Tan Kin Lian's Blog: Who's really looking after your money?

Monday, July 07, 2008

Who's really looking after your money?

There is an excellent article by John Bittlestone in Today paper, 7 July. It shows a list of improvements that should be made by the finance industry. Although the suggestions are made to the banking sector, they apply to the insurance sector as well.

The topics are:
> Drop the jargon
> Cut the "products" by 95 percent
> If a bank wants to act as a broker
> Treat us as customers
> Be transparent
> Make your charges realistic
> Re-examine your "relationship manager" practice
> Reduce your paper chase
> Look at your bonus system
> You are already over-regulated

Here is the soft copy of the article:
http://www.todayonline.com/articles/263596.asp

9 comments:

Unknown said...: Hi, the article is available here:
http://www.todayonline.com/pdflive/0707SCL034.pdf; July 07, 2008 8:52 AM
TM said...: hi mr tan,

you can find the online version here:

http://www.todayonline.com/articles/263596.asp; July 07, 2008 8:55 AM
dsowerg said...: Mr Tan, you can read the text version of the article here:
http://www.todayonline.com/articles/263596.asp; July 07, 2008 9:27 AM
sunny flowery said...: This is the whole article, from the copy that comes to my email.

WHO'S REALLY LOOKING AFTER YOUR MONEY?

------------------------------------------
A list of improvements that should be madeby the finance industry

NOT as important as your health or your soul, looking after your money is
still high on the list of things you want to get right. That is why
bankers, finance and fund managers are paid more than most people — more,
certainly, than doctors and priests.

Most doctors and priests are pretty good. Not all, of course, but the
majority stick to their vows and fulfil the obligations of their
profession. So, it must be said, do many bankers. Although doctors' and
priests' behaviour are somewhat regulated, they are generally left to make
decisions based on their consciences — and the results are mostly
satisfactory. So they should be. They are teaching healthy physical and
moral behaviour. They know the best teacher is example.

Were our medics and pastors to be over-regulated, problems like those in
banking would emerge. Substituting conscience with guidelines is the
fastest way to hell on earth.

Do you think your money is being well and trustfully cared for? If your
answer is "no" then you may like to consider my10 requests to the finance
industry.

Drop the jargon. Use language we can all understand; treat us as literate
but ordinary human beings.

Cut the "products" by 95 per cent. You only have one product. It is called
money. There are no other "products". There may be some opportunities that
a bank or fund is willing to guarantee 100 per cent. We would like to know
about those, but they are still money.

If a bank wants to act as broker for other investments, let it have a
broking division (or use its existing one) and let it charge those who use
it for that service. At present we are all being charged for brokerage
services whether we want to use them or not. We want basic banking.

Treat us as customers. At present, your customer treatment is confined to
your advertising. None of the things you promise in your commercials or
press ads comes true for the normal customer. Ban the mind-blowing menus
and the egregiousness. Being polite is conducive to good business; being
egregious is not.

Be transparent. Your charges are socomplicated that no normal customer can
understand them. Obfuscation is a well-used tool of doubtful businesses
but you are handling people's hard-earned money, not selling baked beans.
Your customers have other things to do than deal with their bank. Help
them, don't confuse them.

Make your charges realistic. Many charges are for sums of money so small
that the cost of collection must exceed the revenue generated. Neither you
nor your customers benefit from that.

Re-examine your "Relationship Manager" practice. It is obviously necessary
to change relationship managers from time to time but having seven in two
years — quite common — is hardly conducive to a relationship or to even
discovering correct contact information.

Reduce your paper chase. We get more paper from our banks than we do from
any other source. The vast majority of it is unnecessarily damaging the
planet. Your words of commitment to green corporate social responsibility
must be carried through to your paper-creating practices.

Look at your bonus system and your profits. The former is geared almost
totally to selling and hardly at all to service. But you are a service,
not a sales outlet. Are your profits commensurate with those of service
businesses?

You are already over-regulated. Why? Has it worked? It happened because
people lost their trust in bankers, not just over sub-prime but over a
long time. It has failed because control without trustworthiness can never
work.

Go on, you tell your financiers, too.

John Bittleston mentors people inbusiness, career and their personallives
at www.TerrificMentors.com; July 07, 2008 10:09 AM
Wayne said...: I would say I can only agree with some of the suggestions listed by the author.

Top of the list for me are:
> Re-examine your "relationship manager" practice;
> Look at your bonus system.

> Re-examine your "relationship manager" practice;
The perceived "short RM tour-of-duty" phenomenon is what is very prevalent in the industry. Not many RMs can stay in one place for long. It probably has something to do with the "must sell, sell, sell" culture that is entrenched in the system. Often, when RMs don't make the sales quota, they leave the bank to another bank. And the whole "must sell, sell, sell" cycle starts again. When the new RMs take over, instead of engaging and understanding the clients, they succumb to the "must sell, sell, sell" culture. Missed quota, and they go again. At the new bank, they have no choice but to start the whole "must sell, sell, sell" cycle again. This is the vicious cycle. When clients realize they are being sold an inappropriate product, they go back to the bank, the RM is gone. Clients complain a bit here and there, and they move on.

> Look at your bonus system;
This is the second part of the "vicious cycle"; when an RM does well, the bonus and incentives are very good. This brings on the argument of whether should bonus/ incentives be seen as the ultimate and currently, the only reward system.
Even in the financial planning industry, the most prevalent example is ILP products. Even if we know the charges are higher than normal "D.I.Y buy-term-invest-the-rest (BTITR)" way, they are being "pushed" like nobody's business. I am from an IFA, so I know the difference in commission payout between the ILP and BTITR is rather significant. Recently, my blog article http://www.waynekoh.com/2008/07/btitr.html received some harsh feedback from an insurance agent. I am not against paying more commission to agents, but only on the condition that the clients are fully aware of their decisions.; July 07, 2008 2:08 PM
zhummmeng said...: Selling is a not a service.Selling is manipulating the emotion, creating guilt, out witting and holding the consumers to ransom.Why pay the salesman? There is no work or advice done for the consumers. Why pay?
Don't you think consumers are all suckers paying commission to insurance salesman to suffer the long term comittment to the premium.I can see the insurers and their agents laughing all the way to the bank, and sipping wine and feasting on suckling pigs at Ho Chi Min city.
Over regulation? MAS can't be bothered and it is leaving self regulation to the insurers just like the doctors. Now every doctor wants to practise aesthetic procedures, botoxing their business and detox the traditional time wasting practice. Insurers are rolling out dubious other products and reshaped anticipated endowment to con the unwary consumers.Is MAS concerned?No!! can't be bothered..
Who is looking after your money?
If you put a fox in charge of your coop indeed they will really look after the chicken for you.
Putting an insurance salesman in charge of your personal finance is like having a thief in the house.
Who is looking after your money? I suggest YOU look after it yourself.; July 08, 2008 12:26 AM
zhummmeng said...: Honesty and truth have been replaced by greed and what have been observed by John Bittleston are symptoms .
Obfuscation is a tool used to create more product differentials to pass off as new to hoodwink the consumers. With the collaboration of the greedy insurance agents using reprehensible approaches the consumers are being cheated without their knowing it.
The 2 greatest perpetrators are the companies that are aggressive in the cashback products.How on earth can they profit from the misery of consumers and how can the agents have no conscience at all.
But , alas, the consumers have themselves to blame too for abetting in their devious scheme.Without the consumers abetting them all these would not have happened too.
Just wondering, why the the so called financially savvy consumers can still be a victim of scams. Are they also greedy? that makes them easy victims? or are they savvy?; July 08, 2008 1:20 PM
Khiat Han Hwee Adrian said...: There are nothing wrong being in Sales. But if done ethically and fairly, advisors can still be respected in the industry.; July 08, 2008 2:16 PM
zhummmeng said...: Adrain, please read the article by Life insurance association of Malaysia about financial products being different from other products.
If financial product are pushed and sold like others the whole sales process is bound to border on unethicalness. Ethics is always at odds.
Why today the most complaints against salesmen is against insurance agents.
Insurance agents have been known to be unethical and is the most despised and shunned job in US. Why?; July 08, 2008 9:57 PM