I have been wanting to write about this topic after having done a number of talks over the past 2 years. It's interesting because the common feedback from the talk attendees have always been that they were expecting to hear a presented solution they can take immediate action on instead of general concepts.
This interesting phenomenon has made me think deeper into the bigger problem - consumers have been sold products so often, they now expect to be sold something. Yet, this is also one of the biggest contributing factors why this industry has such a strong stigma.
Expecting to be sold products and solutions is very dangerous when it comes to managing money. Everyone's financial situation is different and there's no cookie cutter solution available. A more suitable approach would be to adopt a consultative approach where the advisor and client sit down to work out a suitable solution together based on the client's circumstance and objectives.
In this article, I share some of the common pitfalls I've encountered people face based on this assumption of being sold products and how it may be detrimental for them if they met the wrong advisor.
Story 1: Retirement Planning
About a year ago, I was referred to a client who wanted to meet me for some retirement planning needs. When we met up, she straight off the bat told me she was looking for those 'save 5 years, wait 10 years' kind of plan. Naturally, I asked her for her purpose and this was her reply, "isn't all the retirement plans in the market like that?"
NO?!
What gave her that idea? So apparently, every bank she stepped into and every advisor she met previously seemed to give her that impression. Whenever, she asked for such a solution, everyone was too happy to give her what she wanted without clarifying if it's suitable for her actual needs. Later on, after a 2 hour conversation discussing the various available options in the market, she settled on a retirement plan that paid her a monthly income after retirement for a fixed duration. Again in her words, "this is precisely what I am looking for but I didn't know it exists! Why didn't my previous agents tell me about such a plan?"
This is why, we shouldn't keep approaching financial advisors or bankers with the expectation to be sold something. It sends the wrong message and perpetuates the problem. Go with a consultative approach and there's always more than one way to skin a cat. If whoever you are consulting only have one solution and no reason why it is like that, then you might want to seek a second opinion.
Story 2: Creating Additional Income Streams
Another client reached out to me online early this year with the intention to sort out her retirement planning. All this while, she has been supporting her friends and in her own words, lazy to research about financial products.
It is only recently given she is nearing retirement that she decided to seek out a third party advisor whom she doesn't know to give her an independent perspective. In this case, she met me. After a deep discussion, it turned out she has committed a significant portion of her net-worth into an Investment Linked Policy that is supposed to generate her monthly income. The information she was given is accurate except her risk exposure was on the high side considering this is her main retirement solution outside CPF.
Again, various options were laid out to her and her solution of choice was interesting. She decided on an endowment plan that paid her a monthly income with premium financing. I understand that most retail consumers view debt with a negative connotation but in her case, she took up the solution with sufficient liquidity to redeem the loan in full should the need calls for it. In other words, the debt facility simply gave her the option to borrow at a low cost and free up her excess cash she would have put into the plan to set aside as spare funds.
What struck me the most in this engagement was this statement of hers, "if I knew such a solution exists, I wouldn't have taken up some of the other plans I took previously. I didn't know such an option was available."
From my interactions with many clients, this is very common. The market place is too deeply ingrained in this product selling mentality, financial advisors aren't viewed in the same manner as a person in a specialized career like accountancy, medicine or law. In reality though, good financial advisors are just as specialized. The scope of advice is wider than most retail consumers imagine it possible.
Story 3: Investment
Another recent occurrence that intrigues me is how fixated one of my prospects was about believing I sold stocks. A client of mine has been encouraging her to have a session with me given her interest to invest but she was adamant she wasn't comfortable because her occupation happens to be one where if she bought stocks, she needs to make a host of declarations.
Most financial advisors don't sell stocks!
Most financial advisors deal with unit trusts or investment linked policies. A stock broker who possibly also holds a FA license may be selling both but not everyone does that. In any case, clarification is free. To simply deprive yourself of a consultation opportunity because of this fear might come with a huge opportunity cost. I can understand the general fear the public has where sitting down with an advisor means buying something. The most amusing part of this entire process was, my client knew that all my first appointments are mainly to see if both parties are a good fit and does not come with any product recommendations. Prospects can't buy anything even if they wanted to. This is why I encourage people to go make enquiries with the expectation of doing a consultation rather than waiting to be sold something. You probably get more suitable options to choose from also.
Summary and final thoughts
So my most recent talk again sparked questions on what solutions would be recommended. This is disturbing as consumers seem primed to be sold. It's interesting because consumers who are always waiting to buy the next solution presented are essentially doing their own DIY portfolios.
I just wanted to put out this consideration to every reader out there. There are thousands of financial advisors who are logically supposed to be trained to provide financial advise. Consumers have developed a stigma because many advisors have disappointed in terms of purchasing experience and competency. Yet, consumers believe they can put together a portfolio competent to meet their goals on their own. What are the odds?
I'd say, there will be financially savvy people who can do so but they form the minority. Most consumers assume they can but may have many gaps in their portfolios due to a lack of perfect knowledge. If you recall, the examples given above, most clients buy from multiple advisors and bankers, essentially DIY-ing their portfolios only to lament had they known of the better solution earlier, they would have picked that instead. This could be mitigated if you sat down with a competent advisor and run through a consultative session.
My final advice before ending this article would be to stop approaching a financial consultation expecting to be sold something. Yes, this has been going on for years but the entire experience always has room for improvement. Go to every appointment with the expectation to do a proper consultation. You might find yourself happily buying something (instead of being sold) if you meet the right consultant.
If you would like to address some of your outstanding financial planning needs, please speak with a trusted advisor. You can also drop me a message if you would like me to help you with it.
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Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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