What Is Sold?

There are mainly 2 types of business, one, the sale of a product and two, the provision of service.

Selling of a product is quite straightforward, one pays money in exchange for a physical asset or product. When we buy a mobile phone, we pay the price and we receive the goods.

For service, it is paying for the provision of an action or advice. When we pay for a mobile service, the teleco provides the network service for you to make calls/sms/internet, no physical goods was provided.

However, most of the time, the line is not very clear. For example, purchasing a pair of shoes from a shoe shop. Although the end result is receiving a pair of shoes, a service staff is around to assist finding the pair that fits and promoting the product for sale.

So, sometimes, it boils down to the expectation. Some go to hawker stalls and expect 5 star service, when you are paying more for just the product, your meal. Whereas, you are paying a huge premium for fine dining in expectation of excellent service and well prepared food.

When it comes to financial planning, what is the expectation? I polled insurance agents and the general public (ok, I admit, it does not meet the minimum standard of a survey), most were of the view, agents themselves included, that it was sale of a product. Well, sadly, that is the impression the commission structure has created of the industry.

I would like to compare it to a professional, a doctor. A doctor performs a medical diagnosis, gives you advice of the analysis and finally sells you medicine. Would you think that a doctor is a salesman selling medicine? You got to admit, in the end, that is the end product. However, he provided the more important part of advice and you pay consultation separately from medicine. I would say that a doctor provides both, a one stop solution, you pay for service and get his medical opinion of your illness as well as the cure. You indeed pay for the right medicine as a product, which you can alternatively, free to go to a pharmacy or buy online yourself, since ultimately, it is the product manufacturer who earns.

A financial planner should see oneself as such. A professional who performs a financial diagnosis, gives advice of the results before selling any product. Hence, he should be compensated separately. The client is free to purchase the financial product from someone else or himself online. After all, the one who earns from the financial product, is the financial institution (i.e. the bank, insurer, investment company, etc).

This demarcation of fees is more important than focusing on adding layers and layers of paperwork, hindering customers from making a simple purchase, like a shield plan or term insurance. To make matters worse, MAS has recently introduced customers to take a test before purchasing. This is really getting out of hand. In such cases, I would like to propose to MAS, customers who pass the test to be competent should be allowed to make their own purchases without an agents help, filling in less forms and cutting out the agents commission.

Let's look at the spirit of the law, rather than the letter of the law. Address the root of the problem rather than creating new ones. Industry practitioners are amazingly innovative, adding more layers are not making things better for the customers, it is in fact benefiting the sales agents. One may have the knowledge of personal financial planning but has no clue how to navigate through all the jargon and paperwork introduced that they simply give up and rely on cunning sales people.

What is so complicated about a simple term insurance? You pay a premium for the sum assured in the event you pass away. No cash value, some simple exclusions like war, suicide needs to be noted, but how complicated is that? It is simple, but what is complicated is that you have to fill a ton of FNA, take a test, assess your risk profile, read & sign every page of a BI, product summary, have a guide to insurance, proposal forms and some have even more like KYC, product highlight sheet, important notes, etc. Listing them out is tiring enough, I think I rather pay some else to do them for me.

Are "financial planners" selling a product or a service?