Perhaps no greater warning could be sounded against ignoring the fine print than that by Minister Mentor Lee Kuan Yew reported in the local papers on 10 November 2008.

Commenting on the losses suffered by many who had bought the high notes and minibonds which were affected by the financial crisis, particularly the collapse of Lehman Brothers, he said, “Higher returns mean higher risk. So when somebody tells you you get 1½ per cent from the bank, I give you 5 per cent, read the small print carefully because how can they pay you 5 per cent unless they are in dire need of the money? And if they are in dire need of the money, would you want to buy what they sell you?”

The Bible says, “Let your yes be yes, let your no be no.” James 5:12

In other words, say what you mean and mean what you say, and no need to swear by anything. Speak the truth always and make no false or empty promises. Plain speech on plain truth, no double speak or cunning use of words and twisting of meaning of words to mislead, deceive or confuse.

There is a proverb which says the more the words, the less the meaning.

I think it was Lord Byron who mentioned having to “explain the explanation” of certain people. And we know of the bombast of people full of sound and fury signifying nothing.

Ideas and words have great power and spin doctors and advertisers are paid handsomely to promote the popularity and sales of people and products. In modern economies driven by keen business competition for markets, it is expected and accepted practice for the sellers and the creative people they employ or engage, to do their best to sell their products.

But the phrase “Terms and Conditions apply” is now generally taken to mean “These are the real terms – the big print is mere advertisement.”

WHY MUST THIS BE SO?
Lest I be misquoted, I support advertising and marketing as essential business practices. Advertising has its place and play an important role in modern commerce. If the saying is true that nothing moves until a sale is made, it is just as true that nothing moves in sales without advertisements.

It is said that the salesperson is the company’s best direct advertisement. Print ads, radio ads, and TV ads also play a great part in building brand recognition and also promoting specific products and services.

Every time I read the Straits Times, I have a strong urge to buy SPH shares – just look at the number of ads, whether in good times or in bad times. And some ads are really creative in a good sense, although their constant bombardment can be wearisome.

What I don’t like about ads is when the advertising brains exercise “poetic license” and creative license and play fast and loose with facts or use deceptive means to make claims which are fictitious or false. I am tempted to quote examples, but out of prudence I will not.

Suffice to just refer to the different techniques that are used. It is tempting to mention about the beauty and slimming ads, but I will stick to ads in the financial services industry.

TECHNIQUES TO GRAB ATTENTION AND REDUCE DEFENCES
One technique is to show a very high interest rate e.g. 8 per cent. The intention is that the person seeing the ad will be attracted by the figure. The first thing which comes to mind is that, wow 8 per cent per annum. But on closer examination, it may be 8 per cent only for the first three months and then it’s something else.

There is such a thing as the effective interest rate which is a very important concept, but if this is shown at all, it is not in the ads but the fine print. For a better understanding of interest rates, see article “A Matter of Interest”.

The mention of a big interest rate or returns “up to 10 per cent” immediately focuses one’s mind on the 10 per cent, but up to can mean 0 per cent to 10 per cent.

This reminds me of the CDs with labels showing “songs by” followed by the name of a famous singer e.g. Elvis, but when you play it, the sons are truly by Elvis but actually sung by another unknown singer.

Another variation is that if a investment product is for five years and the simple interest return is 5 per cent per year, the big Ad grabber will cry out 25% interest.

You have to go some way down before you note that it is for 5 years and that it is actually simple interest and not compound interest.

It used to be more common that some insurance policies offered simple interest return, while others offered compound interest return. When you see simple interest being used, you have to be careful to compare apple with apple.

The moral of the story is to be careful to read the terms and conditions.

The chairman of DBS, Mr. Koh Boon Hwee was quoted in the Straits Times on 12th November saying that DBS will preface every investment it sells with a summary sheet and customers must affirm that they have read the prospectus.

It would be better if the summary sheet contains the material facts or the main points of the product – e.g. features like effective rate of interest per year, whether capital guaranteed or capital protected, whether derivatives are involved, whether there are currency risk exposures. And of course all the fees and charges and penalties for early redemption.

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