Sunday, May 12, 2019

What I learned from observing Financial Advisors

In every preview, my colleagues are always able to spot who the Financial Advisor is in a room full of potential students for my course. This week one subject has his hair combed backwards, his watch looked like a Patek Phillipe ( although it seems out of place as he looked in his early 30s. ) and he wore a prominent Coach bag.

To Financial Advisors, my previews can be a nasty trap that can make them feel depressed for weeks.

Within the first 10 minutes, I would ask the class to participate in answering some questions and you can see the results on this page that shows just how much the public trusts folks from this profession (note that these surveys are done before the substance of my talk so no attempt was made to prime the audience to react negatively in a survey.)

It does not end with just one survey, I do eventually talk about my origin story. I shared about how a policy that was mis sold to my mother that put me in the path of intense study in the field of personal finance that got me to where I am today.

Typically these FAs who attend my preview eventually become so angry that they storm out of the room, my colleagues always tell me stories of folks who get triggered by the substance of my talk. This is not a loss for me, because if you actually get a commission higher than my training fees when you sell a policy and claim that you can help your client, then why are you even attending my preview ?

These are students I don't really want to have.

Of late, I realised that many Singaporeans may have made some insurance moves they grow to regret. This because as part of my class, I get all my students to reveal their weekly expenses to me and I get a front seat on investment decisions made by more responsible members of the Singapore population.

( No worries, I don't make recommendations except to ask them to eliminate the conflict of interest by seeking an independent FA. )

This has gotten me really interested in how financial products are sold and what the internal tricks of the trade the profession might have so I picked up a book on how FAs can handle objections.

Salespeople develop a very mature and complicated system of objections handling to deal with common ways a layperson may reject them. My first objective is to see how to immunise myself from these objections. My second agenda is to adopt some of the responses for my own pitch which faces interesting objections of its own given that my work has an increasing sales dimension to it.

As it turns out, bread and butter advisors you meet daily hardly get into the detailed technical discussions that folks like Money Maverick even get into. I was disappointed that no attempt was made to disarm "Buy term and invest the rest". I ended being grateful that at least guys like Money Maverick are sophisticated enough to talk about real issues like active vs passive investing.

I will just share three tricks I see repeatedly being used to handle client's objections based on their own text-books.

a) Don't let an FA compare themselves to other professions

I noticed that if you can block the move whereby an FA compares his work to a medical doctor, half of all objection handling strategies will fail. For example, when you ask for a discount, the FA might ridicule you by asking whether would you ask for a discount from a medical doctor.  This theme gets repeated over and over again across different objections - that it is rude/illogical to do to an FA what you won't do to a doctor.

Just refer the FA to the qualifications required to qualify to be an FA here. Ask them whether they can really compare themselves to doctors when the education qualifications are A level/Diploma/IB.

This should disarm them fine and good.

b) For retirement planning, realise that you are paying for a financially engineered guarantee so you will need to push into a discussion on numbers.

When it comes to retirement planning, FAs will attempt to sell you a financially guaranteed solution that will ensure that you meet a future goal. There are a couple of ways to deal with that.

First, know that you are paying hefty commissions for this guarantee, so by not taking this guarantee you have some leeway to make a few mistake of your own in investing.

Second, you are sacrificing a huge upside by not participating in market risk - likely the manager of the endowment will be earning that upside instead.

Third, you should get your FA to factor in inflation on their promised meagre returns.

Standard objections rarely move into numerical territory because they want to confine your decision making to emotional ones. Even today, a lot of retirement plans are sold without comparison making. If you invoke recent REIT returns, FAs will find it hard to maintain the attractiveness of their pitch.

All this, of course, assumes that you know how to invest. 

c) Some contradictions are built into the stock answers.

I was quite shocked that some objections handling were contradictory.

One answer claimed that reviewing the proposal is pointless because it is very complicated and only a credentialed professional can really understand it fully. It then proceeds to make the claim that the policy can be explained easily in 15 minutes.

Another ridiculous idea is that premiums will always go up so when you delay a purchase so the advisor will always get richer with more delays. Remind the advisor that markets also go up and you are more likely to get richer when you delay as well. If the advisor wants to refute you, he should provide the CAGR of his premiums.

Anyway, do read this article with a pinch of salt. They are taken from a prominent guide on objections handling and with the number of contradictions in this manual, policies may not be sold today using these techniques. If you are an FA who can go through this article without blowing your top, you may share with me to confirm whether these strategies are really used.

I will be reading every single book I get on FA sales pitches over the next few weeks because I think that my own program will become better once I get under the skin of this profession.

If you are an an ex-FA with some axe to grind ( there are a lot of these guys out there ), the best thing you can do right now is to offer to lend me a copy of your sales manual so that I can deconstruct the sales approach on my blog.


  1. Hi all,

    Investing yourself is the best approach as per my perspective.


  2. Thanks for your input JohanJ,

    May I know which country you are from ?

    If there are regions with better regulations, maybe we can learn from them.


  3. Majority of FAs are into salesmanship hence they will avoid serious discussions of numbers.

    As they say in the news biz, fear & the morbid sells (besides sex), hence the main thing FAs use to sell is fear --- fear of medical bills, fear of cancer, fear of no money for your kids, fear of your kids having some unspeakable disease, fear of your kids being thrown in the streets, fear of your spouse having to prostitute herself to support the family, fear of not having money for kids' education, fear of no money for old age, fear of losing money in the markets, etc etc. As for sex, the sexier ones often have a better head start in achieving sales targets -- we call it production & high productivity (based on anecdotal observation over 2 years).

    I used to tell the mgmt that I have fear of unemployment, but no insurance companies in S'pore are interested to provide unemployment insurance, at least at reasonable premiums.

    ILPs are sold on another type of fear -- FOMO. Hence mainly sold during bull markets.

    99% of them can't even provide a coherent linkage between par fund performance & the actual declared bonuses. They often won't be able to get a verifiable set of long-term (e.g. 20-30 years) of declared bonuses for their par plans from the back office. And most of them can't even explain why the figures in the Benefit Illustration table is not showing the compounded 4.75% and 3.25% numbers at the top of the table columns. Or to calculate the projected yields as shown by the figures in the BI.

    As for advising you & selling you based on your insurance & liability needs, well I've been thru their training before & let's say that we're trained to sell based on size of clients' monthly salary (for regular premium products) or bank account balances (for single premium products). BTW these training were conducted by a "social enterprise", so I can only guess how much more predatory those insurance companies that are publicly listed profit-focused entities.

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