Good morning Sellvem, friends, ladies and gentlemen.
Thank you for having me at your congress.
In the last nine years, I have been kept very busy covering news on the financial sector. During this time, the pace of change has been amazing.
When I first started out at The Straits Times money desk in 2000, the Committee on Efficient Distribution of Life Insurance, otherwise known as Cedli, was just set up. The Cedli recommendations were implemented as LIA guidelines in 2001. Many of them became law when the new Financial Advisers Act (FAA) was passed a year later.
Since then, several changes have taken place. And there will be plenty more to come, such as the inclusion of the financial services sector in the Consumer Protection Fair Trading Act next month.
The changes are driven by the need for better disclosure and transparency, and to increase the quality of advisers. It changed the way financial institutions sell their products and services.
We are all familiar with the changes. Just to name a few: Insurers now have to disclose much more to customers, including distribution costs and the performance of its par fund; it is compulsory to conduct a fact-find exercise, and advisers in insurance firms are required to undergo specific hours of training per year.
The Straits Times is not an exception. I heard that it is adopting one of the changes. Soon it will be a requirement for me to clock a specific number of compulsory professional training hours per year. This is to ensure that journalists keep up with what is happening in the sector we cover. So, you see we all have something in common. We have to learn to keep up with changes.
Personally, I’m excited about the changes that have taken place in the industry and where it is heading. As a former financial practitioner, I see them as positive changes.
Some of you may not know this. I am from the insurance industry. In the early part of my career, I worked at The Insurance Corporation of Singapore (ICS) for over two years. Back then, my work required me to handle insurance brokers and market general insurance solutions to corporate customers.
As Sellvem has highlighted earlier, financial advisers play a very important role in society. Almost everyone has protection and investment needs and advisers are the best persons to provide the much needed advice and service.
There are good things that people have said about their advisers. I know of advisers who practice needs-based selling, providing comprehensive and professional financial advice. They also have the habit of contacting their customers regularly, even when they don’t have a product to promote. These are advisers who eventually become their customers’ much-trusted friends just like the way they would trust their doctors with their intimate details.
But not everyone I met has good things to say about their advisers. Because of the nature of my job, I have come across many bank customers and policyholders who have written or emailed their complaints about their advisers and the firms they represented.
They do so in the hope that I can highlight their plight in The Straits Times, so that they can get redress.
Allow me to highlight five common complaints.
1. Lack of product knowledge Here’s what one customer told me. He was sold a structured product. He said: “My experience is that they don’t have adequate product knowledge. I asked my adviser to work out the best and worst scenarios and he tells me that he doesn’t know. I asked him to list all the factors that will impact the indicative value and he said he needed time to find out but he never reverted.”
Another customer says this: “My adviser told me that it’s up to me to disclose my medical conditions.”
Yet again, many clients were caught in a bind when their advisers fail to inform them of the impact of putting their spouse and/or children as beneficiaries in a policy. Many thought they could change the beneficiaries as and when they like but it was too late when they found out that they couldn’t.
As you can see, the lack of product knowledge will result in poor advice. For instance, if you market a Shield H&S plan, on what basis do you help your client decide which plan to choose? If your client opts for Plan A, which is a class A ward in a restructured hospital, would you caution your client that she can’t bring her own specialist there?
2. Not disclosing the downside
This is a very common complaint from customers. Everyone who buys a product wants to know the full picture. This means being informed on the advantages and the disadvantages. For instance, people who buy regular premium ILPs should be warned that the premiums would get higher as they get older because of the higher mortality charges.
From my own personal experience, I have yet to come across friends who were sold term insurance. Almost everyone I know own whole life insurance policies but not term, unless they are savvy investors. And yet we know that what people need most is affordable protection which only term insurance can provide. Only when this basic level of protection is achieved, can we then talk about investments if there is surplus cash.
Here’s what a customer told me:
“People don’t like to lose money and look stupid so advisers should give reasons why I could lose money. Tell me the possibility of both making how much money and how much I can lose. Give a potential loss scenario like 8-10%. There should be equal emphasis for both.”
Another instance of irresponsible selling is this. Last year before the tightening of the CPFIS rules on the first $20,000 in the CPF Ordinary Account, many advisers encouraged their customers to invest all their CPF funds before Apr 1. Was that a responsible thing to do?
3. Not being sincere
Customers have told me that they felt that their advisers were interested only in a quick sale. In some cases, they were even rude. Customers can feel your sincerity. It’s not just in the way you pitch your product recommendations. It includes your tone of voice and your body language.
4. Continuity problem
Many customers become orphans when the advisers leave their firms and there is no follow up.
Here’s what a customer experienced: “I called the new adviser. She was very busy and said she will call back but she never did.”
5. Claims handling
This is an area when advisers can offer assistance. Most customers are not familiar with the claims process and under what basis they can make their claims effective.
Let me recap the five points. They are: 1) lack of product knowledge, 2) not disclosing the downside, 3) not being sincere, 4) continuity problem and 5) claims handling.
Looking at these five points……and noting that we in the midst of one of the worst financial crisis, this is when consumers need us most. Many are worried about their protection and investment portfolios.
So, where can we go from here?
MAS and financial institutions are stepping up on consumer education. The media will continue to raise awareness of good practices and money management habits. What about financial advisers? Advisers can brush up their professional knowledge and service levels.
This is an opportune time for all of you to help the consumers take stock of where they are, what they have, their time horizons and review their goals, objectives and lifestyle.
Rather than take all these complaints negatively, take them as a learning experience. Use them to your advantage and turn them into opportunities to reach out to customers, particularly now, when we are in an economic crisis.
There is much all of us can do to build confidence and trust during this period and prepare for the future.
Thank you once again for having me this morning. It’s a pleasure being part of your congress.
I wish all of you a fruitful discussion over the next two days.