Friday, July 4, 2008

Financial advisors EVERYWHERE

I meet up regularly with my JC classmates and at the age of late twenties, we inevitably meet the crossroads of our careers: To continue our present job or head for a career switch?

Some of us are in favour of a career switch, citing low pay, high pressure and boredom as the main reasons, with the exception of those in the financial industry.

In fact, 80% of my JC friends who studied engineering, computing and science are in the finance industry doing sales. Even at the current market, they are able to clock an average of $10,000 in sales commission monthly.

No wonder the remaining 20%, including myself are attracted by the prospects of finance industry.

One of my friends had even given up a $5,000 a month salary as an accountant to join an IFA firm with ZERO basic pay.

I am sure this phenomenon is not exclusive to me. Do you hear more and more of your friends joining banks as personal bankers or joining insurance companies as agents? Of course, becoming an IFA is also a highly sought after career alternative given the potential lucrative income.

If you have read today’s Recruit, it yet again featured a young chap in his thirties earning in excess of $300,000 per annum by simply giving financial advice and selling insurance.

A first class honours graduate after going through the HSBC management associate programme, will become a relationship manager (RM) in commercial banking (also a sales commission driven post).

With successful examples and role modals “everywhere”, it will be queer if there is no rush to join the ranks of financial consultants.

However, consider this scenario: Who is going to buy insurance from you when every other man on the street have either bought it or can buy from someone he knows better from school? Worse still, the man on the street is likely to be an insurance agent himself.

Insurance companies are selling their products, banks are aggressively advertising with free gifts and higher FD rates, IFA firms are dishing out free seminars and claim nobly being exclusively “fair and unbiased” in selecting the best plan for their clients.

I think the main reason for the current phenomenon is the low barrier of entry required to become a financial advisor. Just 4 “O” levels passes, a few hundred dollars and several hours of self-studying will give one the relevant qualifications and licenses to dish out useful, life long financial advice.

This sounds rather silly and dangerous to me. I have personally interacted with a fair number of RMs, IFAs and tied agents. To be really honest, from the products and plans they offer me, it seems that they are only interested in selling products and squeezing me for their benefit!

Example: All tried to sell me life policies when I have told them I already have a $200,000 whole life policy. I have also informed them that I am remain single and my parents have reached financial independence. In other words, I have no dependents. Then why do I need a whole life policy? Well, because the commission is the highest!

Actually I only need a top up term insurance for critical illness and a private H&S policy. However, all are not willing to even meet me to sell the H&S policy or follow up on it as the commission is too low for their attention.

Of course many tried to sell me unit trusts by recommending Japan, European and US Funds. Sales talk includes Japan stocks have been in decline for the past 10 years, a rebound is likely; US and European Funds have large market capitalisation companies and should give good returns every year etc.

Of course I will prefer to DIY and buy UTs and stocks through online portals for investment.

In my opinion, there are a large number of incompetent and sales driven financial advisors, and only a small number of them who place clients’ needs before their personal pay cheque. In fact ideally, the most competent advisors should be those who have earned an average income throughout their lives and yet have reached financial independence through careful planning and investments. Such people, far and few do not have to worry about sales targets and will be able to provide proven and tested strategies to their clients on achieving financial freedom. They are living examples, isn’t it? Just like a teacher who teaches a subject he has a degree conferred for his area of expertise. He is proven to be a master of the subject is thus qualified to provide guidance and advice to the young. Can you imaging paying hefty sums to learn maths from someone who has just taken a few lessons in advanced?

I guess I will not be entering the financial industry for now, but to continue saving and investing for a better tomorrow.


Anonymous said...

I was reading another blog about people who eat more meat than vegetables and fruits even though meat is more unhealthy than the latter. The reason given was this:

Advertising expenditures (United States):
Meat industry: $ xxx million
Health authorities: $ x million

Replace meat and health authorities with "banks/insurance/IFA" and "pro-consumer body" respectively. It's no wonder the parties with more financial power are having their way.

Sgbluechip said...

Not everyone can benefit doing the same thing as everyone. But still, money always drive the herd (to destruction and regret).