Structured Note killer: an exclusive confession from an investment banker
A group of mathematics geniuses from international investment banker dealing rooms have created, out of thin air, an investment product---structured notes; while these professionals enjoyed million dollar salaries [note: article says over-ten million NT$ salaries], their investors ended up with broken homes and families. All along the financial advisors repeatedly promised "guaranty of principal, guaranty of principal", that the principal would be repaid as promised. This type of "wealth management" rings a degree of sophistication, yet the end result turned out to be the total destruction of investor wealth.
by Wu Tsio Chen, Wen Chien Ton and Wang Tsi Tien
For the first time ever in our country [note: Taiwan], a foreign investment banking executive has steppd forward to reveal what's the behind the structured note black curtain.
"The broker's job is to make a living, regardless of what happens to their investor's investment", said Ms Ho, former vice president of J.P.Morgan Chase Sales & Trading group. Creating structured note is the exclusive domain of genius among geniuses. As long as a client has an account, the game is to continuously churn his/her account until the game is over. [note: literal translation is to continue offer the client financial toys until there are no more toys to play with"
The professionals that she is referring to, sales & trading room structurers and bankers, purchase multi-million dollars brand-name watches and lavious mansions. While typical base salaries for these bankers start around $250k USD, compensations over a million is commonplace. It is estimated that investors in our country [note: Taiwan], have poured as much as $36.8 billion USD [Note: $1200 billion NT @ 1USD = 32.59 NT exchange rate] into structured notes investments.
The last three or four years have been a diabolical world. A perfect money-pit investment plan, led by a consortium of foreign investment bankers, local banking executives, financial advisors and planners, with willing participation from investors, has created a structured note farce. The play, with devils as directors, greed as screenplay, was funded by investors who ended up with broken homes and families. While the show was playing out, the banks were feeding investors mouthful of these "venoms". [to be continued]
For those of you who read Chinese, the excerpt of this original article (from Taiwan's Business Weekly magazine) can be found here
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I will translate the remainder of the article when I get a chance.