SSS, GSIS stock loan program
In an effort to strengthen the capital market, which has been sluggish lately, the Philippine Stock Exchange (PSE) proposed the revival of the 1990s program of the Social Security System (SSS) and Government Service Insurance System (GSIS) that had made loans available to their members to buy listed stocks.
Since SSS and GSIS funds are considered government money, the stocks bought were placed in their name under a trust arrangement and were registered in the name of the investing members only after the loan was paid.
According to PSE, this time, the purchase of the stocks shall be linked to a voluntary retirement savings program sanctioned by the Personal Equity and Retirement Account Law.
This writer had the opportunity to avail of that stock program when he was a young lawyer. The managing partner of the law office encouraged the young assistants to buy the stocks of its clients, namely, Meralco, PLDT and San Miguel Corp., which at that time were selling at two-digit prices.
The law office staff took care of the paperwork and the amortization of the loan through salary deductions.
During those days, most listed companies were stingy in declaring cash dividends and when they did, the dividends were peanuts. To make up for that deficiency, they periodically issued stock dividends that increased the number of shares of stockholders.
Since there was little incentive to sell the shares because of their low price, they were simply kept and, along the way, grew through stock dividends. Those shares are now earning four-digit cash dividends per share that are regularly declared.
Going back to the PSE proposal, for financial capability reasons, the target market, so to speak, of the loan program should be young professionals or SSS and GSIS members who are unmarried or, if married and have children, who are in the kindergarten or primary school level.
This is not to discriminate against those who are not within the same age or civil status bracket, but capacity to pay the loan is a critical element in the success of the program.
By and large, those who have less financial responsibility to their family or otherwise have disposable income that enables them to enjoy the perks of youth would be most likely attracted to buying listed stocks as a hedge for the future.
Those who are not similarly situated would have the interests of their family at the top of their mind rather than incurring loans to buy stocks whose prices fluctuate depending on the mood of the market.
With the sales pitch, for example, that money saved from lesser trips to Starbucks, or fine dining in Bonifacio Global City, or gigs in “Pobla” could buy stocks that would be easy to sell when they’re out of job or retired, the program may appeal to gainfully employed millennials and Generation Z Filipinos.
A subliminal challenge to encouraging investment in stocks is overcoming the “yolo” (you only live once) attitude of young Filipinos who that feel preparing for the future through investment in stocks would be a no-brainer in the belief that the future would take care of itself. What me worry?
Since those Filipinos are proficient in, if not addicted to, digital-based facilities, it would be a good marketing strategy to reduce to the barest minimum the paperwork in the purchase of stocks, or better still, allow the transaction to be accomplished digitally in the same manner that digital banks are doing at present.
Note that in the 1990 edition of the program, the supporting documents were lengthy and full of legalese that even lawyers may find overwhelming or were extraordinarily protective of the interests of the SSS and GSIS.
This time, it is essential that those documents are concise and easy to comprehend because the younger generation, based on many consumer studies, tend to have shorter attention span or are visually-inclined. Too much ink is a turn-off.
A repeat of the old practice of multifarious documentary requirements that included notarization would surely cause disinterest in participating in the stock program.
