SINGAPORE: In a recent Reddit discussion, user Zestyclose_You_8701 started a conversation expressing strong opinions about the financial advisory industry.
The user’s concern raises a crucial question: can financial advisors genuinely have their clients’ best interests at heart when the primary focus of such advisors is earning commissions? He draws a parallel to a nurse upselling medicine for personal gain, questioning the ethical grounds of such practices.
He started his post by asking, “Are financial advisors shameless?” as he wondered whether their focus on their own financial gain compromised the quality of service they provide to others.
According to the user, financial advisors, or as he put it, “insurance salesmen with additional services,” are lured by commissions to recruit more individuals under their wing. This, in turn, creates a saturation of young and money-motivated professionals flooding the industry.
Zestyclose_You_8701 also highlights what he sees as a “glamorizing” incentive structure in the industry.
Euphoric_Emotion5397 chimed in, acknowledging that financial advisors must have “thick skin” for commission-based sales jobs across various industries.
The sentiment echoed that survival in professions like property sales, relationship management, and car sales often hinges on a salesperson’s ability to weather rejection.
sacsgawd defended the necessity of “hard-selling” insurance products. He argued that certain insurance products, though requiring a sales push, genuinely benefit individuals.
He also referenced MoneyOwl, a company that does not charge commissions, adding weight to the argument that some insurance products could be beneficial without the cloud of commission-driven motives.
Zster_2020, a former insurance professional with over a decade of experience, added a layer of complexity to the discussion. He acknowledged that there are “selfish intents” in sales jobs but shed light on the enduring drive of successful salespeople.
According to him, many agents operate on strong values and beliefs, shaping their sales pitches around aligning with their customers’ values.
Interestingly, he also pointed out that the industry encompasses diverse values and practices. Agents often operate under the radar, relying on word of mouth and referrals rather than flashy social media promotions.
He also credited the Monetary Authority of Singapore (MAS) for proactively monitoring and highlighting the consequences agents face in case of complaints, suspensions, or subpar documentation.
To navigate these complexities, Zster_2020 advised seeking recommendations for advisors with similar financial goals and expectations. He emphasised that aligning values with an advisor is crucial for a positive experience.
We’ve been throwing around this idea that financial advisors are basically “insurance salesmen with additional services,” but what’s the real deal? What exactly do financial advisors do, and are they just in it to sell you stuff for their own personal gain?
What do financial advisors do?
According to Indeed, financial advisors help you navigate your money game:
- Turning your financial check-ups into solid plans.
- Chatting about your regular spending and saving habits.
- Schooling you on why a certain financial plan is a game-changer.
- Serving up expertise in estate and tax planning.
- Dishing out investment advice and keeping an eye on your portfolio.
- Figuring out the right accounts to open for your goals.
- Dropping hints about insurance products that might fit the bill.
- Being your go-to guide on investment, insurance, and tax options.
- Handing out lessons on crafting a budget and saving money.
But then, not everyone likes to have a financial advisor on their team.
So, who might need a financial advisor?
When it comes to financial advisory, where opinions clash and values vary, the bottom line remains – finding a financial advisor who aligns with your financial goals and values can be challenging, tricky and even risky.
Therefore, to play it safe, it’s always best to conduct your own due diligence before making major financial decisions or trusting a financial advisor to make the decision for you.
And if you ask one of the richest people in the world, Warren Buffett and his close friend Charlie Munger, whether you need a financial advisor, their advice will always be the same: No, stay away from financial advisors!
Warren Buffett has expressed his opinion that financial advisors may not provide sufficient value for the fees they charge. He also says such advisors may not always offer sound financial advice since they do not share the same risks as their clients in the event of financial gains or losses.
For most people, Warren Buffett advised, the best thing to do is to invest in the S&P 500 index fund. /TISG
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