Tan Kin Lian's Blog: Avoid financial advisers

Monday, January 31, 2011

Avoid financial advisers

A foreigner, working in Singapore, approached me for advice. He bought a Vista plan from a financial planner two years ago, and was shocked to learn now about the high monthly charge of 5% of the premium that is deducted from the account. He never knew that he was buying a life insurance policy with a high upfront charge, which came into effect after 18 months. He was told that it is a regular saving investment product.

The financial adviser had assured him, a few times, that the charge was only 0.7% after 18 months. The adviser had told a deliberate lie to him, to get him to put in a large sum of savings, more than $3,000 a month. I asked him to check about the surrender charge, which I suspect will take away most of the accumulated premiums - if the policy is terminated now.

It is bad for an insurance company to design such a policy that is confusing to the consumer, and for the financial adviser to tell a deliberate lie to get the consumer to put in a large part of his savings. This amounts to cheating, but how can the consumer prove it? He must have signed the forms without proper understanding.

I advised him to write to the newspaper but he is worried that his colleagues and employer will get to know of his predicament.

My advice to consumers - avoid all financial advisers and insurance agents. Do not buy any investment or life insurance product from a person who approaches you. You will never know if you can become the next victim of this type of financial product.

My message to MAS - is this the kind of financial hub that you wish to build for Singapore? Do you wish to sit back and allow these types of practices to continue?

Tan Kin Lian

9 comments:

JasonX said...: Mas probably won't do anything until something similar to mini-bonds happens. The next best thing is for consumers to be educated. Sadly, that is almost impossible unless the media starts a campaign to educate the public.; January 31, 2011 9:19 AM
Anonymous said...: Ya lol,
Papaya believes it's private matter as long as they don't have any benefit in the matter. Caveat Emptor is their "motto" first until the people really can't take it anymore.; January 31, 2011 12:24 PM
Lye Khuen Way said...: Let us just "wish" more non-Singaporeans get conned and tell the whole world how wonderful our regulatory authorities are ! Sad that I have to wish such things, but then, we are accustomed to our authorities waiting for significant statistics to act, don't we ?; January 31, 2011 9:55 PM
Anon said...: Singaporeans should engage financial planners, proper financial planners that is, who will give proper financial advice.

The salespeople and conmen who are masquerading as financial planners should be avoided.

Like how the term "specialist" is regulated by MOH, MAS should regulate terms like financial consultant, adviser, planner etc and only allow accredited professionals to carry such titles. Financial product pushers and conmen should be labelled as salespeople, which is already a very good term for them.

It's a small step to take, but at least consumers will be able to identify fake financial planners a bit easier.; January 31, 2011 10:32 PM
zhummmeng said...: Mr. Tan,
you forgot one title that is even more lethal and venomous ....Executive Financial Consultants . Beneath this facade lurks an evil conman far dangerous than the magic stone sales cheat. Why? to earn this title the holder must con alot of victims, poor victims, the ordinary folks, the vulnerable gullible easy meat and impoverished them.; January 31, 2011 11:45 PM
yujuan said...: Just name them salesgirls and salesmen, giving them bombastic names just to con people.; February 01, 2011 4:22 PM
ExIFA said...: I was a certified financial planner [for a short time] and also a qualified accountant (FCCA) and I fully agreed with TKL's comments. I was with one of the largest Independently owned Financial Advisory firm and my experience there makes me realised that almost all financial planners are sales persons as far as investment advice is concerned. Most financial planners are competent to give advice on insurance products because financial planners are basically insurance agents. Almost all senior and top management of IFP are from insurance companies. Most of my ex-colleague do not understand basic economics and investment strategy. What was said to the clients are rehearsed speech [penned by his manager and memorized and practiced in groups] on the investment products. Basically, if you want to invest and they recommend you a investment linked insurance product [ILP], you better avoid it completely. The reason, the commission in recommending unit trust is small, 2% to 3% of your invested amount. If it is a investment link insurance product, his/her commission can come up to 100% of a year premium that you pay spread over 3 years.

Getting the designation of CFP is easy. If you have O level, you can sit for the multi-choice exam in front of a computer to answers a series of questions. Now, unless a person is an complete idiot or refuse to memorize the answers of these standard question papers given out by the FP firm, you just cannot fail the exam.

In singapore, an FP can only recommend you unit trust products which you can buy from many online porters at lower commission. The portfolio of unit trust that FP recommends to you is basically a "set menu" of funds selected by the FP firm. If you are conservative investors, take set A. If you are a more aggressive investor, take set B. There is no skill required by the FP except his/her selling skills. You can get the same portfolio funds from the online porters.

I would not said all FPs are crooks. I have ex-colleagues who refuse to recommend Investment Linked insurance products or health care plans pushed by the FP firm. The important thing to remember is that if you want to invest, do not buy an insurance product. The best insurance is term insurance - it is cheap and affordable and give you the best coverage.

The main reasons the insurance/FP companies opposed to the government fee based approach for charging for financial advice is commission based system benefits the decision makers who are senior partners, managers, and owner of the firms. If you are senior manager of insurance companies or IFP, your commission or over-riding commission is based on your team performance. The bigger the team you have, you are likely to earn higher commission because you have over-riding commision. That is why the main job scope of the FP manager is to recruit young and energetic FPs and motivate them to sell the highest earning insurance products. It is a Multi-Level Marketing except that the product are financial products.; January 29, 2013 11:13 AM
Unknown said...: The same thing happened to me about 2 years back when I went for a Insurance + Investment policy with Prudential Singapore. I Lost over S$ 10, 000. Public should be educated more and more about these cases.; October 11, 2013 11:24 PM
Okapi el Poeta said...: HI Mr Tan Kin Lian,
I'm an expat and I have also fallen for this product (Friends Provident. Name product: Global wealth Advance).
I have misled by my Financial advisor.
I'm willing to report this to the MAS, I'm pretty sure I won't get my money back for the 7 months I have been paying the premiums, but I wonder if with your help (you are being followed and read by a lot of people) Maybe all together we can great a strong voice so MAS bands all of this products from Singapore.
What do you think?; March 28, 2017 2:25 PM