Life insurance is something very close to my heart. It was one of the first financial products I marketed since I joined a local bank as a financial consultant 5 years ago. Today, I am a firm advocate of proper insurance planning and am glad that my career decision has allowed me to gain tremendous exposure by meeting people from all walks of life. However, like all jobs, it is not always smooth sailing. It is a well known fact that 90% of financial advisers, especially those of tied agencies, do not stay long in the industry. On a personal level, I have at least changed 3 different insurance advisers over the past 3 years, all of whom are young and aspiring graduates who decided to call it quits.
It is a worrying trend given such high attrition rates. I believe it can be attributed to the wrong expectations people have when they start out as an insurance adviser. Sadly, many of these misconceptions are initiated by insurance agencies that are desperate to recruit at all costs. Judging from the number of ads posted daily by recruiters, Insurance advisers always seem to be in high demand despite it’s out of the world benefits. A typical ad for insurance adviser looks like this:
(I have plagiarized this image from my friend, Seth Wee’s website. Do visit the original site by clicking this link. )
I would like to dispel a few myths that aspiring life advisers may have and also set the expectations right. For other readers, it might also be helpful to know the challenges that your life insurance agent may be facing.
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Myth 1: One can earn unlimited income
Truth:
Income is never unlimited. The reason is because to generate income, one requires time and work. If time and work has limits, so does one’s income. Time and effort will eventually reach a ceiling. One has to be careful of such misleading statements.
Income (unlimited??) = Time (limited) + work (limited)
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Myth 2: People need your help
Truth:
People do not want your help. Yes, it is true that many Singaporeans are severely underinsured and underfunded for retirement. However a recent AIA survey conducted in 2011 has demonstrated that Singaporeans are more concerned about upgrading to the latest Iphone models than about purchasing the right insurance. (See survey findings here)
To put it simply, life insurance is a “need”, people however act on “wants”.
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Myth 3: An insurance adviser is a respected profession
Truth:
People do not respect insurance advisers because it is a sales job. Regardless of one’s education or experience, as long as one’s remuneration is based on marketing a product, the customer will always hold the upper hand. Lawyers get paid even if they fight a losing case. Doctors get paid even if the surgery is not successful. A true professional is paid when he does a job, a sales person is paid only when he closes a sale. I have written extensively about this topic, See my article : (Difference between financial sales & financial planning)
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Myth 4: Income commensurate with ability, unlike a fixed salaried position
Truth:
Ability here refers to marketing ability, not the ability to give proper insurance advice. As it is a sales job, one will find that a lot of time and effort is spent on prospecting and generating interest to prospects rather than providing advisory work. This is especially true of new advisers.
In addition, one can quickly recognize that most top performers in the insurance industry are often those blessed with the gift of the gab with attractive personalities rather than those who are most competent in giving insurance advice.
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Myth 5: Being in insurance means running your own business
Truth:
Life insurance is a flawed business. Can you think of another job in the world where one has to consistently prospect for new clients even though they have 350 clients? Any business with 350 clients will be laughing all the way to the bank. Not for life insurance. As 1st year and renewal commissions run out, one has to constantly find new prospects to close. If one closes 50 cases a year, in 7 years time, he would have 350 clients. If the adviser chooses to meet one client a day per year for a financial review, he would effectively have no new business coming in, thus destroying his income stream. The nature of Life Insurance business means one have to constantly source for new clients while giving up existing ones.
The real winners of course are the insurance companies and agencies which continue to profit from premiums paid by customers whose advisers leave the companies. The real people running a business are these financial intermediaries, not the insurance adviser.
The real winners of course are the insurance companies and agencies which continue to profit from premiums paid by customers whose advisers leave the companies. The real people running a business are these financial intermediaries, not the insurance adviser.
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Conclusion
Despite it being a noble profession, people do not have very high regard for the average life insurance adviser. It is common for new advisers to find that their friends start alienating them for fear of being prospected. People in general respect other highly paid professionals in finance like investment bankers even though an insurance adviser can leave a positive footprint in other people’s life unlike the former that only make one filthy rich, but have little or no contribution to society.
My experience suggests that sustainability in the industry is attributed more to personality rather than competence. If you are wearing a dress, has a mesmerizing smile and have flocks of rich men prepared to meet you anytime of the day, the life insurance industry is a place where one can truly earn an extraordinarily high income at a young age. However if one does not satisfy the above criteria. It is of utmost importance to plan a strategy of conducting business rather than depending on hard work alone. Hard working and good natured people do not necessarily succeed in life.
As for the misleading advertising conducted by insurance companies, remember the old adage:
" when it sounds too good to be true, it probably is"
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Hi Gary:
ReplyDeleteYou are quite right about insurance agents. The same thing applies in the States. When one is approached by an agent here, one knows that they are trying to sell you the product with the highest commission to them, not necessarily the one that best fits your needs. Also, most people go for what is called "term-life", which is for a set term and then runs out. Insurance companies love this because they frequently collect premiums for many years with no need for a pay-out from their side. People should be buying "whole of life", so their heirs get something when they die, but again, most people are never educated on this.
Hi Farmland investments,
ReplyDeleteyou have brought up a perpetual problem that advisers face and it is that of conflict of interest. This unfortunately can only be minimized, not eliminated. For practical reasons, many advisers who start out wanting to be a professional do end up marketing the " high margin, low benefit" products as only " toxic products" can provide substantial commission to justify not earning a fixed and stable income . I feel the public has a role to play too, their general unwillingness to pay fees to insurance professionals will hit them hard, especially at old age, when many people will wake up to the reality that their insurance/investment products turn out to be complete junk. The floodgates will be open soon. Mark my words!