Do you want to be a financial consultant?

Jes 12 Comments

I overheard 2 undergraduates talking among themselves while queueing for food and it's quite an interesting topic that I, myself have pondered before.


One of the guys asked his friend why he is not considering to be a financial consultant, aka insurance agent. He went on to illustrate that his friend got an AIA scholarship. 1 year before he graduates, he already has a job and can afford a BMW. The friend is not studying so hard anymore because he already has an iron bowl job (They never retrench anyone).

His friend gave a few valid points but I would like to add more:
1) No career progression - Yes, you can have your own sales team and employ your own people but ultimately, you are still doing the same things and using the same sales pitch for many, many years. There will not be more learning beyond the occasional amendments of policies.

2) The money will be stagnant after a while - For the initial years, there will be big money because you are targeting your own network of family and friends. The commission is not never-ending, it stops after 2 years. So, you will have to keep going to road shows and cold call others. For a normal 9 to 5 job, the money will definitely be increasing over the years.

3) The stigma attached - Once you introduce yourself as a financial consultant, everyone will know that you are going for the sales pitch some time into the conversation. They are more wary of you because you are trying to take their hard earned money. Are you meeting me to catch up or to sell something? Do you really want to help me or just thinking about your commission?

4) Commission driven job - People who succeed did not do it because they keep playing Pokemon Go. They have to meet people during nights and public holidays, when the masses are free. They have to be thick skinned enough to call acquaintances. It might screw up your social life so it is difficult to go on leave or even go for maternity leave peacefully. No work means drastically lesser pay. Are you motivated or proactive enough?

5) Limited opportunities - Besides not being able to go regional, it is difficult to job hop to a competitor. Granted, competitors will come knocking with huge offers but switching people to different insurance policies is not that simple. With the sales skills, perhaps you can find a sales job in a different industry but you will have to start all over.

6) Worthless degree - I study so hard to get into a good university, then go into a job that does not require such a high academic qualifications. A bit sian right? Somehow, most people will think to try a higher level job first and if things do not work out, insurance agent may be a good fall back. A valid point is that you study so hard just to be able to earn big money so this should not be a big factor.

That is not to say that this job is not good if you have the interest. Think about the flexibility, the increase in confidence for meeting and persuading strangers, the perks that come when you keep hitting your target - free flights to other countries! It's a super good vicious cycle, you spend more, you have to work harder to earn and hit the target so that you can spend again.... brilliant idea!
Image result for luxurious holiday
How nice to just keep taking vacations
I do know of a few friends who lead the high life and may just be the envy of many. They spend a lot, buy condo, big cars, golf set, take luxurious vacations and their savings are mainly into their own insurance policies and unit trust. I do not advocate living like them because I am not sure they can handle scaling back their lifestyle once their pay stagnant or decline.

If everyone bought only term insurance like me, the agents will go bonkers because I heard it gives the least commission. Are you paying for their holidays or protecting yourself? 

Jes

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12 comments:

  1. Good post, I'd like to add another point:
    7) Ethical concerns. The insurance industry has a perverse incentive structure - those who are the most successful also tend to be the ones who have no qualms about fleecing people who don't know better. I would find it pretty hard to reconcile my desire to do well in my job and be successful, with not compromising on my principles.

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    Replies
    1. Hi J,

      Actually, I do know of a few friends who bought into the ILP, unit trust thing themselves and genuinely thought it's a good product because their families had financial difficulties previously for not buying insurance. Of course we know that insurance are different from the upgraded ones but to them, they are helping people out.

      Definitely a grey area so ultimately, it's up to us to be more aware of the different products. I like that you do not compromise, the society will need more people like you :)

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  2. Hi Jes

    Afterall, one is an employed and another is self-employed. Different tune, different strokes ?

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    Replies
    1. Hi Small Time Investor,

      Welcome to my blog! I don't think insurance agents are really self employed, and what about sales man in other trades such as myself, or property agents? More towards commission based but there is still a small amount of base salary. Definitely different when people are working to benefit themselves.

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    2. Hi Jes

      From what I have understand, self employed are those without cpf contributions from their employers.

      Regarding the base pay of the insurance agent. Yes it's a scheme to help the transition for the 1st year, however the monthly remuneration is flat or net rate, and it is tied to the kpi or targets from what I had heard. If the targets are not met, there goes the base for that month.

      Of course, in the business context, everyone is out there to earn. Perhaps some industry are more grey than some.

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    3. Hi Small Time Investor,

      Oh, your definition should be right, I did not know that. Then in that case, insurance agents are definitely self employed. I know they do not have CPF contribution for sure.

      Well, most of us do not earn at the expense of our relationships. In order to prevent being fleeced, we should educate ourselves on the different financial tools available so we will not easily be swayed by others, even though they are the 'financial advisor'.

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  3. Hi Jes,

    I had wanted to be a FC because I wanted to advice people on how to get their personal finances right. However, I face two problems.

    One, the products that are good for my clients is bad for me. I won't be able to survive being good. Two, FC can't give investment advice, and I can't tell clients how good ETFs are even if I invest in them myself.

    The insurance industry is not financially literate. They are salesmen. It is painful seeing the FC sell products they think are good for the clients but are actually not.

    Lazy Singaporean

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    1. Hi Lazy Singaporean,

      I hear you, I also considered being a financial consultant but decided against it in the end because I couldn't see how I could both be successful (in an industry where success is measured by the amount of commissions you generate) and at the same time do the best by my clients.

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    2. So I didn't become an FC in the end. :)

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    3. Hi Lazy Singaporean,

      Indeed you are right. What will sell by itself is not likely to profit the salesmen. You can tell people how good ETFs are... that's a role of a financial blogger haha. The difficulty now is to educate the masses between insurance and investment, which we can do it because we are not FC!

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  4. Hi Jes,

    Yeah I don't doubt that there are some agents who truly believe they are doing good by selling ILPs and unit trusts, but if they're not aware of term insurance and index funds, then they're not exactly competent as financial consultants.

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    Replies
    1. Hi J,

      You got it right, there are really FCs out there who are not competent enough to advise but yet the majority of the popularity is even worse! If the people do not know what they are paying for, is it the fault of the FC or themselves?

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