trades of more than US$100,000 ($149,000) each time in the US dollar and the Australian dollar.
‘I wasn’t told’
On 15 Aug, he said that his trades made a US$129,000 loss, and John is now claiming that he did not know about this until a month later.
He claimed he did not receive the weekly notice on that transaction, and found out only in the monthly statement, which states the profits and losses made during the month.
He also claimed that he had been calling his relationship manager before he found out about the loss, but was not given the information earlier.
He said: ‘When I called, I wasn’t informed of the losses. I presumed that the profits from my other transactions had managed to cover my losses. I was told there was still an excess in my account.’
This led him to mistakenly believe that he had more money in his account than he really had, John said.
After the loss in August, he placed another trade, which resulted in a US$190,000 loss on 19 Oct.
He said he knew the risks of forex trading, and he had a ‘stop-loss level’.
‘I had a buffer amount of losing no more than US$150,000,’ he said.
‘By neglecting to tell me that I had made such a huge loss, the bank exposed me to a very risky situation and caused me to over-extend myself.’
Affected behaviour
He said: ‘If I had known I had to top up my account with US$129,000, I would have lowered my trading limit.
‘What was the possibility that they missed out such a huge transaction? I even called them regularly to check.’
Frustrated, he wrote in to the bank demanding an answer.
He said the bank apologised for the error, but he was not satisfied.
When approached, a spokesman for ABN Amro said: ‘As (part of) the bank’s policy, we do not comment on individual client matter due to client confidentiality.
‘We have taken the issues raised very seriously and conducted a thorough investigation and review.
‘We believe that our current processes and the steps we have taken are in line with market’s best practices. We will continue to actively address any further concerns the client may have.’
‘Investors must take responsibility’
Mr. Aaron Sim, CEO of Wealth Mentors, has spent five years coaching investors, and he has seen his fair share of investors who have had their fingers burnt.
He said: ‘In cases such as John’s, it is difficult to point the finger at the relationship manager.
‘The investor should take the responsibility for the investments. After all, he was the one who made the choice to invest.’
Here are some do’s and don’t’s for retail investors:
• Get an online trading account
Mr. Sim said: ‘You should not try to manually track your investments or rely on someone else to do so for you.
‘Getting a bank statement sent to you once a month is really primitive.
‘I am sure there are many avenues for investors like John to open an online trading account instead,’ he said.
• Understand your level of risk
Mr. Sim said: ‘Always ask yourself what is the worst that could happen if things go against you?’
If you are able to tolerate that risk, then go ahead, Mr. Sim said.
He added that investors can make use of stop-loss levels and their currency account’s automatic One-Cancel-Other settings - which would automatically stop trades once the threshold is reached - to further protect themselves.
• Get educated
Since John was investing in foreign exchange for his personal wealth management, he should have done some research and education, Mr. Sim said.
‘He needs to understand the pairs of currencies well. It would also be useful to know when the market is most conducive for trading.
‘The market is most active when the Asian market is trading.
‘He can think of doing trades where he can get in and out of the market within a few hours, instead of just placing his order and leaving it there for months.’
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