Financial advisers have an important job to do – plan your finances, provide advice on insurance and investments, etc. The best ones will be your lifelong friends as you move through different stages in your life. However, the bad ones are the ones that leave the strongest impressions on consumers – news, viral social media posts, angry word-of-mouth, etc. In fact, members of the public may have different ideas about who and what financial advisers are. In this article, fundMyLife asks three of its financial advisers – Kennard Lee from AIA, Winifred Tan from Great Eastern, and Ryan Teo from AXA – about the biggest misconceptions about financial advisers.
Kennard Lee, AIA
Misconception #1: All advisers are the same
Consumers think that all advisers are the same. As such, they end up buying policies from friends and family. While relationship is important, it is more important to take into account the quality of the person providing the financial advice.
One of my clients bought several plans from her aunt. Upon finding out more information, I realized that she spends less than $200/month on insurance. It turned out that her combination of plans did not provide adequate coverage. For example, her hospitalization plan was at the lowest grade. She also purchased an endowment plan which she thought yielded 4%, but was only a projected yield as shown in the benefits illustration. I succeeded in redoing her plan and building a portfolio that best suited her. The financial planning jackpot is a friend or relative who is also competent at his/her job at advising. However, it is more important to choose someone who can advise well first and foremost.
People think that products are different across different insurance companies. But based on my calculations, the difference between insurance products of the same profile and type is only 5%. This means it’s never about the product. It is more about the adviser who is serving you and how much they care about your financial success. These advisers will always make sure your portfolio is never out of date, and make sure it is updated according to your life stage.
Misconception #2: Insurance agents can only sell insurance
Insurance agents are not just for selling insurance only, but also sell investment products. Competent agents will help their clients achieve good returns, and conversely those agents who are not as competent will achieve poor returns for his/her clients. Apart from being competent, good agents also truly cares for his/her clients as well.
My personal policy is to buy the same sub-funds that I recommend to my clients. By recommending what I myself use, I have skin in the game.
Misconception #3: Advisers from banks are the same as the ones from insurance companies
The products you purchase from an adviser from a bank is different from products you purchase from an adviser from an insurance company.
For example, purchasing a mutual fund from a bank is different from a investment-linked sub-fund. Consider this scenario: you purchase a $100k fund product from either a bank or an insurance company. The following day, a catastrophic financial event like the bankruptcy of Lehman Brothers. The stock market collapses, and your $100k becomes $40k. The next day, you die of an accident. If you purchased the $100k fund from a bank (a mutual fund), your family will only receive the $40k. However, if you purchased the $100k fund from an insurance company (a investment-linked sub-fund), your family will receive $100k back. That’s a great safety net to have.
Winifred Tan, Great Eastern
Misconception #1: Financial advisers are the same as insurance agents
The financial planning industry has evolved since the past. With a population that is better educated, and a society that faces more problem that it did today, there’s a need to make sure that someone stands by you to help you.
Financial advisers are not just insurance agents, where we sell or take orders from clients. For us, we are qualified consultants – some even have Chartered [fML: professional bodies] or Masters – and know finance and insurance/investment related knowledge and applying them to your lives. We also know retirement planning, estate planning, tax planning, and we have advanced certifications in theses specialized areas!
Misconception #2: All financial advisers are the same
Regardless of the good or bad experience that you had with the advisers you met, there are so many different advisers out there that you should not generalize them. There are very good/responsible/ethical ones out there, and this is how you tell them apart.
Firstly, you usually know the good ones via referrals. Secondly, the good ones have good resume, experience, and qualifications that set them apart from others. Thirdly, advisers who conduct seminars and other forms of educational events are usually more credible.
Misconception #3: Advisers will sell me policies for their own gain
As mentioned, not all advisers are the same. There are very passionate ones who love to add value to their clients’ lives. The best ones are reliable, and clients love them and like to discuss not just financial issues but life issues as well.
Some advisers have better qualification like ChFC, Masters, CFP, etc, so they know matters that the members of the public do not. The number of years in the industry would show that if they are really the type to seek personal gain rather than clients’ interests.
Ryan Teo, AXA
Misconception #1: Clients should just leave everything to the adviser
When you have a financial adviser, you should not leave everything to them to handle. There are clients who let their adviser figure everything out by themselves without giving them enough information about themselves. Both parties should actively participate and play a role in the financial planning journey.
For example, you need to let the adviser know of any major changes in your life, such as marriage. Clients should also have a quantifiable goal to work towards, so that the adviser knows how to plot the route to get there. A lot of clients fear that if they reveal too much information, the adviser may sell them more things. This is detrimental to the client if he/she withholds information.
For investments, clients need to articulate the % returns that they want so that advisers can advise accordingly. There are clients who hand everything off to the adviser, but get upset when their expectations are not met because of a lack of communication. You have to help them help you by communicating your expectations. I suggest that clients and advisers engage each other quarterly to review the investments and discuss strategies.
Misconception #2: All advisers that you see in roadshows are bad
One of the biggest misconceptions about financial advisers is that only bad advisers go on roadshows. However, good ones still go for roadshows because it is one of the many ways to meet potential clients. In road shows, there’s a fear that advisers whom you meet will sell you a plan straightaway. But, the best ones will first take a look at your finances before doing anything else.
Hate them, love them, financial advisers are here to stay. We hope you learned about the biggest misconceptions about financial advisers, from the advisers themselves. In their own ways, all three advisers emphasized the fact that not all advisers are the same. It seems that the public tends to hold a single impression of advisers, which is wrong since individual adviser has their respective edge.
Kennard emphasized the importance of competence over familiar relationships when it comes to financial planning, i.e. pick a good planner over supporting a friend or family. He also makes the case for insurance agents being able to advise on investments and not just insurance since the best agents can obtain the best returns from investments because good agents care about their clients. Winifred talked about the difference between advisers, and shared some tips on how to find the best ones. Ryan noted that it takes two hands to clap and that clients must work closely with their advisers to reap most of the benefits of the advisers’ advice.
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