Monday, February 18, 2008

Can we really retire comfortably? (4)

The last barrier I like to share about is the "Inadequacy of Financial Planners in Singapore".

Insurance and Investment products are distributed mainly by 3 channels: Tied Agencies, Bancassurance and Independent Financial Advisers with Tied agencies and Bancassurance as the current major players.
So what are the problems?

1) All 3 channels are very Sales Oriented
* No commission = No Salary
* The process becomes "Transactional" and advisors have to close more sales to hit their quotas.
* To get a sales done quick, no proper fact-finding is conducted and plan may not be suitable for the customer
* Under the Tied agency and Bank channel, there are no benefits to ensure that their customers are on track to their investment objectives.

2) Lack of regulators effort in controlling the quality of advisers.
* Current minimum qualification for advisers is only 4"O" levels passes
* Part-timing is allowed as long as training hours and sales quota are achieved
* No dateline for an adviser to reach any Financial Planning qualification or standards
* If an adviser is not fully committed to his job and not interested to upgrade himself, he may not be in the best position to advice.

3) Fee based distribution structure is under establised
* Fee based structure appeals to the high net worth because the fee is usually only a fraction of their total assets.
* The lower and middle income people cannot accept a fee base structure because they expect the advice to come free. They don't realise that the commission given to the agent is sometimes higher than to pay that small fee.
* There are also no guideline on how much a fee should be charged. There is a lack of benchmark in this aspect. Advisers cannot pluck any figure from the sky and tell the customer to pay for his advice.

To summarise:
a) Bolder steps must be adopted by the Regulators to control the quality of advice.
b) Quality advice can only be given by competent and professional Financial Planners.
c) Advisers must be properly paid for good advice and not due to good salesmanship.

I look forward the era when the unqualified agents are shipped out of the industry and the industry properly regulated. Such environment will ensure that Singaporeans get solid advices that will benefit them.


Anonymous said...

I'll don't expect the authorities to take any actions unless something dire occurs. Maybe in a few decades. And maybe I'll be able to look at those sales financial advisor with less stigma.

If I had my way, I'd force financial planning to be a compulsory subject in schools so that people will realize the importance of it.

Anonymous said...

It is impossible. From a business perspective, insurers want as many agents as possible. More agents implies more revenue. And that is why Income is now opening up its brokers/bancassurance distribution channels very aggressively. In fact if 4 PSLE passes is the minimum, insurers will only be happier. The state of affairs of lousy agents is here to stay. Does this make sense to you?