Is Your Financial Consultant Driving You Nuts?

I know this post might raise some eyebrows and disagreements but really, I’m writing this post not because I am a Financial Consultant or selling any financial products but it’s because more often than not, Financial Consultants are often misunderstood by us; especially when we are approached by them during their roadshows.

In case you’re wondering, the term “Financial Consultant” or even a “Financial Advisor” essentially refers to an “Insurance Agent” and they are inevitably the same. I know some Financial Consultants/Financial Advisors will disagree with me but really, insurance companies came up with this title to replace “Insurance Agents” so that they can sound more professional. Nevertheless, we all know that some over-zealous Financial Consultants can be quite pushy and recommend policies that we don’t really need; and hence, continue to give insurance companies a pretty bad reputation.

Now, what about “Financial Planners”?

Honestly, anyone with the Chartered Financial Planner [CFP] Certification Mark is considered a Financial Planner but not all Financial Consultants are Financial Planners.

In fact, a Financial Planner or a Financial Consultant with the CFP Certification Mark is a notch above your ordinary Financial Consultants because there are extremely strict requirements an individual has to fulfil before he or she can be awarded the CFP Certification Mark. You can refer to Financial Planning Association of Singapore for more details.

Well, whether it is a Financial Planner, a Financial Consultant, or even a Financial Advisor; all of them would recommend some form of insurance policies that you may or may not require but I’m pretty sure we all need some form of financial planning and financial advice.

Why then are Financial Planners always talking about insurance?

This is because insurance plays an important role in financial planning.

In fact, insurance is an arrangement by which a company undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

Is having an insurance important?

Yes, it is.

The word, “insurance” is such a taboo in Singapore that many people try to avoid it as much as they can and as a result, they don’t seem to quite comprehend the importance of having an insurance.

As a matter of fact, I even hear people saying that if they buy insurance, it means that they are not trusting God and I will go speechless.

Why is having an insurance important?

I can’t stress this enough but having an insurance is important because you never know when a disaster or crisis will strike. Having an insurance will help to safeguard your wealth in the event of an unfortunate accident and insurance can take on many forms; car insurance, house insurance, health insurance, travel insurance and etc., just to name a few.

For people who are serving National Service or are engaged in high-risk jobs that may endanger their own lives, it might be apt to buy a term-life insurance plan, a health insurance plan, and a personal accident plan. But of course, all of these suggestions vary according to individual’s needs and it would be more prudent for you to engage a Financial Planner who would be in a better position to advise you.

My suggestion is, only buy insurances that you need and can afford. For example, if you are travelling overseas, you might want to consider buying a travel insurance or if you are accident-prone, you might want to consider buying a personal accident protection plan.

Some people buy insurance because they want to safeguard their wealth while others may buy insurance because they want their medical costs to be covered. Some people may even buy insurance because they don’t want to be a burden to their loved ones when crisis strikes. Whatever the reason may be, engaging a qualified Financial Planner will definitely aid you in your financial planning.

What about Financial Consultants who does not have the CFP Certification Mark?

You can seek them but they may not give you the complete picture because some may be more interested in selling you insurance plans that offers them more commissions and may not necessarily understand your needs and requirements. In this case, you may want to exercise your personal discretion when you engage one to one with the Financial Consultant. Ask lots of questions and if a Financial Consultant tries to smoke his/her way out, be very wary.

If during the discussion, a Financial Consultant is insistent that you take up an Investment Linked Policy [ILP] Plan or a Savings Plan, it is very likely that the Financial Consultant is trying to offer you policies that give them an annual recurring commission.

Some of the reasons Financial Consultants will give you will include [but are not limited to] the following:

• Taking up a savings plan will ensure that you will inculcate the discipline of saving regularly • A savings plan offers you a higher interest rate than what the banks can offer you • The savings plan offers you a yearly cashback for you to use or re-invest for higher returns • ILP will see all your money invested in the sectors that you want to invest in • You can diversify your investments when you take up an ILP • An ILP allows you to add on additional riders to protect yourself • And many other reasons

The thing is; Financial Consultants often paint the good side of the story but they are also pretty hesitant to reveal the other side of the story. Some may even tell you that they bought the insurance plans for their family members and try to encourage you to do the same.

Just to make things really clear; the projected returns that the Financial Consultant will often generate for you on the spot at roadshows are PROJECTED. They are not guaranteed and even for those saving plans with a cashback option, those are what I call marketing gimmicks because the money given out for the cashback is really your own hard earned money; not what the insurance companies give out from their own pockets.

And for one, I really think buying an ILP is a very bad decision. Brendan Yong, a Certified Financial Planner gave his inputs regarding the purchase of ILP and you can check out the article on Big Fat Purse. Of course, there will be other Financial Consultants who will tell you otherwise but personally, it’s a better idea for you not to get involved with ILP at all.

How then do you decide if a Financial Consultant is trustworthy and reliable?

There is really no formula or standard answer for that. I personally believe that a good Financial Consultant is not one who keeps on pestering their clients for referrals but is one who is recommended by their own clients via word-of-mouth without even asking for it. You certainly do not want to engage a Financial Consultant who suddenly goes missing in action [MIA] when you need assistance to file a claim and you will definitely want a Financial Consultant who can really understand your needs and give you the right advice.

However, finding a good Financial Consultant is akin to finding a needle in a haystack. This is especially true when the employment turnover rate in the insurance industry is pretty high [it is pretty obvious especially when all the insurance companies are aggressively recruiting young undergraduate jobseekers who keep on receiving unknown phone calls for job interviews offering a pretty high basic salary which comes with quite a number of terms and conditions].

Nevertheless, in this digital age that we live in, information is readily accessible and there is no way insurance companies can smoke prospective clients into buying products that they don’t need; only if all of us can have access to some form of basic financial education.

If you are interested to learn about economics and finance through game, I will highly recommend Wongamania and if you are interested to start learning about investments, you might want to consider attending the Value Investing Mastery Course conducted by Big Fat Purse.

If you want to learn more about insurance, consider taking up the theory papers that Financial Consultants themselves sit for at Singapore College of Insurance or if studying for a paper isn’t your cup of tea, you have got no other choice other than to ask a Financial Consultant.

And if you are new to insurance and you do not have the contacts of a Financial Consultant but would wish to learn more about insurance without buying anything, you can always head down to the Post Office to enquire more. Just so you know, there are Financial Consultants from AXA who are stationed at certain SingPost branches and you can just feel free to approach them to enquire more about insurance so that you can be more informed before buying any insurance.

The downside is, the Financial Consultant from AXA can only sell you insurance products from their own company and not from other companies like AVIVA, Great Eastern, AIA, Manulife and many more.

Well, whoever you approach for advise; if you were to ask me about insurance, I would personally suggest people to take up a health insurance policy with additional riders to cover their medical expenses in times of need; and if you are a working adult with liabilities, you may want to consider a term-life plan and a personal accident plan that offers you riders for total permanent disability and critical illness.

Having seen people around me having to fork out large sums of money to cover their medical expenses, I truly believe one must have a private health insurance plan especially when medical costs in Singapore can be quite expensive; more so if you require urgent and special medical treatments that may only be available at the private hospitals.

Well, I certainly hope that this post would help you one way or another and if you have any thoughts about this article, feel free to comment below. :)