Some of you may have read that US often accuse China of “dumping” cheap products into the US market. Not too long ago, China also accused US of “dumping” cheap products into the China market. What is “dumping” really? The act of a company “dumping” their products is by selling their products at below cost of production. The company does this to enlarge its market share. On surface it appears to be great for consumers. However, on a long run it is very harmful to consumers because such an act kill off competitors resulting in the economy having less players. When there are fewer competitors, consumers’ interest will be harm. Moreover, the company that tries to enlarge its market share by “dumping” is almost never the best company otherwise it could compete confidently with the rest without resorting to selling products below cost. The act of “dumping” is happening in Singapore.
Finexis has started “dumping” a financial product called the AXA FutureProtector. Almost every client I met told me that they have heard of this offering. AXA Life isn’t the one selling this product below cost but the IFA firm is using almost its entire commission to pay for the first year premium for its customer. So customer actually get the product FREE for the first year. There appears to be no financial string attach other than a seemingly obligation to provide more referrals. Quite often there is no financial need for the client to get the product but they go and get it anyway since it is free and they would terminate it after 1 year. However, based on the human nature of being lazy, it is unlikely there will be large number of people terminating the product after 1 year. The company is doing this to get market share and to acquire leads and referrals. Based on law of large numbers, some of these leads will buy other products (not for free of course).
Some people think this is a marketing genius. No it is not. It is simply the old fashion “dumping.” The firm should compete based on quality of advice rather than using this way to acquire leads and customers.
I escalate this issue to my managing director and I was surprised to learn that actually the Association of Financial Advisers (AFA) already knew about it and consider this act as professionally unethical. But because AFA has no power, the issue has been raised to MAS. But that is the problem – MAS seldom exercise its power to rein in advisers/firms which mis-sell. The issue with this company is not about mis-selling (they are giving the product free – there is no selling!). It is about anti-competition behavior. Also, there is total lack of professionalism because financial advisers supposed to provide quality advice and not to induce the client to make a commitment. If MAS is doing its job, it would have banned free gifts when you buy something from the bank or insurance company because the gift is an inducement to purchase. For this case, the free gift is worth 100% of the first year’s premium!
Personally the act of dumping has hurt my business significantly. As you all may know, I don’t charge any fee for simple financial planning. If the client took my advice and go to buy the products from someone else, I don’t earn a single cent. In the past maybe 1/10 cases of simple financial planning was like that. Now, 9.5/10 cases are like that because that firm is giving it FREE for first year. I don’t have plenty of cases of fee-based comprehensive planning all the time. Maybe twice a month or so but usually clients are quite cheapo and so I can’t charge very high (you guys know who you are!).
If this practice continues, I’ll have to withdraw the “Simple Financial Planning” totally since it will be a complete waste of time for me.
If you think about it, why the industry descended to chaos and massive mis-selling is because everybody was giving FREE advice. So advisers resorts to all sort of inducement and misrepresentations. So now we have a company that give FREE product, what will become of the industry? Sounds like it is better to get out of this country before it is too late!
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