Tan Kin Lian's Blog: Future for Financial Advisers

Thursday, February 07, 2008

Future for Financial Advisers

Mr. Tan,

Can I say that the days of an insurance adviser is numbered because:

1) An insurance adviser is highly unlikely to transact several term a day as each plan will be for very long term. The adviser have to look for the next person for planning.

2) Commission is low especially for Term insurances. It is difficult and take a lot of time to plan and convince the next person to the Term insurance. The adviser eventually get paid peanuts for the vast amount of time taken.

3) Next comes the emergence of index funds which pay low sales charge and no wrap fees. Adviser may even not earn a single cent to introduce these funds.

4) There is also no guideline on how much an adviser is worth for his time and advice. If the public view an adviser time as $10/hour, how many hours must an adviser works to compensate for his business cost? Is it possible for him to get 10 customers a day in order to earn that $100/day. Is meeting that 10 customers day considered as efficient?

5) Financial planner is different from other professional such as doctors and lawyers. People look for them when they are seriously sick or need legal advice. People don't usually think they will need a Financial planner due to their low urgency towards financial planning.

Financial Advisers took great pains to gain hybrid knowledge ranging from Insurance, Investments, Tax, Estate, CPF, Retirement, etc. They also keep updated on all the changes and investment climate.

Do you think that it is fair that advisers should always get lower paid than other professionals?Should the public get all the advices for free and then buy the cheapest term insurance and ETFs and they pay peanuts to the agent?

In your opinion, do you think that if there are no proper framework protecting the advisers in term of compensation scheme, a too drastic change in the benefit towards the public will kill many good advisers which may subsequently result in more social problem?

REPLY

I am optimistic of the future for a new type of financial adviser who provides good value for the client. The client will look for a trusted financial adviser, just as a patient will look for a good and trusted doctor.

The consumer will pay a fair rate of remuneration for the advice and help in making the transaction. The adviser can earn a good level of income by working efficiently and spreading his remuneration over a large number of clients (i.e. keep the cost low for the customer).

Can the new model give a living for many financial advisers? I believe so. There are so many people that need good advice. Many advisers are needed to educate and give good advice to these people.

In the economy, we need many teachers, many doctors, many nurses, many preachers. They do good work to serve the entire population. We also need many financial advisers to do their good work.

Gong Xi Fa Cai.

6 comments:

Anonymous said...: In 1983, I bought a personal accident plan after reading a full page advertisement. I cancel it after one year. The "American" agent did not advise me anything! Later, I took an insurance course in order to understand all about insurance. In 1985, I join INCOME and learn more of insurance sales.
Social objective was yesterday NTUC INCOME's goal. Many union leaders and members support it. Everyone in the employee community are benefited. INCOME's agent usually are union member. We are happy with little bit of sweetness after a sales closed. Social objective was in every one's heart. It was a win-win situation. Today's agent, they are right to sell insurance with aggresive marketing strategy. You are right to make high commission. Ultimately, the demand and suppy will tell you how much your service worth. Now, the key question is: Will NTUC INCOME as a social enterprise able to survive without aggresive marketing strategy? If yes, what are the product mix most benefit the employee community? If no, is NTUC INCOME (owned by employee Union) exploit poor worker's dollar and cents each time an agent close an expensive sales without CONSCIENCE. The new INCOME management team may wish to study how the old POSBank change its strategy and survive under international business environment. What is social marketing? The new generation of INCOME agent would have a better future.
(Mao Fa); February 07, 2008 10:57 AM
Anonymous said...: Social problem? The insurance agents should be very grateful that they could earn so much money without the necessary qualification. They should
kow tow to MAS for allowing these former taxi drivers, bus drivers, clerks, secretaries, odd job workers and of course retrenched engineers and other workers to earn what "they never dreamed of the kind of money they could earn". In fact it is a good time to put a stop and get rid of these unscrupulous and unethical and not qualified agents when the economy is doing well. The industries need workers to fill up. These agents can fill up instead of hiring foreign workers who are the ones who will pose social problems for Singapore.At least 8000 agents can be ridden of because as many as this number are not qualified to provide financial advice.The available records are evidence of malpractices by these insurance agents over many years, from CASE to CPF. MAS should start looking into this if they are sincere that the public get responsible financial planning.
MAS should act quickly before more damages are done.
As for earning, it is the public , the consumers to decide how much to pay for your service. It is basic economic principle, supply and demand.Just like the lawyers, you mean the law sets a minimum fee? The doctors are free to charge the fee and yet their fee is determined by forces of supply and demand.
Come on, you have to earn the trust and respect of the public to percieve your worth instead of forcing upon them.
Indeed the days of insurance salesmen are numbered.
I see this as good news. I can visualise the days when we can just pick up any adviser from the roadside and yet we can have the confidence and safety that he or she is honest and competent and he or she is not an unethical or rogue insurance salesman. Don't you think it is good?
Look at your profession more positively. It is the market that determines how much you are paid, not you, not the insurance companies and not MR. Tan too.; February 07, 2008 11:15 AM
Anonymous said...: NTUC incmoe agents have conscience?
If they have they would not have sold revosave.Many customers who bought this product will be shackled for life and yet get nothing out of it. The only way to get out of it is terminate with loss but with minimum loss. You didn't know what you have gotten in. Dr. Money had shown you. The experts had shown you. People with financial knowledge had shown you. Or you think that they were wrong and the agents were right?
NTUC has no social concern anymore. The new ceo might have said it. That was to appease his master, the union. His actions all this while have not matched his words. One question, how do revosave and vivolife benefit the poor, less fortunate masses. The truth is to benefit the agents so that he can prove that he can bring ntuc to number one. He is interested in upmanship, to beat the old ceo, and he is using the greedy agents to help him to be #1.
The proof is in the products. Expensive premium with high commission for the agents, how to benefit the masses. What social role? The buying public must realise this and must not let yourselves or be led by agents to believe that the products are good value for money. You will be disappointed in the long run and it may be too late.; February 07, 2008 12:49 PM
Anonymous said...: I was approached by one female at bedok . No details and info she pestered me to buy this latest insurance promising me cashback every year. I told her i don't need cash back but she keep sayin it is a good better than other company. What i didn't like was the way she bothered me keep pulling me to listen to her.; February 08, 2008 12:25 AM
Khiat Han Hwee Adrian said...: The standard of the Insurance Profession should be improved. It cannot be improved natuarlly by the industry itself. The main efforts must be from by the regulators.

Things that can be improved such as:

1) Minimum qualification to go up from Diploma and above.
2) Advisers must achieve certain Financial Planning standards/qualification by a specific dateline.
3) Needs based sales be made compulsory (Violation will means the insurance company need to explain)
4) Certain advisory charges should be capped. (Especially so for ILPs)
5) There should be a guideline on how much an adviser will be paid on their advice. (Example, Risk Management Planning = $50 / Retirement Planning = $75 / Investment Planning = Assets every $50k - $50 etc.
6) Insurance companies, especially agency managers should not be allowed to recruit too many advisers at their free will and allow exploitative selling.

Adrian Khiat
http://akhiat.blogspot.com; February 10, 2008 1:15 AM
Anonymous said...: I support you. The industry needs a clean up badly. The rules of the game
must be revamped and if possible redesigned.The bar must be raised. This is to ensure no more shoddy work. Agents must shore up or be shipped out. It is painful but it is needed before more damages are done.
The regulators, the intermediaries and the consumers must work towards this.; February 10, 2008 6:26 PM