Financial Industry Disputes Resolution Centre Ltd or FiDREC for short has reported an increase in complains against financial institutions. Complains against banks were up by a whopping 48%; for life insurers, the complains were up by 31%. Complains against licensed financial advisory firms and insurance intermediaries was down slightly by 5%.
In this article, I will briefly provide a few tips on how to avoid becoming a victim.
Understand whom you are dealing with
If you are dealing with a life insurance agent, you have to understand that by the law of agency, insurance agents are legally bound to put their agency first. The insurance ‘agent’ is not your agent, he or she is the agent of the agency. You do not have any agent in this case.
A property agent represents you as the buyer (if you are purchasing) or you as the seller (if you are selling). This is the reason why property agents are not allowed to represent both buyer and seller due to conflict of interest.
The insurance agent is always representing the seller. In this case, the life insurance companies are trying to sell insurance policies to you. That is why, they are not allow to represent both the buyer and seller due to the same conflict of interest.
If you are dealing with a relationship manager (RM) of a bank, the RM is an employee of the bank. The employee has the duty to put his or her employer first. Again, you do not have an RM. It is not possible for the RM to represents you because you are not the employer of the RM.
Understand the statutory Requirement
There are statutory requirements under the Financial Advisers Act in which the insurance agent and relationship manager must fulfill in order to protect the client from harm.
These are like the requirement to fact find, conduct risk profile and recommend suitable products to the client. There is also a Balance Scorecard in which the insurance agent/relationship manager’s salary will be confiscated if the products recommended are not suitable. But you must understand that the statutory requirements constructed are very easy to fulfill – you just need to sign the countless blank forms. These blank forms are then fill up after you purchase the product so as to satisfy the compliance department.
I strongly advice you never to sign blank forms. Ask the agent / RM to show you exactly why the products recommended is suitable. If the emphasis is on the features of the product, you can be sure that the agent/RM does not know how to ensure the product is suitable.
Imagine a doctor who keeps on telling you the benefits of open heart surgery but fail the explain why he thinks you are suffering from a heart disease. Such a doctor is ‘pushing’ products without explaining why the procedure is suitable.
Understand the importance of after-sales
The financial industry is highly transactional. This means they place a lot of importance of making the sale but little effort in the after-sales service. The after-sales service is seen as a cost-center while the initial sale is the profit-center. Obviously this is not what you want. So it is important to find out how the after-sales service is. While the insurance agent / financial adviser plays a big role in the after-sales service, the financial institutions also play a significant role. For example, if the insurer outsource its call center to a country which cannot even understand English, you can be sure that the after-sales service is as good as none.
Even though pre-emptive measures have been put in place by the Monetary Authority of Singapore (MAS) over the last few years to improve financial services, we have yet to see encouraging results. The primary role of financial advisers is to assist clients by giving professional advice. From the many grievances received, advisers were found to be engaging in the "selling" mode rather than the "advising" mode. This goes to show that professionalism is seriously lacking among some advisers. This is a grave concern.
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