Business Idea

In the context of the current financial crisis, many Germans have lost a lot of money after having invested in risky assets. Some of them claim that they were told by their bank that these investments are "absolutely safe". But try proving that in a court of law. (Sidenote: I guess in many cases there will be two customers and only one bank employee present. But contrary to what most people believe, in German law the judge does not have to trust the word of two people over one. Obviously, the customers have a huge incentive to lie - or maybe there's even some unconscious self-identity management at work - so the judge would probably give the bank employee the benefit of the doubt.)

Two interesting ideas they had on the radio:

1. You could include an explicit statement about the bank's risk assessment as a part of the contract.

2. You could have someone protocol all conversations between the bank employee and the customers concerning a certain investment. Protocol to be signed by all parties. Banks could offer this for an extra charge, but they don't. I guess the reason is that that would implicitly portray themselves as untrustworthy.

1 comment:

pj said...

There have been a number of similar cases in the UK. Endowment mortgages (you invest in a plan to pay off your mortgage sum at the end of a fixed period) are one example where people succesfully claimed that sellers did not make it clear that if their investments did not grow sufficiently there would be a shortfall on their mortgage.

Part of the problem is that these sorts of products are sold by brokers or agents with incentives to mislead, and it is entirely within their control to prevent there being any evidence of this.