Friday, July 14, 2023

Who would have your back, a Skrull or a commissioned FA?


There have been two well-thought-out pieces on commissioned Financial Advisors. 

First Investmoolah argues that you are much better off avoiding FAs and consultants in your lives (link). Then, Woke Salaryman substack explained why FAs in particular are quite braggy (link). 

The first argument is that given how disadvantageous some instruments get sold by FAs, you are more likely to lose out if you buy some high-commissioned product from someone out to squeeze commissions out of you. The second argument is that FAs who are braggy and show off their conspicuous consumption like expensive holidays tend to get rewarded with more sales. 

The net effect is that commissioned FAs are not too different from Skrulls in the MCU. 

A lot of sacred places have been infiltrated by FAs. Now even MAS is aware that dating apps are full of FAs looking out to sell to a Simp. I also get information from students and friends that FAs are also doubling up as community organizers. Some even take on paid jobs as wine experts to fish for more clientele. Even if you do not buy anything, befriending an FA may mean being subject to their social media which will feature an aspirational lifestyle and looking at pictures that might affect your mental wellness. Let us not forget that because everything shown on social media is curated, it has the effect of making the person seeing all this feel even worse about their own lives.   

Today, this article wants to put a different spin on this issue.

I think the easy answer is to ignore, unfriend or disassociate yourself from FAs. But the finance industry is not dumb because they have an army of marketers to cast doubt on your personal finances. I mean, what are your real options if you really have been diagnosed with cancer? Over 99% of attempts to sell me critical illness and whole life insurance were not attempted by actual FAs because I hate them so much, but by well-meaning colleagues who are their customers. For me, these are the folks who are the biggest obstacles to my FIRE which in 2000, was truly a lonely road. 

I advocate the harder way to solve this FA problem. 

The first solution is internal -  to work on yourself.

You need to educate yourself about investments and set up some kind of facility that allows you to own investment assets like stocks. If you have done NS, buy the SAF term life policy to cover yourself first as it will be the one and only time anyone will attempt to sell term to you. You do not have to attend investment courses that I run, but I do recommend some investment books during my free ERM previews as a service to members of the public. The best option, in my view, unbiased by my job as an investment trainer, is to self-study the CFA, which, when combined with books on investing locally in Singapore, can be a powerful vaccine against FA indoctrination.  

This solution I advocate is tough because it can burn up the second half of your 20s as it has done so for mine.  

The second is external - to see local Financial Advisors as a problem Parliament can solve.

There are two approaches to doing this. 

For me, my ultimate legislative objective is to simply no longer allow insurance businesses to be excluded as a pyramid selling scheme. ( The law can be found here. ) But a more realistic alternative is to get MAS to do a review of the industry again as it has done in 2013. MAS wanted to outlaw commissioned sales in favour of a fee-based approach, but I hear from insiders that the industry lobbied aggressively put a stop to that. Maybe this time, a change can occur because there are actual countries running on the fee-based model and there is more diversity in product offerings locally. There are also bloggers, thought leaders and influencers to lobby for change. 

This is something you can bring up to an MP, that will relieve the middle class of unnecessary financial burden that will not plunder our reserves. 

Sometimes I really feel like Nick Fury fighting this Secret Invasion. I don't demonize every commissioned FA I meet because they update me on the more nefarious practices (like LED balloons) and give me intelligence on commissions and product updates. In return, I do work with them on some win-win initiatives I run. But the good ones are quite rare - for every Talos, you might see 20-30 Graviks waiting to show you their latest Rolex purchase on Instagram, or their latest European holidays, all paid by the ILPs you buy from them. 

I would like to think that the FAs I work with are those that will do even better under a strictly fee-based regime. 

At the very least, it would soothe their conscience. 

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