There is a choice.

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Another great article by Wilfred Ling, a professional fee-based financial planner.

There is no law in Singapore that prohibits financial advisers from recommending other products that are not carried by their own principal. There is also no law prohibiting the financial adviser from charging a fee.

However, many insurers and IFA firms prohibit their own advisers from charging a fee. Why? There are two main reasons.

First reason: If advisers can charge a fee, they would have less motivation to sell products. Do you know that insurance advisers earn commission based on 3 – 6 years on a declining basis but product manufacturers earn perpetual revenues as long as their clients do not terminate the product? Are not these advisers fools to keep on selling when the one who ultimately benefits are the product manufacturers? Many advisers do not realized that they are being made used of. Advisers must keep on selling and pushing products to earn a living while product manufacturers earn perpertual revenue once the sale is closed. Advisers who want to escape from this trap must quit from this kind of working environment.

Second reason. Many firms prohibit their advisers from recommending other people’s product and prohibit them from charging a fee. The reason is because the firm views these advisers as salesmen. Salesmen must be loyal to their bosses. They must not have a conflict of interest selling other competitors’ products. Salesmen loyalty lies with their companies. Each prospect is a chance to milk and squeeze more money so that their bosses will be happy.

Many “financial advisers” join the industry thinking that it is going to be a noble job. Unfortunately, they are not “financial advisers.” They are just product salesman in the eyes of their firm. Frankly speaking, I really pity these people. I have friends who are trapped in such situation but they must keep on selling and pushing to make their bosses happy.

To the end consumer, this is very dangerous. A salesman that keeps on pushing product is not going to care whether the product is useful or not. There is a conflict of interest too. The salesman is unable to recommend more superior product to the detriment of the client. Consider a television set. The maximum lost of being cheated for buying a wrong TV is capped at the cost of the television. But when comes to financial advisory, the maximum lost has no upper limit at all. There is no cap.

I strongly urge all my peers to rethink their business model and consider whether is this what you really want in life. You do not need to be a salesman. Singapore is quite a free market. There is always a choice. The choice is up to you to decide whether you want to ruin other people’s life in order to serve your Master or help others achieve their financial goals.

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