As the public get savvier and financial markets mature in Malaysia, independence in form of fee based financial advisory will get increasingly popular. This is when the trend turns away from ubiquitous financial products and homogeneous asset management or unit trust companies. The general public who appreciate the nuances between different financial products and understand that there are more than just the good “highlights” of what tied agents tell you will start to appreciate independent financial advisers aka financial planners.
Independent fee based financial advisory does not enjoy the privilege of being backed by an insurance company or associated with unit trust companies. It is relatively small, compared to the existing agencies structure everywhere. But being small and independent offers some specific advantages. For example, tied agents trained by agencies can be strongly encouraged to recommend the more profitable products, which may not be in the client’s best interest.
But independence is still under appreciated as the possible conflict of interests that can arise from being tied to another institution with its own set of priorities are rarely highlighted. That’s why no agencies can do away with the quota system, while independent advisory can. It takes time for me and my peers to explain the value and importance of independence to our potential clients. Independence is not something highlighted in our market and most people are not used to financial services that are not owned or backed by a brand name we are familiar with.
I also emphasize on education and makes a stand against pushing products onto potential clients. While people may be aware of all the financial products out there, some tend to assume all products are created the same, while the rest are just helpless to do comparison. Hence they take whatever that comes to them. Which is why during client engagement session, myself spend a lot of time disclosing material facts of any products from providers and the stuff that pure sales people would not spend the time to explain. Some clients may be turned away knowing some of the things or risks prevalent, but it had to be done sooner before one commit to a product, rather than later. For example, I never guarantee high returns for investments when market is down – after all, we are not hedge fund managers with a crystal ball. Consistency is an equally important criteria.
So if a prospect wants to double his money in 1 year time, then I’d just say – “I am probably not the right adviser who can help you achieve such goal“.
Rather than over promise and under deliver, I rather turn away prospects. Those who appreciate this kind of honesty will keep the conversation going. Upon further fact finding, I notice that people always talk about wanting highest return at the lowest possible risk. But at the end of the day, they actually don’t want to take a lot of risk. They will choose this any day over high returns.
This is a post inspired by Personal Money July 2013 – Investing Big Money Article – Interview with Opus Asset Management MD – Siaw Wei Tang. The article by Elaine Boey logo maker expresses independence in investing much better than I could put into words myself – hence, I adapted it for a related topic – that is on independent financial advisory