Fat Fitness Trainers and Poor Financial Advisers
A friend tweeted something one day, and it was along the lines of him not understanding the concept of a fat fitness trainer and the idea of a poor financial adviser. It is seemingly logical and I suppose most people would agree quite readily, but I couldn’t help but cringe at the rather misguided view.
A fitness trainer must be fit himself in order to be able to help his trainees become fit, right? Therefore, shouldn’t a financial adviser be wealthy in order to help his clients become rich?
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Keep Commission Model, Say Financial Advisers, Managers
A friend highlighted this article to me a few days ago and I had quite a reaction to it.
The following are quotes from the article (bold emphasis added by me) and my comments:
An ad-hoc alliance of about 15,000 financial advisers and managers are hoping to sway a review panel, which is considering, among other things, doing away with the commission model that most insurance and financial advisory firms use.
It is entirely expected that all 13,000 tied agents would fight tooth and nail against the ban of commissions. Why? It’s simple – nobody would want to pay a fee to a person who is a sales representative of a product manufacturer. The old model worked because it was merely the transaction of products – advice is given “free” and the client will take up the product if he is persuaded enough, earning the agent commissions. The other 2,000 advisers probably come from financial advisory firms which are new-age financial sales agencies, just that they have more products to sell.
Oversupply of Financial Practitioners And Its Effects
Singapore has a population of about 5 million while the number of practitioners in the financial advisory industry can be estimated to be about 20,000 to 30,000. This includes tied insurance agents, Financial Adviser firm representatives and banks’ financial services personnel. It is a considerably large number for our population size. How so?
Let’s look at how we compare to other countries:
| Country | Population | No. of Advisers1 | Ratio |
|---|---|---|---|
| United States | 311,000,000 | 310,000 | 1,003:1 |
| Australia | 22,000,000 | 18,000 | 1,222:1 |
| United Kingdom | 62,000,000 | 20,000 | 3,100:1 |
| New Zealand | 4,430,400 | 1,963 | 2,257:1 |
| Singapore | 5,183,700 | 20,000 | 259:1 |
Leaving You Underinsured Creates Repeat Business
Imagine having a doctor who purposefully does not treat you completely such that you would constantly remain sick, thus having to visit the doctor repeatedly, each time paying for his services and medication. I am not familiar with the medical fraternity in Singapore and I trust that most doctors do their jobs ethically, but I know for a fact that the local financial industry thrives on this unethical practice.
I recently met a client who bought an investment-linked policy recommended to her by her friend which provided poor coverage while being taxing on her monthly budgeting.
What’s sad was what the agent wrote in the point-of-sale documents to justify the sale of the policy – an ostensibly apologetic “client to increase coverage when financially better”. It shows that the agent was fully aware that such a policy underinsures her client and yet deemed it fit to recommend her friend the policy. It is particularly upsetting since the client had specifically indicated her concern was (quite rightfully, for her profile) insurance coverage with her limited budget.