Tuesday 9 August 2011

Difference between Financial Sales & Financial Planning

Financial planning is not a glamorous job in Singapore. Regardless of one’s education and experience in the industry, it is inevitable that some consumers I come across do view practitioners in a negative light. I believe this is strongly attributed to its intense focus on financial sales rather than financial planning. As a result, many young people have joined the industry hoping to be a professional often become disillusioned that remuneration and recognition is pegged to how good one is in marketing products rather than helping their clients.

The turnover is so high in the industry that an estimated 90% will not stay over 3 years. Usually, only 2 kinds of financial advisers can survive in this competitive environment for the long haul.

1. Financial Salespeople who have mastered the art of conning unsuspecting consumers. 

2. Advisers who find real meaning in their line and are convinced they are helping people solve problems while earning a living in the process.

For obvious reasons, one should shun financial salespeople. However finding an adviser who has your interests at heart is not as easy as it seems as no one will claim to be poorer than their competition.

From my experience, the best way to differentiate the 2 types of advisers is via the approach undertaken.

1) Most Financial Sales people have the following characteristics

- Going straight into presentation of products
- Explaining benefits and encouraging a prospect to buy without identification of client’s real needs.
- Focus is on closing a deal, not solving the clients problems
- Closing is usually attempted on the first meeting
- Unwilling (often also unable) to advise the client based on the whole context of his finances.
- Conducts Ad-Hoc planning in the pretense of giving advice.
- Examples: Insurance Road shows, buying products from banks, supporting friends who are part time agents.

2) True blue advisors, on the other hand, work in the following manner

- At least 1-2 hours spent on gathering client data.
- Analysing a clients financial status with a clients financial needs in mind.
- Focus is on solving client’s problems, not closing a deal.
(Savvy clients will implement the tools recommended if it does solve their problems)
- Closing is usually attempted on the second, third or fourth meeting
- Willing and able to advise client based on the whole context of his finances.
- Conducts comprehensive financial planning because it is the right thing to do.
- Examples: Fee based financial planning or simple financial planning conducted in a conducive environment like office or residence.

(See Wilfred Ling's article: Why Fee based & comprehensive financial planning)

Difference between financial sales & financial planning using the 6 step needs based model:

(Click to enlarge image)

For higher quality financial decisions to be developed, it always take 2 hands to clap, the public has to appreciate the value done by an adviser as it can take days to develop recommendations, and some of which involves little or no product sales. Many consumers in Singapore often think they hold the upper hand in a client – planner relationship and expect professional advice to be free. These consumers often mistaken generic advice or ad hoc advice for specific advice relating to their personal circumstances. Unfortunately, they will eventually bear the burden of free financial advice through unsuitable products marketed to them. (See my article: the downside of free financial advice)

Financial advisory can be a very honorable profession if it is being conducted in the right spirit. There are enough bad apples in the industry, let’s do the right thing for our clients.


1 comment:

  1. Hi Gary, I think regardless how savvy we are, we need to put on a sales cap and need to have a long term marketing strategy in our profession.
    The successful ones are not necessarily conning the people and be product focused. There is a demand for consumers to seek assistance. Not everyone are interested to DIY or to understand the products.