There is an advertisement by Interactive Brokers on CNBC TV. It shows an independent adviser describing her job as helping clients to monitor their investments and trading through a low cost internet platform offered by the advertiser. The adviser gives value to the clients by getting access to the suitable financial products traded on the exchange, at the lowest possible cost.
I hope that independent financial advisers will move to this business model, i.e. give value to the clients and earn a fee for their service. This fee is adequate for the time spent and is not so large as to make the client poorer off.
It is possible for a finacial adviser to make a living with this model, just as a doctor makes a living by giving medical advice for a fee.
Tan Kin Lian
A fee based advisory service is fairer and it is commensurate with the scope of service provided. It is known in advance and it is agreed between the parties. It can be more than the 'current commission model' or below depending on the reputation and the expertise of the adviser. The clients have a chance to negotiate , agree and decide the contract.
ReplyDeleteThe current commission model disregards the advisory work, the complexities and scope of the service.Very often it is earned through dubious means like cheating,misrepresentation, and value added. It is a reward for outwitting or conning the clients.The clients have no idea of the cost and the service. The clients are under the impression that it is the 'cost' of the product and there is no way to valuate the cost. It is not equitable. 2 differently 'qualified' people are being rewarded the same. A salesman is paid the same as an adviser.
Mr. Tan,
ReplyDeleteOne of the requirement for the adviser to trade on the low cost platform is that the platform need to offer B2B facility for the adviser to use. However, in Singapore only two platform providers offer B2B facility for financial advisers and these are iFast and Aviva Navigator. Unfortunately it is my belief that they want to earn a large profit and hence only offers unit trusts. Although they offer hundreds of unit trusts but the high cost embedded in unit trusts do not benefit the clients. UT gives high trailer fees to the two platform providers and the two companies do not pass on all the trailer fees to the advisers. As a result, the advisers have to charge another layer of wrap fee to earn a living.
I believe if there are low cost platform willing to provide a B2B service for advisers, many advisers will be willing to use these.
Don't trust "Introducer".
ReplyDeleteDon't trust IFA.
Remember Minibomd / Pin saga?
If the IFA or the Brokering House have different responsibility from the Banks, then MAS should not allow them to sell the same or similar products.
ReplyDeleteMr. Tan, FISCA should look into introducing the 'After the Event Insurance Scheme'(ATE) for aggrieved policyholders or investors who want to take the insurers, banks, the insurance agents or RMs to court for mis-selling.
ReplyDeleteMany consumers are reluctant or ignorant of their rights to sue the agents and the company because of financial resources. With ATE , aggrieved policyholders or deceased's spouse can seek compensation for inappropriate recommendation, or mis-selling by insurance agents or RMs.
Hope FISCA will arrange for such scheme for members.
We should have prepaid legal service for ordinary citizens to address their grievances in court.
ReplyDeleteMany consumers don't take up legal against the insurance agents because they do not know their rights and because it is expensive. To address this problem MAS should get more power from parliaments to prosecute agents and FIs.
The recent consultation paper provides for this . I hope parliament will see it as necessary to empower MAS to punish errant insurance agents and to enforce compensation for aggrieved policyholders.
Secondly, the private legal service
like (1)contigency fee legal service and (2)After the Event insurance scheme and (3)prepaid legal service will help the poor policyholders to sue the insurance agents , RMs and FIs.
It is long over due. The malpractice by these salespeople must be stopped and they must be punished.