Wednesday, July 30, 2008

What the Financial Adviser is expected to do

Q7: What can I expect a FA representative to do when he recommends an investment product to me?

A: A FA representative must take all reasonable steps to:
1. Determine your investment objectives, risk tolerance, financial situation and investment experience;
2. Ensure that the product he recommends is suitable for you, taking into account the information you gave; and
3. Explain to you why the product he is recommending is suitable for you.

You should provide complete and accurate information to ensure that the FA representative is able to recommend a suitable product for you.

This advice, and other useful tips, can be found in this webpage:http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html
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2 comments:

zhummmeng said...

First the adviser must be knowledgeable about investment and portfolio management before he takes all those necessary steps.
Otherwise the whole process is a sham and he or she will end up selling funds.
I don't think the insurance salespeople are properly equipped and have the skills to 'sell' investment products.The certificate in ILPs is very low.MAS should not allow them to sell.That is why a lot of CPF members' money have been screwed by them.On record only about 15% make return above 2.5%, the other 85% are drowned in losses. With the current market situation I wonder the number may be even higher.
MAS should realise that insurance salesmen are not qualified to advise and manage investment. Before CPF members' retirement goes up in flame or into the pockets of insurance salesmen MAS must quickly act. In the past few years insurance salesmen were performing remisier's role advising buy and sell. Churning was rampant and it still is. Today churning has taken a new form called switching. The FAs do take a cut from switching which sometimes can cost as much as 2% of amount switched. This is abused that in a year a client is "recommended" to switch from one to other many times.Whenever there is a switch the adviser gets paid.
Switching becomes an excuse as a portfolio managing tool.
I am strongly against insurance salesmen selling investment products or any collective investment if they do not have the necessary qualification. Certificate in ILPs is not even called enough. CMPAS module 8 is slightly better although still not good enough but it least introduces investment management concepts to beginners.
The cert in ILPs should be thrown into the river before it causes more damages to people's finance.

July 30, 2008 7:28 PM
zhummmeng said...

Consumers, please take your time to read the below and understand your rights as a consumer.

Q: What information is the insurance salesman required to disclose to me when recommending an investment product?

A: When recommending a unit trust or life insurance policy, an insurance salesman is required to disclose to you the key features of the product including the following:

1. Nature and aim of the product
Whether the product is a life insurance policy or a unit trust, and whether it is meant for protection, savings or investment.

2. Benefits of the product
Information on the amount and timing for payment of benefits and whether the benefits are guaranteed or non-guaranteed.

3. Risks of the product
Details of the risk factors that may result in the benefits payable being less than the illustrated values (for a life insurance policy), and the risks stated in the prospectus or profile statement (for a unit trust).

4. Details of the product provider
The business address and permitted activities of the product provider, and the relationship between the product provider and the FA.

5. Fees and charges to be borne by you
Details of the amount and nature of fees and charges to be paid by you, and the frequency of payment.

6. Warnings, exclusions and disclaimers
Information on the procedures, charges and restrictions for withdrawal, surrender or claim of the product.

7. Reports that you are entitled to receive
Details of how often you can expect to receive reports on your unit trust

Did your insurance salesmen comply with all the above when he or she sold you a product especially a whoelife and endowment product or an ILP? If he or she didn't, they have breached this rule and if any of your investments should go awry you are entitled to redress by the company or to take the insurance salesman to court.
Remember your rights to responsible and competent advice.

July 31, 2008 12:36 AM

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