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Damaging Advisers

Written By: Tiang Chuan on March 15, 2009 No Comment

“The superior man understands what is right;
The inferior man understands what will sell.”

Confucius

People in sales generally don’t command a high social status. Many will refer to them as “salesman”. The popular perception is that they will resort to all sorts of things so as to clinch the deal. Reason behind such behavior is normally pressure (sales target, earning a living) or greed (commissions). To be a “superior man” may not be easy.

Financial Advisory have also been popularly classified as a sales job as there is normally some sort of product sales. Not all advisory ends in product sales. And with fee-based advisory, there may be no product sales at all. However, this form of advisory is still uncommon.

As I go through insurance portfolios, I find many instances of mis-selling or feature selling, ie selling on some seemingly good feature. It is almost a sure bet that anticipated endowments or Investment-Linked-Products (ILP) can be found in the portfolios. The wrong type of policies are bought without considering some more important needs. ILPs are bought without knowing how it works. Many times, people ran into budget constrains with significant amount of income already committed into the wrong policies, leaving them unable to cover the more important areas. Many of these are sold by so called friends and relatives.

A chat with a platform provider shocked me with the kind of things some advisers have done. Apparently, some advisers have ‘ran away’ after the markets tumbled in 2008. This, in conjunction with the drop in market value due to the market tumble, has caused a sharp drop in the AUM. A sharper drop was seen in the B2B platfrom compared to the B2C platform. This was not suppose to happen as funds sold by advisers are supposed to be more ‘stickly’ compared to DIY ones.

Sometimes, I wonder how people can continue to believe in advisers with all the damage that has been done to them. Some advisers are not doing the industry any favors with the damaging ways they do business. Some victims will definitely lose faith and forever harmed by the lack of proper planning.

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