This article first appeared on fundMyLife, the platform that connects financial planning questions to the right advisers.
Finding the right financial adviser is hard, and on the other hand, engaging the wrong one is really easy. In this article, fundMyLife outlines the expensive mistakes you can make when choosing the wrong financial adviser.
# 1 Choosing Friends And Family
A fundMyLife user whom we spoke to admitted that he had bought more than 5 insurance products to help a close relative to meet her sales targets. Seeing someone purchase a plan just to help friends or family is quite a common phenomenon. While the intention to support them is laudable, bear in mind that most insurance and investment products are long-term commitments that could potentially last longer than even the agent’s career in the industry. You should only purchase these products if they benefit you in the long run, rather than help your agent in the short-term.
On the flip side, because these people are your friends and family, you should feel like you’re at greater liberty to ask them really tough questions that you should be asking a potential adviser. For example, you are at a greater liberty to ask them what the commissions are, their plans to stay in this career, etc. We wrote a list of questions that you can ask your potential adviser. Choosing friends and family as an adviser because they are friends and family is one of the most common mistakes people make when choosing a financial adviser – do avoid that!
It is tough, but you must say no if the reasons for taking up a plan with them are not well-justified.
# 2 Buying From A Complete Stranger
On the other spectrum of relationships, one of the common mistakes people make when choosing a financial adviser is engaging a stranger straightaway. Bear in mind, we’re not saying that buying from a complete stranger is bad. We’re saying buying from a complete stranger whom you do not have any information on is bad.
There are three usual ways to encounter a complete stranger that wants to sell you a financial product. Firstly, you may encounter one from roadshows in shopping malls and MRTs. Another way is to get messaged online randomly, be it via Facebook and Instagram. If you attend networking sessions often, you will also encounter advisers on the prowl to know more people/potential leads.
When you buy from a complete stranger, you will need time to ascertain whether the adviser is credible or otherwise. Ask this complete stranger for strong client referrals, or even better – the client’s contact. If he/she is doing a good job, the clients are more than willing to vouch for him/her.
Does it mean all strangers that you meet are bad? Not at all. We’ve seen amazing advisers opting for roadshows, as personal preference. It only means you should ask more questions when if you want to engage this particular adviser.
# 3 Focusing Too Much On Products
Products are but one half of the equation. Every company has its fair share of suitable and unsuitable products. As such, you should not be too fixated with getting a product over choosing a good adviser. Neither should any advisers that you engage. Be careful of advisers who are more interested to talk about their company’s products and features than understanding your finances, needs, and future goals.
Good advisers are knowledgeable about competing products, and can advise you accordingly based on your needs. The best ones may even recommend their friends in other companies, if you’re adamant about getting another company’s products.
# 4 Letting Their Image Of Success Blind You
Scroll your social media, and you might see what the starter pack above is describing. Some advisers flaunt their success on social media in order to portray that they are successful. The idea behind that is that potential clients view an adviser’s success as a reflection of their expertise.
Chances are that an adviser you met talked about how he/she got into the Million Dollar Round Table (MDRT). Getting into the MDRT is a prestigious thing, but it only reflects the sales volume of him/her for the company. It does not indicate whether the adviser is good or otherwise for you. What you should be looking out for are industry certifications, such as Certified Financial Planner (CFP), estate planning certification, etc.
You might also want to ask about a different but often overlooked metric – persistency ratio. It’s a metric used to measure the performance of an adviser. It shows the total number of policies that an adviser retains during a period without the policies sold lapsing or losing the premium to other insurance companies. Good advisers have high persistency ratio (think >95%) because it means no clients cancel their policies, reflecting the quality of the advice that the adviser gives.
# 5 Falling For Sales Tactics
Another one of the most common mistakes people make when choosing a financial adviser involves sales tactics. Giving free gifts to get a yes is an age-old tactic, where the adviser tries to get you to agree by dangling a carrot in front of you. It can be a voucher or a physical object. It is not worth saying yes to a product just because you’ll get a free gift from it. The mistake will cost way more than the voucher or gift you receive, in more ways than one.
Another tactic is the bait-and-switch tactic. The adviser piques your interest with a small, low-cost product at first. However, the conversation later switches to a different product altogether, one which is potentially more lucrative for him/her. Last tactic is one that involves talking repeatedly for a long period of time. Long talks will wear you down mentally and eventually you’d say yes when your willpower is low.
Financial planning begins with uncovering your needs, financial situation, and goals. Only with a clear understanding of where you are, and where you want to be in the future do products come into the picture, so falling for sales tactics is one of the worst mistakes you can make.
Connect with fundMyLife financial advisers today!
We hope this list of mistakes people make when choosing a financial adviser will help you avoid make the same mistakes again. It’s serious business, choosing the right financial advisers. You two are in it together for the long haul and as such it’s important to find the right adviser.
Where to find them? Worry not – fundMyLife has your back. You can connect with our panel of experienced and awesome financial advisers, curated by us. If you want to engage more financial advisers, or if you haven’t found the right one, why not consider advisers of fundMyLife? You can head on over to fundMyLife and ask our awesome financial advisers questions. Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.
fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect you to the right financial planners in a private and anonymous manner, based on your financial planning questions.
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