Dear Mr.Tan,
I had read some of your articles about insurance and would like to seek your advice.
It is sad to learn that the current practices by insurance companies and their agents are not as ethical as what they claim in their mission statement or business code of ethics. It is also too late for my wife to realize that her entire CPF savings (ordinary and special) is now suffering heavy loss after being misled by an insurance agent in November 2007.
All along, ordinary people like my wife took insurance agent as professional and able to give reliable and accurate information. However, such trust was shattered after she was misled to loss-making investment-link policies. The way that he pushed the high risk bank-stock-link funds before the stock crash to unaware customer as low-risk investment still upset me today.
Although we complained about the agent's misrepresentation in Feb 2008 and got him admitting his 'ignorance' of the stock market, our request to annul the policies was rejected without clear explanation. His unethical use of national annuity scheme to scare my wife into putting her entire CPF savings in the dubious policies was also unanswered.
We contacted FIDREC but pulled out halfway due to stress and forlorn hope because my wife had already signed the Know Your Client Financial Needs Analysis Form which binds her to everything.
I have some questions below and I wonder you could offer your opinions.
1) Can stock-link-fund-selling agent ignore stock market warnings such as US housing credit crisis, US recession, banks' losses, etc? Isn't he a professional in his industry?
Reply: It is difficult for the fund agent to know that the market will be so bad. If they know, nobody will be transacting in the market.
2) These funds follow STI intimately; can agent ignore STI's sliding from historical peak late Oct 2007 and sell the funds at highest prices? Isn't his financial advice guided by the "buy low sell high" principle? This goes against Income's claim that they care about client's interest and are social responsible.
Reply: It is difficult for the fund agent to know that the market will be so bad. If they know, nobody will be transacting in the market.
3) Is it ethical to use annuity scheme to scare and influence client's decision, instead of sound financial judgment?
Reply: The agent should not use the national annuity scheme to scare the investor into making stock market investments.
4) The business law governing fund selling seems to be flawed. We only realized now that the Financial Needs Analysis Form, done casually, is holding the policy holder solely responsible. Isn't this document a likely signed blank check which could be rigged by unscrupulous agents?
Reply: The financial needs analysis should have been done properly and not casually.
5) Isn't there a mechanism to prevent such suicide-like buying of funds when all the indicators point to a looming stock crash? Can such crash prophets by George Solos, Warren Buffett and Jim Rogers be totally ignored and risks as high as such not mentioned to clients during the selling presentation?
Reply: It is difficult to know if the market will go up or down, at any point of time. One can only know with the benefit of hindsight. Your wife has made a long term investment. You should hold the investment for many years. It is likely to recover.
I made a personal investment myself around that time, and my investment is showing a big loss now. So, I was not aware that the market can be so bad. But I have to wait for it to recover.
From what I know NTUC agents are not qualified as far as investment is concerned.They have no idea of portfolio construction and management.They sell funds and depend on risk profiling as guide to determine the needs of the clients. They behave like stock brokers giving tips freely.They advise timing the market.
ReplyDeleteThis is not as simple as this.
I have long clamoured that CPF should withdraw and disallow insurance agents to invest members' money .They should not be allowed to invest in insurance products too.CPF should know since the time members were allowed to invest in insurance products many insurance agents abused and caused a lot of losses to their money.Investment in ILPs was even worse and still is. Churning and twisting were rampant.
NTUC agents are not trained properly and some are untrainable. How could a certificate in ILP make the insurance agents as investment advisers.It is a BIG JOKE. It is the biggest mistake that MAS has made to recognise that the certificate is sufficient to give advice.Has MAS checked the content and syllabus of the course or leave it to the licensing mill? It is a huge mistake that MAS should be held responsible.In fact there are 2 standards in the market now for advising ILPS and UTs. The FA representatives must pass a higher certificate in investment in addition before being allowed to advise on investment.The tied agents are causing more and big damages , is it a wonder, with a lower certificate? WHY?
Even you have signed the ' know your client' form , you are not put at a disadvantage becuase the assumption the court will use is that customers are clueless and the insurance agents are 'experts'.You will not be held for what you have signed .You also can claim that you have been misled and misrepresented
and which very often it is the case. Don't worry, the agent definitely left a trail of self incriminating evidences in the fact finding form.There are also many telltale evidences in the form to tell that the agents
are not qualified and incompetent and they also could be used to nail the agents in a legal suits. You should resubmit to FIDREC. There are qualified people who can spot those details to help you sue the agent.
You can sue the company for negligence of their untrained and unqualified agents. The company is bound and responsible for any professional misconduct of their salesmen.
Although I feel sorry for your wife's loss, you can't use ignorance and blame the whole world. Eventhough the insurance agent might be unethical, you can't use the fact of 'trusting agent's professionality'. Give yourself a break. The first thing not to do with your own money is to "TRUST PEOPLE". If you trust people with your money, get ready to lose some or all of it, which afterwards, don't make noise already.
ReplyDeleteAs hard as the lesson is, remember, investing in shares is no free lunch. I.e. investing at your own risk.
Believe it or not, this story underlines what insurance agents, salesmen or consultants would do to wring out as much money from their customers.
ReplyDeleteRecently there is this story about a FA consultant who had no idea that his client was already dead just before the month of the hungry ghost, submitted a switching form to CPF to switch the deceased' fund to another fund. When CPF recieved the form it was puzzled as to how the deceased could give this instruction to switch as their record showed that he had passed on. Upon verification it was found the signature was forged by the consultant. The joke is that the consultant could have obtained the consent from the deceased during the seventh month when his spirit returned home from the spiritual realm.This is a true story.
You may ask why and how it happened? You see, switching isn't free if your UT investment account isn't a wrapped account and the consultant is entitled to 50% of the switching fee which can be as high as 3% of the investment value.Who decides the rate? The consultant is free to fix the rate. You can see that is a lot of money to make if the consultant advises many switches especially in a bull market, no need buy sell buy sell. This reminesces of those times when tied agents were switching and churning clients' investment from funds to funds and giving tips freely.
Of course, the consultant was expelled and license revoked for life. This practice is rampant in the FA circle and this is the picture of the other side of the fence.
The "professional" could not predict the future direction of the market. We also count not. Otherwise, we would not have parted with good monies when we saw a slight correction. [Hindsight is forever 20/20. Foresight depends on a good crystal ball which we don't have.]
ReplyDeleteThe "professional" was more interested to earn his commission and fulfill his sale quota. We should be more interested in protecting our hard earned monies. Invest in knowledge first, before investing in financial products. Go and read Ben Graham's "Intelligent Investor". It is never too late to learn.