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You deserve better financial advice

>> Tuesday, September 22, 2009

In the article "Financial Planning, Inc: lifting the veil", by Christopher Tan, published in The Straits Times on Sep 22, 2009.

He compared the financial planning industry to the food industry where time is often sacrificed at the expense of quality. Quality financial planning requires to fully understand current financial situations (assets & liabilities), financial goals to determine current & projected financial needs. However, many clients are not willing to spend that time and lay all their cards out too. So it is also difficult for the advisers to give the correct advice based on their limited information.

He said, "True and good quality financial planning entails a long and tedious process of understanding a client's need for certain investment returns, his ability to bear the risk because of the returns he needs, and finally how willing he is to bear the risks. It is a process that requires at least 20 to 30 hours of work and quite a few meetings to complete.

Customers very seldom walk into a financial institution prepared to stay for hours for financial advice. They are there just to do a transaction. It is near impossible for relationship managers to spend hours finding out from customers their most private information, without the latter taking along their financial documents, and especially if they are meeting them for the first time."

Besides the needs analysis process, he also touched on the quality of advisers. Advisers, on the other hand, are also very sales oriented as the judging criteria is based mainly on new sales. In fact, conversely, those with high sales are more focused on making the fastest possible sales and moving on without providing much advice. A new yardstick based on how successful in helping their clients to achieve their financial goals should be used instead.

He said, "To give reasonably sound financial advice, one should have at least a tertiary education, a professional certification like a Certified Financial Planner and a minimum of two to three years of experience. If we expect our doctors, lawyers and accountants to be properly qualified, why should we expect something lower from someone who will be managing our life savings and hard-earned income?

Over the past five years, in their pursuit of fast revenue growth, financial institutions and many financial advisory firms have recruited relationship managers and advisers en masse. Many of them were fresh out from school and drawn by the lucrative compensation of this industry.

There is really something wrong with this industry. We measure success of advisers and relationship managers by their sales and whether they achieve the 'Million Dollar Round Table' status (measured by new business brought in), which has nothing to do with quality of advice."


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