Wednesday, 14 September 2011

10 types of clients financial advisers should avoid

Calling all fellow financial advisers!  Have you ever come across a client who is unreasonable, demanding, treat you like a doormat and expect you to work like a slave? Clients are not always right and it is our job to source only for the right clients. Whether you are in the property, investment or insurance business, there are 10 types of retail clients which I have learnt to avoid over the years.  

    1. Clients who do not want your help

As products such as investments, loans and insurance become more complex, and as time becomes more of a scarcity in today’s society, having a trusted financial adviser can effectively save one hundreds of hours of time. People need expertise help when committing financially to something that can last decades (E.g. mortgage loan or life insurance), however many people do not want help. I do not attempt to convince clients why my help is needed as people’s belief has deep roots that can be traced back to their childhood and it is next to impossible to change people’s mentality over a short financial planning session. It is preferable to work with people who already want your help in the first place.  Even in an educated society like Singapore, my estimate is that only about 10% of people believe in financial planning. The remaining 90% think it is a waste of time.  Is it any wonder that Singaporeans are often underinsured, underinvested and underfunded for retirement?  My preference is always to work with clients who understand the value of my work rather than try to play piano to cows.
    2. Clients who do not respect your job

A job that requires only 5 O level credits as entry level truly does not inspire confidence in the general public. Personally I have no qualms working with people who are not highly educated because my main selection criterion when doing business is sincerity.  Competence can be build up over time; would you deal with an O’level insurance agent with 10 years experience or a PHD greenhorn who is doing part time sales? I will choose the former anytime.

Many young finance graduates often admire glamorous positions in banks and trading companies. While these are highly paid professions, they are self serving and only enable one to accumulate vast amounts of wealth throughout their lifetime.

As a financial planner, we seek to ask simple yet critical questions such as whether one’s child is able to enter university in 20 years time, whether a family’s livelihood will be affected if the breadwinner passes on, whether one can retire comfortably with dignity.  Genuinely helping people while earning a living at the same time is a trademark of a noble profession. 

A client who does not respect the nature of our job, sadly also does not deserve our time.

    3. Clients who do not respect your time

Recently I have been working on a case, whereby after 2-3 days work of data gathering, comparing quotations, analyzing and providing recommendations, a prospect tells me thank you and that he will be implementing my recommendations with his friend in company X.  This is precisely the reason why I prefer to work fee based as due to the long hours required for financial planning, I cannot work for free.  (If the client is reading this, please do not bother to call me in the future as I seriously do not want your future business even though u are a highly qualified prospect)

I have also encountered clients who call me at 5pm and expect me to see them at 8pm on the same day.  From time to time, there are also prospects who cancel their appointments at the last minute.  To me, it is a disrespect of one’s time.  As the saying goes, do onto others what you want others to do onto you, if one would not come out upon such short notice, one should not expect financial advisers to be different.  I always plan at least 1-2 days in advance for any meeting with my clients and I expect them to have the same respect for my time.

    4. Clients who do not appreciate your efforts

For the same sale presentation, one can spend either 2 days or 20 minutes to develop recommendations. Most clients can never tell the difference between a financial plan that is carefully thought through or one that is hastily drafted to close a sale as the financial literacy in Singapore is still relatively low. Clients who appreciate your efforts should at least refer you to another qualified prospect even if they do not place their business with you,

    5. Clients who expect you to service them throughout their lifetime.

Assuming one can acquire 50 clients in a year. In 7 years time, he would have acquired 350 clients. Financial planners are required to review his clients’ finances at least once a year. If his remuneration is solely based on him acquiring new clients, how does he able to provide servicing and review?  I have met countless people who have not heard from their financial adviser for at least the past 3 years.  I prefer to educate and empower my clients so they are well equipped with financial knowledge in the event i were to kick the bucket first. (Touchwood!)

Many insurance agents know that a comprehensive hospitalization plan is perhaps the most important insurance any working Singaporean should sign up for.  However do you know that one earns as little as $30 from marketing a shield plan to a young adult? Mr Wilfred Ling, a well known fee-based financial planner in Singapore, has often compared this to a negative commission product as there is a 99.9% chance that one will be hospitalized at least once in their lifetime. The time and effort taken to process claims will definitely outweigh the rewards in the long run. One should never accumulate such lifetime liabilities if he is not comfortable with working with the client. 

6. Clients who treat financial advisers like salesperson

What is the purpose of getting a tertiary education, studying an additional 1-2 years for the certified financial planner (CFPcm) designation, completing 100 continuous development program(CPD) hours,  passing compliance and regulatory exams by the MAS, paying monies out of one's own pocket to attend seminars conducted by CPF, HDB etc....only to be labeled as a vacuum cleaner salesperson? A fellow online blogger once commented that vacuum cleaner salespeople have an easier job because they do not need to service the client once the sale is made.  

    7. Clients who expect advisers to work for free

Time is money. Even as I worked part time during my schooling days, I was able to earn $8 an hour working as a waiter.

Advisers may be working for free without clients realizing it. An example is when a client is speaking to 3 different financial advisers at the same time; he is expecting 2 of them to work for free because often the client can only do business with one. The other 2, regardless of their countless marketing efforts, unfortunately, have worked for free.


    8. Clients who are reluctant to provide referrals

Referrals is the lifeblood of any business

      People can wholeheartedly believe what you say and even implement your recommendations.  However when it comes to referrals, most Singaporeans still have a stigma. Some feel embarrassed to refer a financial planner to their friends.  One may be embarrassed to introduce his mistress to his wife, or to introduce a criminal friend to their family members. It appears that what we are doing is a crime when clients feel embarrassed to introduce us to their loved ones.  All businessman know the importance of returning a favour, I scratch your back, you scratch mine. If a financial adviser does a good job, does he or she deserve to be recommended to one’s parents, relatives or friends? 

Referrals help the client and the adviser in more ways they can imagine. It helps the client ensure their loved ones are financially sound (E.g. if your best friend suffers from end stage cancer and need $100,000 from you for an operation, will you reject him?) By referring him to your financial adviser, u can ensure situations like this are avoided. 

Referrals also ensure sustainability for the financial adviser in the long run, if the financial adviser can stay in the business for the long run, he can be an effective co driver in your personal finances. This can only be achieved if one’s financial planner doesn’t become bankrupt in the process of helping the client achieve financial independence.
    9. Clients who prefer ad hoc planning to holistic financial planning

Health and wealth are the 2 most confidential things in a person’s life. Ad hoc planning is simple and quick, like fast food, which is why it is often detrimental to one’s financial health.  Comprehensive financial planning however is longer and to some extent, tedious, it enables one to make higher quality decisions in the long run but require one to make time and monetary sacrifices at the onset.

10.   Clients who ask for rebates
Discounts are often offered by fund houses and insurance companies provide an added incentive for clients to take up their plans, although it affects objectivity, it is still acceptable in a competitive market.  Rebates on the other hand, are highly unprofessional, especially if offered by the adviser or requested by the client. Commissions are our bread and butter. It is used to reward professionals for doing a good job. Rebates tell a lot about the ethnics of an adviser as well as the client.  If you are a client, would you consider someone as a professional if he offers a kickback when you do business with him? 

For the adviser, would you work with a client who wishes to discount the value of your work after countless hours of work? I would seriously have doubts about the ability of a surgeon if he offers me a discount if I allow him to operate on me.

It is important to select clients, just as clients select us.  I have learnt it from the school of hard knocks… A nasty client is like a cancer cell, one can never have a healthy practice if the cancer cells surface from time to time. A highly successful financial planner once commented that one should only work with clients who fulfill 3 criteria:

1) They like me
2) I like them
3) They are willing and able to implement my recommendations.

For the remaining clients, one cannot help others who don’t want to help themselves. I can only hope they are able to make well informed decisions on their own. If your client just wants you to be part of their success but not the other way around, it may be time to rethink and re-establish the client – planner relationship (Financial planning process step 1)

I am sure there is no lack of financial salespeople out there who would be glad to prospect them though..

Read my other article: Why young people should NEVER invest their CPF savings?


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