Buying insurance

Attached below is a comment from one of my readers in response to my post “Why I don’t believe in financial adviser”. I feel that there is a need to clarify my position and let my readers know more about my background.

I work in the aviation industry and has never worked in the financial sector before. The articles in this blog are a collection of my thoughts and personal experiences. Readers must not misconstrue the articles in this blog as financial advice.

My thinking is that you don’t have to be a qualified financial analyst in order to point out the inherent flaws in our financial industry. Any Tom, Dick and Harry can do so.

Insurance
For many years, job titles like “financial advisers” or “financial consultants” have been too loosely used in Singapore by many insurance agents who are only interested in selling expensive whole-life insurance policies. Instead of educating the public on buying term and investing the rest, these FA often hard-sell unit trusts, investment-linked and whole-life insurances to customers. They often target customers’ desire to become rich and retire early.
Very often, the customers’ interest and needs are not met or aligned at all. To make matter worse, many FA are also not upfront with the commission or fees they are collecting from customers.
My vision is that Singaporeans can buy insurance policies directly from insurers without any middlemen at all. We all know that being a middleman is a lucrative trade because you are just providing a service and earn a commission through the process.
But having a middleman often created a trade-off and the end result is that customers ended up paying more. So do away with insurance agents and any third part independent financial advisers. Today, with online technology so advanced, everyone should be able to buy online easily from insurance companies. Why do Singaporeans have to go through FA to buy insurance policies/unit trusts and pay more?

Could you elaborate more about your following statement:“Financial advisers need to provide value-added services and educate clients on investing. Selling financial products alone will not help clients to improve their investment knowledge at all.”

Are you suggesting financial advisers start to operate as equity investment firms that conduct seminars to their clients? I do know of at least a firm that is doing that successfully in Singapore. However the average consumer in need of some basic insurance/retirement planning would all probably have to adopt a DYI approach as fees can cost between $2,000 – $5,000 a year before commissions for a qualified financial advisor who is able to value add by your definitions.

By the way, have you been a financial advisor yourself? There are certainly inherent problems in the industry that needs to be resolved. Do agree that many FA now are sales oriented however do feel your comments are a bit lopsided.

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Magically yours,

SG Wealth Builder

Updated: May 31, 2017 — 2:12 pm

2 Comments

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  1. First and foremost, I am not an FA nor have I ever worked in that industry.

    Here is my humble views.

    For the majority of the non savvy consumers, an FA is the right way to provide the necessary advice, if the FA is doing it the ethical way, without the underlying vested interests. So they help the consumer get the right insurance with the necessary investment, albeit at a lower yield and higher cost, since someone is managing it on their behalf..

    It is not wrong for the FA to earn the commission, just like in any traditional business, where the revenue is being paid out to Celebrities, Marketers, Distributors, Sale personnel etc.

    So for industries like Insurance, Properties, Finances, etc. they are actually operating like a Direct Selling model, with the ordinary people getting the income pie instead of the Celebrities and Marketers, since they are the ones playing that role.

    You have to correlate it back to the biz model where the revenue is segmented and distributed.

    For the more savvy consumers, going direct is the best options since they know how to DIY, and can actively manage their portfolio. They rightly deserved a higher yield of investment and lower cost, since they are the ones actively managing it.

    Look more at the big picture and see how many prefer to have an FA and what percentage prefer to DIY, since both have its pros and cons.

  2. the problem is the FA commissions are not transparent unless the rest of the industry avialable to the retail

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