Most Singaporeans think that a Financial Adviser and an Insurance agent are the same. In the eyes of the consumer they serve the same purpose, which is to sell financial products.
On that note, as a financial adviser myself (Editor: This is a guest post) I must say it’s undeniably the truth. In fact, many people see us as salesmen. Although that is the harsh reality, but nothing can be further from the truth. There is a stark difference between an adviser and an insurance agent. Therefore, it is important to know who you should engage for your financial planning needs.
There are 3 types of agents in the market;
- Insurance Agents – In the industry, we call them tied agents because of their obligations to sell only the products from the company they represent.
- Bankers – Insurance company distribute their products through bankers who serve clients in the neighborhood.
- Independent Financial advisers – We are like brokers since we carry products from multiple insurance companies and advice on investment funds from most asset management firms.
So what makes them similar to each other, and what differences do they have?
Same Same: They all pass (some) common tests
To practice financial advisory, all agents in Singapore need to pass 3 exams before applying for their license. The basic exam descriptions is as below;
M5 – “Rules and Regulations for Financial Advisory Services”
M9 – “Life Insurance and Investment-Linked Policies”, and Health Insurance (HI)
M8 – “Collective Investment Schemes” (for the sale of Unit trust)
There are other qualifications that allow an agent to sell General insurance (i.e. car, travel, home and maid insurance) which include Personal General Insurance (PGI), Basic Insurance Concepts and Principles (BCP), and ComGI (Commercial General Insurance).
An agent with all these qualifications is allowed to sell the whole suite of products available in the market.
Unless they have cleared the relevant exams, agents cannot advise on investments funds. So meaning, if an insurance agent claims to be an investment guru and urge clients to invest through Investment-linked products (ILP), make sure they have the relevant qualifications before taking any of their advice. You should double check your agent’s qualifications by calling the company to check.
But different: Mindset and Visibility
Many Singaporeans would think that If they need insurance, they approach an insurance agent. While for investments they would usually visit the bank. It is rare that Singaporeans would think about looking for an independent financial adviser. Most do not even know of our existence.
Most of them many do not have any clue how to find one as we are not commonly found canvassing on the streets or doing roadshows in malls. A large number of independent advisers work on referrals basis or through seminars.
The Time has come for Change
This is what I really dislike about our industry. The truth is anyone can call themselves a financial adviser. It kind of irks me each time when I see insurance agents who do not have the relevant qualifications to advice on investments, yet continue to hold themselves as a financial planner.
This gives a clear warning sign that perhaps you have entrusted your financial planning needs to a wrong “professional”.
Take for example you are looking for a brand new car and you want to choose between different makes and models. You met a car dealer who promises that he can offer you everything. When you are at the showroom you can only buy a Cherry QQ and that is all the dealer has to offer.
Calling a something a spade.. does not make it a spade
So when an insurance agent or financial adviser promises a comprehensive financial planning, the fact is that at the end of the day all they recommend to you is either a Savings plan (i.e. endowment Plan) or an Investment-Linked Policy (ILP). Not saying that they are bad products, but they are not right for every single person or every single situation.
(Editor: Concerning investments, there is a whole wide world of possibilities and instruments out there – not just Endowment Plans or ILPs.)
As a client, you would expect your financial adviser to have their own strategy or planning philosophy when it comes to growing and protecting your finances. Your adviser’s knowledge is the deciding factor that determines if you should entrust him with your financial planning needs.
Sadly, a great majority of financial industry people have no idea what they are doing.
Knowlege Paired with an X-Factor: Mark of a true Financial Adviser
The X Factor I refer to is “humility paired with knowledge”. Your financial adviser should be able to give you confidence via their vulnerability. Some financial advisers try to gain your confidence by appearing all-knowing. Such a person you should avoid at all cost.
In most cases, Singaporeans would have encounter insurance agents on the streets trying to get sales leads by conducting a survey on your saving habits and hopefully at the end try to sell you a savings plan. Nevertheless, there is no doubt that the pressing issue could be that Singaporeans are not preparing enough for retirement.
However, that would only solve the problem temporarily but not the root issue.
The issue why Singaporeans aren’t saving enough is because they have no idea how much to save and how much they prepare in order to retire comfortably. A good adviser should give their clients practical solutions to address their clients’ pitfalls in managing personal finances, which is far better than just recommending a product.
If you meet someone who starts talking about a financial product right away, even if they call themselves a financial adviser, they are more likely a financial sales person.
A Financial Planner is not a title, it is a responsibility
So is your Financial Planner an adviser or just an insurance agent? To determine that, we should start by evaluating what value does your agent bring to the table. Clients who value the agent’s advice would be willing to pay for the adviser’s recommendations because the adviser is able to give their clients the confidence they need to manage their finances and able to help them achieve their financial aspirations.
It would be of no value buying from agent A or agent B if both are only interested to convince you on how the product could possibly fit in or meet your current needs, or tries to give you incentives by giving rewards for your purchase (ie. Ipad, LED tv). Sadly, many consumers fall for such marketing gimmicks.
Nevertheless, there are many insurance agents who practice integrity in their work and recognize that financial planning is beyond just selling products to their clients.
Before I end off, I wish to sum up my sharing with this quote which has guided me in all my dealings with all my prospects and clients; “People don’t care how much you know until they know how much you care” – Theodore Roosevelt
This article was contributed by Zest Chia, and he represents an independent Financial Advisory firm. He wrote this article in the hope of educating more people and assisting them in their finances. You can reach out to him at 9675 9587.
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