Everyone – regulators, consumer bodies, clients and even product providers and distribution channels – agrees that better transparency in business process and products is good.
Yet, the reality is that there is still a lack of transparency in many areas.
The letter in The Straits Times headed “Onus on insurers to boost transparency” by Larry Haverkamp was a follow up on the article by Lorna Tan “Excuse me, are you an independent adviser?” The writer draws attention to advisers who do not qualify to be independent advisers posing as independent, and insurance products which pay high commissions but, in the writer’s opinion, are not favourable for clients.
To be exact, there is lack of transparency in many other areas and there are more complex products than endowment and whole life insurance products. Let me share my views and suggestions and what clients can do to bring about better transparency.
Firstly, let me say that it is going to be a challenge to achieve greater transparency because, while everyone pays lip service to it, not everyone thinks it is good business to have simpler processes and products. The reality is that there are more choices of product providers, channels of distribution and products today than 30 years ago. And the products are getting more complex – just think about the structured products which failed and ruined millions of people’s lives.
Just imagine also the challenge for a typical customer, Joe Tan, who likes to know whether he has any protection need and if so, what products he should purchase.
Who does Joe call?
- His tied agency friend?
- His bank relationship manager? And which one, since they change so often?
- The financial adviser representative from his stockbroker?
- The financial adviser representative from his general insurance broker?
- The financial adviser representative from his wife’s licensed financial adviser who claims to be independent?
- The financial adviser representative from his friend’s licensed financial adviser who remains silent about whether he is independent or not?
- His moneylender friend who says he can connect him to someone who will show him how he can use his CPF investment to work better for him?
- His real estate broker who says he also doubles as a financial adviser representative?
- His union supervisor who says that he is also licensed to sell insurance?
- His accountant who also says he has a licence to sell insurance?
Now Joe is confused. Since he has some time, he decides to call each of them to find out a few things. And after making all the calls, he slumps on his chair, even more confused.
The tied agent tells him all the products of the different insurance and premiums are about the same, but he ensures that he will give Joe the best personal service.
A few others tell him that there are significant differences in the insurance products and premiums of different companies. One even illustrated it by showing him a commission table of term insurance and the big difference in premiums, although the product is plain vanilla protection only without cash value.
Only one said that he is independent and claimed to give “fair and objective” advice. What about the others? They did not mention what kind of advice they give. But he remembers everyone claimed to “take care of his interests”.
And one said he is “licensed”. Are the others unlicensed? But why are they still selling?
And one said he is able to offer choices, unlike the agent. But he does not hear anyone say he is an agent, but all used terms like “consultant”, “planner”, private wealth manager, wealth planner, investment planner, associate director. So he scratched his head. Who is the agent and who is the broker – terms his father mentioned over dinner.
One said he is willing to give a rebate. One or two others said rebating is illegal and said it is unethical. Will he be a criminal if it is illegal?
One said to be honest, “we are an exempt FA and not a licensed FA”. What did he mean by “exempt”? And why did he say “to be honest”? Does it mean that the others are not honest?
And why does this guy keep on telling him “just buy term insurance”, and the other insisted that it is better to buy whole life because it is “pow chiah” – sure to win. And another adviser insisted ILP is best. And he wonders, what is ILP?
So trying to sort out his confusion, Joe decided he must find out more before deciding. Good decision. But how will Joe find out more – from friends, banks, magazines, Money Sense, newspapers? Every one of his so called friends warns him to be careful as if he is facing sharks. His remembrance of all the articles he has read also advised him to be alert and diligent as if he is treading a field rigged with mines.
What can be done to make things simpler and less foreboding for people like Joe Tan?
Firstly, I would like to suggest that, while we should not go backwards to the days when we had clear demarcation of business between banks, stockbrokers, investment, life insurance and general insurance, we should still return to the use of the legal terms “agent” and “broker” to describe the legal relationship between the representative and the company he represents (i.e. agent) and the legal relationship between the representative and the client (i.e. broker). One way is to mandate that either of this term be used in brackets after the title of the representative. Whether this broker is independent or not should also be stated. For example:
- ABC Financial Consultant (agent)
- XYZ Associate Director (independent broker)
- MNO Relationship Manager (non-independent broker)
Secondly, whether the representative is licensed or not should be stated, since the representative who is licensed has to clear the MAS’ strict “fit and proper” criteria. For example:
- ABC Financial Consultant (agent, non-licensed)
- XYZ Financial Consultant (independent broker, licensed)
- MNO Relationship Manager (non-independent, non-licensed)
These descriptive differences should be in the business cards and disclosure forms.
A standard disclosure letter can be prepared by the regulator or the relevant association to explain the meaning of the different terms used – agent, broker, licensed, non-licensed, independent, non-independent, licensed FA, exempt FA, etc.
The above practices will go a long way to inform clients about the status or identity of the representative he is talking to and the company the representative represents or is promoting.
As for products, since the descriptive terms – whole life, endowment, term, annuity – are well-known – all products should have a basic description mentioning whether it is one of these or a combination. From my experience, better transparency can be achieved if we adopt the following additional practices:
- Removing the 9% returns illustration from ILP illustration and adding one with minus 5% to show clients about the possibilities of losses.
- Requiring insurers to state the last five years actual bonus rate declared compared to their projection for cash value policies.
- Requiring insurers to split the premiums between the protection risk and the cash value benefit. This will allow whole life polices to be used for keyman protection while the company only claims the premium for the protection as tax deductible expense.
- Requiring insurers to inform clients they should seek independent financial adviser advice if they desire to have product choices.
In conclusion, let me say that the best long-term solution to bring about better transparency is to separate product providers totally from distributors (i.e. insurance companies do not have their tied agents) and to require all distributors to be licensed (both the firm and all their representatives) and all distributors are independent (to meet the higher standards for the benefit of clients).
Differentiating product providers from distribution would eliminate most of the biases and inefficiencies now present in tied agencies which are expensive to support and limit clients’ choices. Given clients’ general ignorance and inertia, tied agents perpetuate the situation of companies utilizing excessive marketing, advertising, promotion and incentives to sell their products instead of focusing on real value to clients. The direct impact is that the bigger companies’ products have higher premiums. Tied agents who are serious about the business would become independent advisers and representatives.
Requiring all distribution channels to be licensed financial advisers and independent also, and all their representatives to be licensed as well, would raise standards immediately and significantly. The total business production should not be affected but there would be a great saving of time of both the consumers and the representatives, and product providers would concentrate on improving their value to customers and not glitz and glitter.
Given the rather open system inSingapore, it would b left to market forces to bring about any changes.
Consumers need to press for better transparency and vote with their dollars.
Challenges To Success – Critical Factors And Decisions
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To be the best in our industry and profession,
1) We must seize opportunities and overcome challenges and dangers, and make right critical choices at major crossroads of our life and business
2) We need to know ourselves, our clients and our business environment well and construct and implement successfully effective strategies
How do we spot the opportunities?
How can we identify the dangers before they become problems?
How we do we make the right decisions in our personal, family and business life?
How do we succeed and move from mediocrity to excellence?
The secret is knowing all the questions
INSPECTION + INTROSPECTION = EXPECTATION + EXCELLENCE
2) Choice, not chance, determines destiny
“Man is not the creature of circumstances; circumstances are the creatures of men.” Benjamin Disraeli
Goals are a preview of future events and experiences in your life.
The difference between a dream and a goal is a plan.
Your success can only be as big as your dream.
A POEM
I bargained with life for a penny
And life would pay no more
However, I counted my scanty store
For life is just employer
He gives you what you ask
But once you have set the wages
Why, you must bear the task
I worked for a menial’s hire
Only to learn, dismayed
That any wage I had asked of life
Life would have willingly paid
3) Daily Targets and Activities
When you know clearly what you want, you will wake up every morning excited about life.
“It is not what you do each year, each month or each week, but rather it is what you do each DAY that determines your level of success.” Tony Gordon
4) Winners Find Ways
“We will either find a way or make one.” Hannibal
Faced with a wall, you can climb over it, break through it, tunnel under it, find a door.
5) Winners Overcome Disappointments
“Success is going from failure to failure without loss of enthusiasm.” Winston Churchill
6) Winners Never Quit – and quitters never win (see Appendix I)
7) Action
Don’t let your learning lead to knowledge
Let your learning lead to action
8) Conviction
“One person with BELIEF is equal to a force of 99 who have only interest.” J S Mill
9) Courage
There are people who fear big waves and there are those who love surfing them
10) Par Excellence
“Lord, grant that I may always desire more than I can accomplish”. Michelangelo
The greatest enemy of tomorrow’s success is today’s success
Focus on self-development, not self-fulfillment
2) Singapor ehas world’s fastest growth of millionaires
3) Singapore has all the world’s leading firms based here
4) IFAs have advantages over other channels
5) Singaporeans still under insured and unit trust investment is still small
6) Financial planning for fees is increasingly emerging as a viable business due to educated population and increasing wealth
7) Inflow of HNWI expatriates in Singapore, e.g. British and European, QROPS
9) Corporate Business – ASME, SHRI, SICCC
10) Social Media
2) Increase in regulation and compliance, CKA, exams
3) Rising business cost – rental, transport, staff support
4) Commoditisation and disintermediation – clients going direct
5) Increasing complexity of products and need for professional indemnity, e.g. accredited investors
6) Increasing volatility of markets and uncertainty
7) Personal pitfalls
- Health (stress)
- Addictions
- Family8) Loss of motivation – age, overcrowdedness, health
9) Loss of confidence – information explosion, clients’ knowledge
10) Lack of structure and priorities
MAKING RIGHT DECISIONS
1) Values and Principles
2) Relationships
3) Making Right Decision at Work
4) Practical Wisdom1) Values
Ken Blanchard
The no. 1 ranked value is Ethical Behaviour
The no. 2 ranked value is Relationship
The no. 3 ranked value is Success
The no. 4 ranked value is Learning
Principles
a) Think Well
b) Focus, Specialise, Prioritise
c) Powerful Motivation
- Excess weight
- Anger
- Cynicism
- Prejudices
- Grudges
- Arguments
- Pet peeves
- Selfishness
d) Know your level (water finds its own level)
- Overambition
- Pride
- Egotism
If you can read yet choose not to, you are really no better off than someone who is illiterate
Every leader is a reader
“All men’s miseries derive from not being able to sit in a quiet room alone.” Blaise Pascal
j) Beware of anger
Anyone can become angry – that is easy. But to be angry with the right person, to the right degree, at the right time for the right purpose, and in the right way, this is not easy.” Aristotle
Don’t get mad at the little thing
- Broken relationship
- Crushed spirits
- Stress on our hearts
- Hours spent on repair and reconciliation
Anger is one of the most destructive forces in life
- An event
- Internal response
- External expression
- We do not get our way
- Someone offends us or puts us down
- Disappointments
- Confronted with need to change or improve something in our lives
- Identify your “hot spots”
- Recognise your inner responses and emotions
- Curb the external explosions
- Strike at the roots
- Why am I reacting?
- Is it reasonable?
- Is the incident worth the stress?
k) Be generous
Towards the poor, homeless, orphans, widows, down-trodden:
“Give freely and become more wealthy; be stingy and lose everything. The generous will prosper; those who refresh others will themselves be refreshed.” Solomon
- Spouse, children, friends, co-workers, others
- Funerals, baptism, birthdays, children’s games, concerts
- Award presentations, graduations
- Visiting ill and aged
“To overcome discouragement, do not focus on yourself; get involved in the lives of other people.”
Karl A Menninger, psychologist
Get involved and start helping others. There is no better exercise for the heart than reaching down and lifting people up.
l) Watch out for icebergs
- Don’t be an egotist
- Don’t give up when life is hard
- Don’t get into debt
- Don’t spend more than you can make
- Don’t give up on your marriage
- Don’t cheat on your spouse
- Don’t cheat on your employer
- Don’t neglect your children
- Don’t neglect your parents
- Don’t abandon your friends
- Don’t drink alcohol excessively
- Don’t do drugs. Ever
- Don’t smoke
- Don’t use profanity; there are other ways to communicate
- Don’t put other people down or speak badly of them
- Don’t be dishonest in business, finance or speech
- Don’t betray confidences
- Don’t give up on God and religion
2) Relationships
Relationship Do’s (see Appendix II)
a) Treat people well
Golden Rule:
Do unto others as you would have them to do to you.
Love your neighbour as yourself. Jesus
b) Compliment people (see Appendix III)
“Catch someone doing something good and tell him.” Ken Blanchard & Spencer Johnson, “The One Minute Manager”
c) Be real
d) Be available
“God does not begin by asking us about our ability, but only about our availability; and if we then prove our dependability, He will increase our capability.”
Open door policy
e) Disagree agreeably
Clarifying questions
f) Speak gently and be kind
“A gentle response defuses anger
But a sharp tongue kindles a forest fire
Kind words heal and help
Cutting words, wound and pain” Solomon
g) Say “thank you”
Appreciation and affirmation motivate people more than money and rewards
h) Call back
He who is faithful in very little things is faithful also in much
i) Don’t carry a grudge
As far as it depends on you, live at peace with everyone
j) Make and keep close friends
“Not just acquaintances or colleagues
There is a friend who sticks closer than a brother” Solomon
k) Meet with a small group
Choose to meet and share openly on marriage, children, work, personal strengths, career issues
l) Make love
3) Making Right Decisions At Work
“All hard work brings a profit but more talk leads only to poverty.” Solomon
“Far and away the best prize that life offers is the chance to work hard at work worth doing.” Theodore Roosevelt
Give a full day’s work for a full day’s pay
Do more than just enough to get by
Don’t give up when the task is difficult
Help others in their work
Keep learning how to do your work better
Hard work reveals your character
Some turn up their sleeves
Some turn up their noses
Some don’t turn up at all
- Not everything that can be done should be done
- Not everything that can do should you do
- Deliberate choices not to get immersed in businesses that consume time with little results
Whoever wants to become great among you
must be your servant, and whoever wants
to be first must be your slave Jesus
- People judge you by your communication
- Writing is a learned skill
- Keep a brief journal and write something everyday
- Join Toastmasters Club
- Teach a class
- Help you organise your day or week
- Offload your memory and free your mind
- Help keep you from forgetting things you need to do
- Help you hold on to information that otherwise might be irretrievably lost
- Relieve anxiety
We develop our God-given gifts by education, practice, focus and training. We are stewards, not owners, of our gifts and capabilities.
- It makes you as a person of your word
- It makes you a load lifter on your team
- It makes you a more valuable employee
- It honours your co-workers
- It is the right thing to do
Otherwise, undependable, unfaithful, a slacker, poor worker
“Reliable friends who do what they say are like cool drinks in sweltering heat – refreshing.” Solomon
Nobody is perfect. The best of men are but men of God.
We expect leaders to be perfect
We expect visionaries, pioneers, innovators, good managers to be positive role models
To have razor-sharp judgement, unlimited energy and patience, exemplary families, faultless morals, available 24/7
Sometimes they disappoint
4) Practical Wisdom
“The purpose of life is a life of purpose.” Robert Burns
The man without a purpose is like a ship without a rudder.” Thomas Carlyle
So many houses, so few homes
So many people, so few friends
So much rhetoric, so few words
So many listeners, so few heard
So many believers, so little faith
So many wishes, so little hope
So much passion, so little love
So much laughter, so little joy
So much sympathy, so few care
So much courage, so few dare
So many lessons, so few learn
So much effort, so little done
So many changes, so little difference
So many partners, so few agree
So much time, so few free
V. MOVING FROM MEDIOCRISY TO EXCELLENCE
Ideas from Dan Sullivan “How To Do Better”
1) Break through present ceiling
2) Break away from rugged individualism and discover unique ability teamwork
3) Expect rewards only after creating value to others
4) Set BIG goals or targets
5) Be clear about what you want to have changed in your life professionally and personally
6) Learn to get referral
7) Delegate everything except genius
9) Create a monopoly in the marketplace around an experience that only you can create for your clients
For example, provide leadership, relationship and creativity
- Leadership provides directions to others in order to help them deal with feelings of confusion that arise out of living in an increasingly complex world
- Relationship is providing a new sense of confidence when people feel isolated by change
- Creativity is providing new capabilities when people are feeling powerless as a result of change
10) Help others succeed
“It is not the products that keep customers coming back, but the value those customers receive that they feel unable to get elsewhere.”
VI. THE FUTURE OF FINANCIAL ADVISORY BUSINESS IN SINGAPORE
1) Increasing demand for risk protection and wealth advisory
2) Movements towards financial planning approach and fee-based compensation
3) Big potential for IFAs if they achieve sufficient differentiation from the other channels and have sufficient resources
4) Increasing costs and likely fee-based compensation will mean need to go upmarket and move to accredited investor clients
5) IFAs will consolidate to keep up with higher paid-up capital and increasing compliance and operating expense
6) Greater reliance on technology and social media
7) Need to specialise and work in teams within company’s multi-platforms and multi-services
9) Need to access regional markets and expatriate markets
10) Need for business partnerships at representatives and company level
Winners Never Quit
A Short Course In Human Relations
The six most important words
“I admit I made a mistake”
The five most important words
“You did a good job”
The four most important words
“What is your opinion?”
The three most important words
“If you please”
The two most important words
“Thank you” or “Forgive me”
The one most important word
“WE”
The least most important word
“I”
Compliment
After being married for 30 years, a wife asked her husband to describe her.
He looked at her slowly, then said,
“You are A, B, C, D, E, F, G, H, I, J, K”.
She asked what does that mean.
He said, “Adorable, Beautiful, Cute, Delightful, Elegant, Foxy, Gorgeous, Hot”.
She smiled happily and said,
“Oh, that’s lovely. What about I, J, K?”
He said, “I’m just kidding”.
His eye is still swollen but it will get better.
Purposeful
- Future-oriented
- Analytical
- Logical
- Intuitive
- Creative
- Relational
- Sequential