Comment posted in TKL Blog
I have a radical suggestion and that would be to scrap the FAA. The FAA is one hell of a bible that I can bet that not a single financial adviser rep has read and understood it from cover to cover. What it does is raise entry barriers to new FAs. I'm not exactly well-versed with the FAA but I believe one such instance is that FAs must have a capital of a certain minimum sum. This prevents FAs with an "ethical" culture from thriving as they won't have that kind of capital in the first place. It is a known fact the "unethical" reps "earn" more than "ethical" reps for their principal.
Another problem in the FAA is under training and competency. Anyone and everyone should be allowed to hold a license. This way, where's the "information assymetry" now? These "part time" brokers can act as the "direct channel" that has been dreamed of for such a long time. They have full time jobs and just act as "form fillers" who knows the drill and won't stuff any products down your throat since they don't live on that anyway. The FAA restricts such "neutral" brokers as the FA has to spend resources to train them to satisfy CPD hours. Without the FAA breathing down FAs to train their brokers, FAs will be more than happy to have "inactive" brokers who do nothing but help friends and relatives fill forms. They know what's going on behind the scene, the commission, the exclusions etc and won't lose too much dough sharing with his "prospect" for the lack of a better word. Honestly, the training for CPD hours is nonsense. How does holding a party at Expo or Suntec count as 5 hours of skills or knowledge?
The professional consultants who do real financial planning can still carry on with their usual rounds, but as many have pointed out, "the probability of finding an ethical and upright financial sales staff is 0.01%."
People always draw analogies between financial "consultants" and doctors. There is a stark difference here. Financial planning is voluntary, and can be managed by yourself provided you read TKL's good book and do research. In fact, you would make the most objective decisions this way as there is 0 conflict of interest. Medicine however requires years of study and training and medical services demand a high price due to this exclusivity to only the brightest and most determined of the population. If fiancial services were to become such (given even higher entry barriers), people will avoid them altogether due to the high charges and simply read TKL's book instead.
wjsim
It is misrepresenting to liken the work of the insurance salesmen to doctors. They are product peddler like the koyok men or the the snakeoil comen.
ReplyDeleteThe usaual victims of these conmen are the poor , the gullible,the uneducated and unsavvy educated and professionals. The good news is MAS will be addressing this to protect them from these insurance conmen.
If you want to help enhancing the FAA do contribute to the 3rd MAS consultation paper.Please comment on these areas.
ReplyDelete1. product pushing or product option should be tighened to prevent insurance agents from abusing and use it as an excuse to dodge fact finding.
2.Product option is meant for consumers who are financially savvy and for people who know what they need and don't need advice and they are the ones who approach the agents . For those the agents prospected or called these people MUST be given a fact find and NO product advice.
3. if in deed consumers who insist on product advice option they should be given a steep discount from the premium as much as 80% as no other valuable advice is given to justify the full commission.
4. A warning must be sounded to the consumers who have chosen product advice option to warn them of their loss of all their rights to recourse or advice. This statement must also be hand written by the consumers and signed to say that they understand the implication of choosing a product advice option.
5.To further eliminate the product pushing salesmen MAS must give to insurance companies a time frame to come with a remuneration model that is free from abuse by agents.
Meantime, a steep discount appraoch for the savvy buyers should be allowed.
Please comment on and give your feedback what changes you like to see to rid the industry of the wheeling dealing insurance agents.
Also recommend to the MAS to outlaw the the outdated sales 'benchmark' like MDRT to prevent undermining the financial industry.
This MDRT encourages conmen into the indsutry. It is a mark that is based on commission and NOT work and advice.If MAS wants to see more ethical practices this dubious 'benchmark' must be removed.
Another area regarding the integrity of the insurance agents. Most agents ,99%, fail to meet the FIT and Proper criteria of the FAA.
They are unqualified and cannot and don't understand financial planning and inevitably all of them push products for commission.
The above is only some of the serious issues. Please contribute to level the playing field.
The Watchman
Insurance agents are conmen disguised as financial CONsultants and some are senior or executive.
ReplyDeleteMAS will be regulating these titles for misrepresentation.This comes under the misleading statement section of the guidelines.
They are CONmen CONsultants who don't know finance.
FAA does not protect anyone but the FAs themselves. The FAs will be the first to object if there is any notion of abolishing the act. Excuses like it will lower standards of agents and customers will be cheated will be given. The established reps will also make noise.
ReplyDeleteThe FAA just protects FAs from competition and legal suits as they can claim they had followed the various guidelines. Caveat emptor in other words. I don't see how raising the entry barrier further will improve the situation. I would prefer instead that licensing standards become even more lax to allow small start-up firms in insurance brokerage business to even have a chance to compete and keep the bigger players in check. The minimum capital is from 300k to 900k. Who is the one really being protected? Wait, I think that's the insurance act. My point is that regulations should not be aimed at stifling markets. The effort should be channeled towards education like talks at public libraries and such. There will always be ways to circumvent regulations and make more regulations seem necessary. These costs eventually gets passed on to the consumers and the FAs enjoy the high entry barrier from competition.
Won't it be wonderful if you can simply approach Fisca for financial advise for a nominal fee? It is impossible with the FAA around in it current state.
MAS has ruled that making comparison to bank interest rate is disallowed as it misrepresents the real rate of the product.
ReplyDeleteLast year when ntuc rolled out a Capital Plus the agents were using the bank rate as comparison benchmark to decieve and con the risk averse customers. Of course many felt into the trap. Capital plus was only paying 1.6% after 2 years and required a lock in period of 2 years and failing to hold to maturity would result in loss of capital unlike the bank rate which is liquid and no loss of capital. This was never stressed to the buyers.MAS should have penalised and fined NTUC for making misleading statement and should have taken the senior management to task
for misrepresentation.
MAS must enforce the guidelines strictly otherwise the FIs and insurance companies think that MAS is their 'back mountain' and the public are taken for a ride.
I suggest that consumers who were misled into buying should lodge with MAS under the misleading statement guidelines.
To the Watchman.
ReplyDeletePay me a million dollar salary and I will do the work.
Why should I help some scholar on a million dollar salary do his job for free?
Since when is the poor suppose to subsidize the rich?
I'd rather help out for free in the TV programme RenovAid. At least I know those folks really need help.
wjsim,
ReplyDeletei can understand your disappointment with FAA. It was never intended for regulation of the market players but to protect them. Despite feedbacks on unethical practice of insurance agents MAS still reluctant to act and tighten the processes. It still gives alot of room for agents to con the consumers. Eg . if the customers die die want to go against the advice of the adviser MAS says that the adviser can go ahead but to sound the warning of loss of rights to recourse and which in the legal profession would have been a discharge from advising the case.
I think this is a loophole where the creative agents in cahoot with their supervisor and the senior management closing 2 eyes would exploit. The customers might not even know about it. So you see , MAS is rather vague or having 2 minds about closing up the loopholes.
Another excuse MAS has about commission is that consumers are not ready for fee charging. The problem is the impression by the general public is that fee is in addition to commission and which is NOT.The overall cost could be lower and yet the consumers get more value for money rather than pay full commission for form filling.Getting the insurance companies to come up with a fairer remuneration model will take another 10 years just like the CEDLI guidlelines.MAS is wishy washy and not serious about dealing a fairer outcome for the consumers.
I agree FISCA can fill the gap and close in on the unethical insurance agents by exposing mis-selling by reviewing for consumers their existing insurance policies.
The Watchman
MAS hasn't done anything since the beginning of this blog.
ReplyDeleteNothing. Zilch. Nada.
If any buyers are asked by their agents to choose product advice option when buying insurance products they should ask for discount, as much as 85% as there is no need analysis and advice given.On top of it the buyers have to bear all responsibilities if it is wrong product and the agents no need.
ReplyDeleteIt is only fair that buyers pay less and the insurance agents only deserve a small commission for form filling and execution only.
MAS must look into this as this is fair to consumers who don't need any advice or only product advice . It is so easy job for the agents as there is no responsibility on his or her part.
Of course the fee only will be the best model for the industry.