Wednesday, April 29, 2009

Survey: Financial advise

Financial advisers are required to make a financial needs analysis of their client and to have a suitable basis for giving their advice on implementing a financial plan?

How is this advise given? 

Many clients have approached me for advice, because they are confused with what the adviser told them. This is most unsatisfactory. The financial adviser earned $1,000 or more in commission and did not give a satisfactory explanation.  

I suggest that the advise should be given in simple language in a format that is understandable by the client.

I also suggest that a set of the documents supporting the advise should be given to the client. The client can give the advise to another person for a second opinion. This will ensure that the quality of the advice given by the first adviser is satisfactory and conforms with some best good practice standard.

At present, the financial adviser is required to lodge their advice to the advisory firm and a supervisor is required to audit the advice. As the supervisor works for the same firm, this does not give sufficient protection to the consumer on the quality of advice and the suitability of the products.

What are your views on this matter? Particpate in this survey.


zhummmeng said...

A financial advisory approach is entirely different from product pushing.
The advisory approach aims to put the interest of the clients first and to address the cleints' interest on a reasonable basis.Products are solutions.It is assumed that the advisers have no inkling of the product suitable for the clients until the clients' needs are uncovered.
The product pushing approach is aimed at selling the products with the highest commission that benefit the salesmen and NOT the clients.It is peddling the products upfront. It is fast and quick way of making money for the insurance salesmen. All MDRT, COT or TOT aspirants use this method and to make a lot of commission to qualify for these dubious awards because it is commission based.MAS must address this if it wants to see a fair dealing outcome for consumers.
In an advisory process it begins with gathering of data , needs,goals fears and concerns of the clients, financial circumstances, preferences etc and then followed by analysis and then recommendation and implementation of the recommendations or executions and monitoring.
The advisory is a 6 step approach.
1.Client and adviser relationship established, goals, objectives identified etc and gathering.
4.Recommendations/a plan constructed
5.The implementation
6.the monitoring and review
The whole process is documented in the fact find form, from analysis to recommendation and reasons of recommendation..This plan is portable and can be reviewed by another adviser to continue the advisory work if the client wants a change of adviser.
So, you see, the whole process isn't what the insurance agents are doing, do you think your needs can be settled within an hour? Sure, your "needs" will be short changed if you are product sold.Not only that, you are likely to be mis-sold ,misrepresented all because of the greed or incompetence of the insurance agents.It is very clear insurance agents pushing products have no desire to help the clients meet their goals.
To solve this problem.
1.Make the advisory need based approach compulsory for most if not all cases. Who needs this most?
The ordinary man in the street needs this help. They are clueless, ignorant and not financially savvy. Usually these people make up the major clientele of any adviser and not the rich or savvy who don't need advice.
2.make all advisers or insurance agents accountable and liable for their recommendations. This is to prevent product pushing and malpractice.
3.remove the commission and replace with fee . (commission is the major cause of mis-selling and conflict of interest)
4. set a review body to help clients review their existing policies for mis-selling or conflict of interest and inappropriate recommendations.
5.A product advice or no advice WARNING to savvy clients. A warning must be verbally told to client and stated in the fact find form that choosing the options of 'product advice' and 'no advice' will put them at a disadvantage and by their action their rights to redress will be forfeited and waived if the product bought is wrong.
This is necessary to prevent abuse by insurance agents who try to avoid fact finding or to decieve the cleints that fact find is inconveneint to them and messy. This is also to stop the insurance agents from short changing the clients.Currently it seems that insurance agents' clients are financially savvy.The fact it is the opposite. All clients must be assumed to be clueless in order for a proper process to take place..
I hope that you can incorporate these points in your proposal to MAS.

Tan Kin Lian said...

You have made some good points. However, due to time pressure, FISCA protem committee will not be able to meet and discuss the inclusion of these points.

I suggest that you submit it on our own or with other financial advisers who believe in this approach.

I think that your points deserve to be adequately considered.

zhummmeng said...

In a speech at a Wealth Management seminar, Mr. Ng of MAS gave a glimpse of the changes to come and among which is moving away from commission as pay structure.This bodes well for the honest and competent practitioners of financial planning. By now MAS must have realized the root course of mis selling and malpractices is commission. Mr. Ng also said that FIs must put the interest of the consumers first and not their revenues. A change of mindset involves all parties to a transaction which aims for fair dealing outcome of win-win-win and not the insurance agents or salesmen or the FIs leaving the consumers out of the picture and as this is what is happening in the industry currently.
The industry needs these changes desperately to restore consumer confidence. Cleaning up of the industry of unethical, dishonest incompetent agents must be done first to pave the way for the new regime.

Concerned said...

The problem here is how many financial advisers are competent enough to give good financial advice? Most of them are hamburg or "pein chia", with a rudimentary knowledge of financial products, etc. Those good ones end up running doing their own business, manage a specialised team in a financial institution or becomes advisers to those big and rich clients. That leaves those mediocre financial advisors for the man in the street with very unsatisfactory results. This is unlike in some western countries where financial advisors give good advice benfitting the man in the street. The problem arise due to the rapid rise of Singapore as a financial centre with not enough attention paid to the education and training of financial advisors. Most financial advisors end up becoming product pushers aiming for the highest commission to compensate for the insufficent fees received in giving advice.

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