Seth’s Blog on Finance

Ex-MP Ong Kian Min Right About Misleading “Financial Consultant” Titles 10 Years Ago

It’s perhaps cliché to claim to be passionate about one’s job, but I think I prove it by spending my Saturday morning reading and analysing the Parliamentary record of then-Chairman of MAS Lee Hsien Loong presenting the bill for the Financial Advisers Act in 2001.

Reading through the hansard, I realised then-MP Ong Kian Min had already identified potential problems which are indeed prevalent in the financial industry now. I am quite surprised at how similar his points were to the reflections I have had over the course of my work, even though it was spoken some ten years ago!

Here are the relevant parts of the Parliamentary hansard:

Sir, if everyone in the industry will be migrated over and covered under the term “financial adviser”, then this generic term “financial adviser” can potentially be extremely confusing to the public. This, I find, is the big weakness of this Bill. Now, when someone approaches you and represents to you that he is a financial adviser representative licensed by the MAS, what skills and qualifications would you expect him to have? What kind of advice would you think he is competent to give? I think it is reasonable to assume that a financial adviser representative licensed by the MAS is competent to give you advice regarding your financial matters. But, lo and behold, he merely wants to sell you an insurance policy.

There is a big difference between someone who can analyse your financial needs and someone who is knowledgeable only about a particular product.

This cannot be further away from the truth today. An overwhelming majority of so-called “financial consultants” are merely insurance salespeople with over-glorified titles. Insurance is only part of the picture when it comes to financial planning, but has been used by them as a cure-all panacea or koyok to solve every financial issue from investing to estate planning. Yet such people are allowed to carry their fanciful titles which they cannot possibly live up to. Their clients are none the wiser, thinking that have done adequate planning with qualified planners.

These titles are misleading and confusing, as Mr. Ong has predicted. Statistics and media reports have shown that Singaporeans continue to fare poorly for financial planning outside of insurance no thanks to such insurance salespeople. To add insult to injury, Singaporeans are still grossly under-insured even though they place most of their surplus cash flow with such “financial consultants”. This is invariably due to the kind of policies being sold by the agents due to ignorance (poor and skewed training) or greed (high commissions).

It is analogous to the relationship existing between doctors and pharmacists. One would go to a doctor for diagnosis of what sickness he is suffering from. The doctor does the tests, diagnoses the illness and prescribes the medicine to take. One does not expect the pharmacist to do all that even though the pharmacist may be very knowledgeable about the medical products.

The current scenario now is that the industry is rampant with “tied pharmacists” who are paid well to sell only “drugs” from a single “drug company”, or “non-independent pharmacists” who can receive special incentives from “drug companies” to preferentially sell products.

Actually, comparing the product pushers in this industry to generally knowledgeable pharmacists sully the good name of pharmacists. I apologise for any offence caused.

Can the general public make a distinction between a financial planner and a financial adviser? I believe it is hard to change public perception once it is associated with the usage of a certain term; it is easier to change the term to one that is in-line with the public’s perception of it.

The general public have clearly not been able to distinguish the difference. They are ill-prepared for retirement and chronically under-insured. In response, most have a bad impression of “financial consultants”, leading them to shun financial planning altogether.

I would therefore like to ask DPM to consider changing the term “financial adviser” as used in the FA Bill. To avoid confusion, the words “financial adviser”, “financial consultant”, “financial planner”, or words to the effect, should be reserved for someone who is able to properly discover and analyse the financial needs of his client and render more comprehensive financial planning advice in a holistic manner customised to the client’s needs. Could DPM consider whether other terms, such as “insurance adviser” and “unit trust adviser”, that are more descriptive of the skills set, could be adopted for other specialists in the area of insurance and unit trust respectively?

Even though the control of titles may do little to stop the most determined of product pushers, it would at least improve transparency and allow consumers to better decide who they can approach for their financial matters. Much like how the regulators have clamped down on the use of “specialist” in the medical field, similar measures should be taken in the financial industry.

Alas, Mr. Lee did not agree with his suggestions at that time:

I am not keen to control many words, “financial adviser”, “financial consultant”, “financial planner”, or words to that effect.

It’s been ten years since, and while Mr. Ong has left Parliament, the problems he identified persist. I hope the regulators will do something for the sake of the financial health of Singaporeans, even if they just start from something as small as controlling titles.