Financial Advisors. Even the job title is misleading. Let’s face it, these “advisors” are more in the business of being a “salesperson”. (Editor: Also true for Relationship Managers of banks.)
The insurance companies consider the “advisors” as part of their sales team. Moreover, the advisors are paid on their sales performance, and not the quality of their advice.
Speaking of selling, this brings us to the first myth financial advisors would like you to believe, and also the first thing they usually say to you.
1. Have a seat, “I’m not here to sell you anything.”
Photo by Benjamin Lim
How they can say this with a straight face is beyond us. Maybe they manage this by mentally appending the word, ‘yet’, as they begin their opener.
A financial advisor whose remuneration is based largely (or even entirely) on his sales performance is definitely looking to sell something. This is not dissing the people in the industry. Rather we are pointing out the conflict of interest situation occurring here.
Always remember that a financial advisor who is “not here to sell you anything” doesn’t have money for his lunch.
This is the reason why we propose for a fee-based system rather than one that is sales-based.
2. “I am on your side.”
“Its not my fault, I was merely advising you based on the signals.” Photo by Benjamin Lim
Perhaps they mean they are on our side so that they can first understand our situation, before strategising on how they can sell even more products to us.
Important information they would need to know include:
• Our salary and our personal expenses – so that they know what we can afford.
• Insurance policies we currently have – no doubt a valid question since it is easier to sell us something that we do not already have.
3. “I became a financial advisor because I want to help people.”
Source: The Straits Times, Oct. 9, 2013, C23.
There are other service orientated professions such as nurses, teachers or social workers, which we associate immediately with helping people. A career as a financial advisor is not one of these jobs.
However, we notice recruitment slides for financial salespeople littered with slogans such as “be your own boss”, “be rewarded handsomely”, “flexible working hours”. Occasionally, the success story of a 27-year old financial advisor driving a red-hot Porsche may even be shared just to illustrate the lucrative nature of the industry.
Nope, the words “help people” do not usually appear in these recruitment ads.
4. Omission of facts – The unspoken lie.
One of the biggest lies is deception by omission. Financial salespeople’s brochures and sales pitches contain carefully selected statistics and claims, and perhaps even a drawback or two. (Editor: Many also do not read the Apple Service Agreements.)
The real costs and risks are often downplayed. These include the loss of premium for early surrender of policy or high interest cost should you (stupidly) decide to borrow against your own policy.
5. “As an Independent Financial Advisor, I am more trustworthy and unbiased than people representing one company.”
Meet the finance industry’s new talents! They can regurgitate sales pitches word-for-word. Photo by Benjamin Lim
It is true that Independent Financial Advisors (IFAs) do not have to limit themselves to the offerings of a single company.
However, their biases lie in products that they are more familiar with. Anyone who claims to know the ins and outs of all products in the market is a Monetary Authority of Singapore (MAS) regulator. Other biases may stem from monetary incentives – one can push certain products to receive higher margins or receive a special bonus for reaching sales target for certain products.
Sim Kang Heong is the co-founder of Dollarsandsense.sg, a local website on personal finance matters.
Top photo by Benjamin Lim