Many of my clients who came to me for protection planning consultation have one thing in common – that I was not the first adviser whom they have seen. Very often they already committed to a product recommended by their adviser recently or sometime ago. Some of them who has not committed are seeing me for second opinion.

fFor those who already committed to a protection plan recommended by another adviser, 99% of all cases they either bought: (1) an investment-linked policy or (2) whole life policy or (3) anticipated endowment policy. 99% of all cases will (1) have an inferior hospital & surgical plan (or none) and (2) does not have disability income insurance. Therefore, 99% of these clients got their protection planning priority in wrong order. For those who had bought a whole life policy, 99% purchased extremely inferior and expensive ones. I guess if their previous adviser was that good, they would never have jump ship and ask me for consultation. This may explain the shocking statistics. However, this statistic is not surprising to me. Their adviser simply recommended products that generate an extremely high commission for them or recommended easy to explain products. For the latter type of adviser, they go by volume. So by selling lots of simple products, they will earn a huge commission although the individual product may not have a high commission. Some advisers are smart, they recommend in this way: anticipated endowment and a regular premium endowment. They say that the payout from the anticipated endowment can be used to pay for the premium of the regular premium endowment. The client will be silly to think that the cost is reduced. Actually the agent earns twice for selling two products. Who pays for the commission? The insurer? Wrong! The customer is the one paying!

BECAUSE most of my clients already is cash strap paying a large insurance premium and yet continue to be underinsured, I have to help plug their holes which will always be: hospital & surgical, disability income and term insurance. These 3 plans will usually not be sold by any adviser out to go for a kill. Why? Because these commissions are either pathetic or the product is academically complex.

For those who come seeking for my second opinion, they usually will go back to the first adviser if my recommendation is similar to the first one. This is the right way but very few have the courtesy to tell me that I am just a second opinion. If that was the case, I will tell them to come to my office for consultation so that I can save on transport and time knowing that I am unlikely going to be compensated. It is not my practice to deliberately “snatch” the client from their original adviser.  

For the above reasons, I earn very little for doing protection planning. Fortunately my business is quite diversified because I helped a number of high-networth clients with their investments. Nevertheless, on a long-run protection planning is like a “cost-center” for me. Although my firm has given me the authorization to charge fees for advice, I shall not do that because I do not wish to exclude ordinary folks. Most ordinary citizens either cannot afford to pay or do not wish to pay for advice. If I start charging fee for advice, I will find myself exclusively targeting high networth individuals only. I don’t think I want to do that for now. Still, this is an option that I can exercise anytime.

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