Money Confessions: Secrets Your Financial Advisor Won't Tell You

Did you know that some agents may not disclose full product features such as add-ons just to avoid more paperwork?

You know what they always say: finding a financial adviser (FA) is like dating — you need someone you can trust, always have your back and will help you should you come across any financial-related obstacles in life. 

But no matter how trustworthy you think your FA may be, there are some things that they may not want you to be aware of, and they can be costly in the long run.

Here are six secrets your (or a potential) financial adviser may not tell you, as told by several current and ex financial advisers in Singapore. 

1. Many agents do not conduct nor tell their clients about KYC and FNA before selling a product 

KYC (Know Your Customer) and FNA (Financial Needs Analysis) is something like a survey FAs should conduct on their client before recommending products to them. 

Filling up a KYC and FNA will allow the agent to better understand any gaps in your coverage, so that they are able to recommend a product you actually need rather than pushing a random product to you. 

To put it in Layman's terms:

KYC — Allows agent to know more about their client's background, goals and financial status

FNA — Allows agent to understand client's investment knowledge and risk tolerance

According to www.moneysense.gov.sg, there are a couple of steps the FA representative needs to do during the ​financial advisory process:

1. Assess your financial situation and needs 
   1. Your FA representative will ask you a series of questions about your finances, needs and goals. They need to gather enough information to assess your financial situation, protection needs, and investment objectives. This fact-finding process is called financial needs analysis (FNA).

2. Make a recommendation
   1. Your FA representative must have a reasonable basis for their recommendation. They must take into account your financial situation, particular needs and investment objectives.
   2. They must explain why the financial plan or product recommended is suitable for you, and disclose information on the product such as the benefits and risks of the product, the premiums and charges that you need to pay, and implications of any early withdrawal or surrenders.

3. Provide all documents needed
   1. Your FA representative must give you the full details of the products that he or she is recommending. 

4. Review your policy
   1. Your FA representative should contact you to review your policy or your investment portfolio with you regularly, in order to help you see if your needs are being met.

These steps are necessary for an agent to find a product most suitable for your financial needs and goals, and should be done for each and every client. 

However, an ex-advisor we spoke to noted that most of the FAs do not do this to save themselves and their clients some time. 

As the process takes a considerable amount of questioning and digging into details, some agents may choose to take a “shortcut” by asking their clients a few simple questions related to their financial situation such as salary and monthly expenditure before filling up the form themselves. 

If you want proper planning, request your FA to go through the KYC and FNA and provide them with sufficient information to make a recommendation.

More on how to manage your money:
Best Short & Long Term Endowment Plans in Singapore (2022)
Insurance Savings Plans: Singlife Account vs GIGANTIQ vs SingTel Dash PET
Endowment vs Insurance Savings vs Bank Savings: What's The Difference?
Best Savings Accounts In Singapore To Stash Your Cash (2022)

2. Companies tend to give agents higher commissions for pushing out a certain range of products 

In some instances, when a company launches a new product, they may incentivise their agents to push it to their clients by offering attractive rewards such as a S$200 voucher for the first 10 agents who sell 10 policies. 

If you experience your agent hard selling you products such as investment-linked policies (ILP) or life products that you feel may not be necessary, it may be an indication that they might be after the commission. 

3. FAs may be profiting in ways you don’t know about

Besides commission, agents can stand to gain in other ways from selling you a policy. 

If an agent hits their target, they are additionally rewarded with incentives such as a fully-paid vacation or big bonuses. 

4. Some agents may not disclose full product features such as add-ons to avoid more paperwork

If you’re a client who has pre-existing conditions, there is a chance you may not be aware of add-on riders available for you. 

That’s because such add-ons will require a health declaration, which means more paperwork for your agent. 

Besides the paperwork, some agents may choose not to disclose such features as to avoid hiccups in the submission of the main policy. 

An example of such policies would be endowment plans. 

These plans may not require a health declaration, but if a client with health conditions wants to add a critical illness (CI) waiver, there will be alot more paperwork. 

In the worst case scenario, an agent could potentially lose their client if they opt for the CI waiver, fail the underwriting due to existing health conditions and cancel their application entirely.