Here is an example on how a financial adviser sold a life insurance product. The following is a scanned image of a section of the KYC:
In the KYC, the client declared "I do not want any advice from my adviser.".
Has anyone ever wondered why a client does not want any advice if the product is purchased from the adviser? When the client declares of not wanting any advice from the adviser, the product salesman is no longer liable for mis-selling. The number of pages of documentation is reduced drastically. For this case, the KYC was just 4 pages.
The irony is that it is quite likely there was some form of mis-selling when such an option of "No advice" is selected. It is like seeing a doctor and your doctor tells you to sign a form stating that you bought medication without any advice from him.
The proposal forms were full of mistakes and non-disclosure. For example:
- The annual income of the client was declared as $0 despite having an occupation declared on the same page. Strangely the underwriter permitted this policy to be transacted without declaration of source of wealth to fund the policy! What kind of underwriting is this?
- Under the section of existing insurance policies, the adviser only wrote one existing policy. I counted that there was at least 7 existing policies at the point the sales was made ! This means there was a non-disclosure of another six policies.
No advice but easy money
With so few documentation to fill, no advice, no liability and sloppy work, do you know how much the salesman earn? I estimated the commission was $3,000! Aiyo, such an easy sale. Even primary school children can do it with their eyes close.
I also checked out and found that the adviser had already 5 years experience in the industry and was a Certified Financial Planner (CFP) prior to the time the sale was made. This shows that experienced adviser does not mean anything. Those with qualification does not automatically imply better quality of advice.
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