Myths and Truths of the Life Insurance Industry

2012-01-25T23:45:00.006+08:00

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. To date, I have at least changed 3 different insurance advisers over the past 3 years, all of whom are young and aspiring graduates who decide 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 this world benefits. A typical ad for insurance adviser looks like this:

(I have plagiarized this image from my colleague, 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 the business means one have to constantly source for new clients and give up existing ones.

The real winners of course are the insurance companies n 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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Gary Tay is an Associate Wealth Planner (AWP^cm) with Promiseland Independent Pte Ltd.

He is a Financial Services Broker and is an appointed representative by the Monetary Authority of Singapore to provide financial advice to companies and individuals.

Contact no: 8183 2979

Email: gary.tay@promiseland.com.sg

Why one should engage a qualified financial planner

2011-12-11T15:32:00.000+08:00

Financial planners have a bad name in Singapore. For many, the mere mention of them often bring back memories of aggressive insurance salespeople harassing passer bys at mrt stations and crowded streets to conduct a fake “survey”. Being a strong believer in providing professional financial planning services to my clients, I often found it difficult to communicate the value of the work I do for many prospects I meet due to the negative impression people have of advisers in general.

For those who are yet to understand the difference between financial sales and financial planning, do read up on my other article here.

So is there a place for true blue financial planners in Singapore? The answer is “YES!”. Based on my experience interacting with people ranging from low income to high net worth individuals, I can confidently say that many Singaporeans think that they know a lot about financial planning when they really don’t. For most of them, their knowledge are either skewed towards areas like investment planning or they have certain deep misconceptions (E.g. “The young should start investing as early as possible to enjoy the compounding effect of long-term investing.”)

Working with a qualified financial adviser can do wonders due to the following reasons:

Constant changes in regulations, products & personal circumstances
Everyone have different needs
One point of contact

Constant changes in one’s financial circumstances

Are we in the know?

The argument here is simple, if full time insurance advisers, property agents already have a hard time keeping track of the constant regulatory changes, is it possible for a layman to do any better? Professionals should be better equipped to provide one with holistic advice. The real key is finding someone who is trustworthy and truly has your interests at heart in a sales focused industry.

Everyone have different needs

Even if we segregate people by 3 simple characteristics: income, lifestage and financial need, there are easily 75 different combinations at play not taking into account one’s unique circumstances. There is no one size fits all advice, many Singaporeans often mistake generic advice published in newspapers, magazines, online portals as specific advice that should be implemented in their personal lifes, this is a grave mistake.

One point of contact for all financial needs

I have often found it puzzling why so many Singaporeans wish to deal with so many different consultants, agents, specialists, managers when 1 financial planner can be the information hub we need. Of course it is impossible for the financial planner to be proficient in all aspects however given his knowledge and expertise, he should be able to advise a client based on the whole context of their finances much better. Many of these agents are more keen for the client to transact rather than advise. A financial planner acts as the gatekeeper for the client so their decisions can still work towards their long term financial goals.

Read my other articles: Common mistakes Singaporeans make when approaching Financial Planning

The downside of free financial advice

Why most financial product purchase end up badly

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Gary Tay is an Associate Wealth Planner (AWP^cm) with Promiseland Independent Pte Ltd.

He is a Financial Services Broker and is an appointed representative by the Monetary Authority of Singapore to provide financial advice to companies and individuals.

Contact no: 8183 2979

Email: gary.tay@promiseland.com.sg

Reflections of an Independent Adviser

Myths and Truths of the Life Insurance Industry

Why one should engage a qualified financial planner