Tan Kin Lian's Blog: Impartial advice

Friday, August 31, 2007

Impartial advice

There is a useful role for financial advisers (and insurance advisers) in giving impartial advice to customers. They should be paid a fee for the time spent.

Many people told me that they are willing to pay a fee of $200 for financial advice. The fee of $500 or more that is currently charged by some advisers is too high for most customers.

It is possible for the adviser to reduce the fee to $200, if they are not required to spend too much time with the client. The client can be asked to read a FAQ (frequently asked question) on financial matters before they see the adviser. It will be possible for the adviser to do a good job within 2 hours.

My ideas are set out in this paper.

6 comments:

Anonymous said...: As long there is commission I don't
think one ever gets impartial advice.Impartiality is a myth.
Tied agents of insurance companies can NEVER practice objectivity when they have only the company's products to "use".For these agents the products are ends in themselves and not solutions.They are salespeople and salespeople find ways to sell what the company manufactures. As selling is
about manipulation for desired results they can take many forms. They can be immoral, unethical,and illegal; misselling misrepresentation, non disclosue or concealment of facts. This happens because no one company's products are the best and having or forced to sell only the company's products, any of the above can happen. They can never achieve 100% satisfaction for the customers because of this conflict of interest.
Impartaility is only possible if commission is removed.Advisers are then paid according to his skills , competence , knowledge , perhaps his standing or reputation and areas of specialisation and scope of services that they provide.Fees are determined by market forces. Execution of plans or advisers' recommendations is through a third party of the customers' choice. The third party can be online portals or a shops that dispense as per the prescriptions by the advisers.They are retailers in some way. They represent many brands. They are free to offer discounts. Their product prices are subject to forces of supply and demand. There is free and perfect competition to ensure market efficiency. When all these happen then that will be the day when the "profession" comes of age like other professions.They can truly hold up a candle to the legal, medical or accountants. Before this day, insurance agents are still pariahs, suspected, cheats, mercenaries and all sorts of negative labels.; August 28, 2007 12:01 AM
Khiat Han Hwee Adrian said...: The above idea is a novel. Most people are unlikely to pay for financial services under current standards.

Over short term, things will remain as it is. Commissioned agents and Independent Financial Advisors will be here to stay.

Over mid term, commission structure will be reduced due to competitive forces. Agents will be reduced significantly and a transition in the industry sets in.

Over long term, 2 types of financial adviser co-exist.
1) Fixed salaried staffs from banks and insurance companies that gives insurance and investment advices
2) Pure Financial Advisory firms with proper investment analysis tools and a very systematic approach in financial planning.

I personally feel that our cohort of Independent Financial Advisors are not really independent and unbias with their views.; August 30, 2007 1:18 AM
Anonymous said...: I agree with Mr. Tan that $500 is too high.

Isn't $200 too much just for advice ... especially when some of these advice can get from internet, faqs?

if the adviser give 3 sessions of such advice, 5 days a week - he will be earning $12,000 a month.

The industry should standardised like the medical profession in the past.. $20/visit ... maybe for Income, it can be $15/visit. You got by volume to generate the required revenue.

I think it's possible as I seldom see my neighbourhood doctor except maybe once in 2 years for flu, and he is still there after 20 years.; September 02, 2007 1:21 AM
Anonymous said...: A financial planner cannot see so many "patients" a day. May be 2 or 3 at the most. Examination takes some time, some may be short but not like what you think the doctors do,put the stethoscope to your chest or back and ask you a few questions and the prescription.A good practice has about 100 patients a day, from 9am to9pm, same like minimarkets.Like to become a doctor?
The financial planner needs a lot of answers from you, the revelations depend on what you want.Then comes the analysis and the prescriptions(recommendations) and if you agree with the recommendations they will be executed.So you see it is lengthy.
It is even longer if you want a thorough complete check up and you get the report after a few days.
Go through one with a qualified financial planner and you agree that the $500 per case basis is not a good deal let alone the $200.
Some planners charge on an hourly basis, $150 per hr or $3000 per case also depending on the complexity and if implementation of recommendations is through the planner there may be a waiver of the fee or reduction. Anyway this must be agreed at the outset and the scope of service to be provided
Lawyers charge between $1000
to $8000 per court appearance, with or without advocating work.
Just think about it. Of course i am talking about qualified financial planners and not insurance agents.; September 03, 2007 10:18 AM
Anonymous said...: $150/hr is too pricey. As a consumer, I will be reluctant to pay this kind of rate.

For the last ten years, I have worked as an engineer and my pay average about $6000/mth. 5 day work week. Sometimes have to volunteer overtime and come back on weekends, no extra pay. I only earn $30/hr.

Pay someone $150/hr for advising I might as well buy off the internet. I know in any sales will incur commissions, this I understand. I sell my house, $500,000, my property agent earns $5,000. When buy insurance, Mr. Tan says earn 1 year comm, so I find cheap cheap ones.

But to cough out $150/hr just for the fellow asking questions and compiling some data ... he better make sure I don't see him too often. Imagine I haven't buy any insurance product from him but end up with a pile of paper worth $300 for a 2 hr session.

What if he/she gives wrong advice? or I don't like his advice? still have to pay? It costs too much!

I am ok with fee-based advising but not ok with the extremely high fees imposed on the structure. Maybe $20/$25 per hour is fine.

Above is just my opinion and not that I am for or against anyone in this discussion and not my intention to offend anyone.; September 06, 2007 3:28 AM
Anonymous said...: You seek an adviser if you think you are not confident about your financial matters, just like engaging an accountant or a lawyer or some professionals.
There were people who didn't engage a lawyer when advocating in court, some won and some lost.
I always advise people if they are not getting appropriate advice but getting just information, like product info, they shouldn't be paying for anything when this information can be gotten from the internet or some where for free.Or for example, if they know about investment why should they pay huge commission to adviser when they can buy from online portals cheaply.
The point is if you do not know you have to decide whether paying is worth the advice you get.When I say worth it, it means it SAVES you the money and ACHIEVES your desired results.
Anyway, the charges are determined by market forces. So it is fair.; September 06, 2007 7:02 PM