“An adviser is not paid until the client signs the dotted line”. This was a statement which a colleague of mine said to his client directly at his face. We were discussing about how much free work that advisers do and how many times we were duped by the clients. I didn’t think much about the statement until the last few days especially today I understand from a NTU survey commissioned by the Association of Financial Advisers that the public perceived Licensed Financial Adviser more expensive then an exempt financial adviser. One colleague (from another firm) looked at me and she said – “Huh? The amount of free work we do is so much and we are more expensive?” I want to write something about this “free” work which is a subject that is close to my heart.

1. A cleaner get paid for cleaning the house
2. A childcare center get paid for taking care of the kid
3. A doctor gets his consultation fee for giving medical advice (plus earning a profit for selling his medicine)
4. A lawyer earn by giving legal advice
5. An accountant earns by sorting out the accounts
6. An auditor earns by checking the accountant’s work
7. and the list can go on

Therefore, giving free service is an economic activity that is uncommon. Free service is indeed common in the charitable arena. Other then that, at times it violates the common sense that nothing comes for free. In fact, it is economically dangerous for a large proportion of people holding on to jobs which comes with no remuneration.

In the light of this, it is at times a rather perverse view of many clients seeking for financial advice to expect free advice. Yet it happens just too often. Is the advice truly free? Maybe for one or two cases on a good will basis – yes (I’ll readily give free advice with zero strings attached to my parents, sibling and wife and good friends). But to all people?  Of course nothing comes for free. To the client, this has tremendous implications. To the adviser, there is not much to say because this is intuitive because no adviser works for free for all people at all times. Intuitive? Yesterday I heard a speaker briefly touched on this issue and we were reminded that it is NOT intuitive of a client to understand the implication of this principle. When I think deeper, it is indeed not intuitive of the client to understand this simply because most people already got a serious problem understanding financial matters like investment planning, retirement planning, insurance, debt management, estate planning, taxes (blah blah blah) – that’s why they need to sought the help of financial advisers. It will be beyond the client to understand how the adviser is paid.

To be sure, the phrase “The adviser is not paid until the client signs the dotted line” applies to all financial advisers regardless of remuneration model. The models are: fee-based (sell service only), commission-based (ie. sell products only), salaried-based. In all these models that same principle applies. For a fee-based advice, he is not paid until the client signs the financial planning servicing agreement (thus binding the parties into a contract); for commission–based, he is not paid until the client signs the proposal form (for insurance) or signs the transaction form (for investments); for salaried staff his pay will cease (through termination) if he or she fails to ensure enough clients sign on the dotted line because all salaried staff has some kind of quota to meet.

There was a time which I will meet anyone at anywhere and at anytime for an appointment. Then I discovered I found myself worn out and very tired. Subsequently it affected my service quality to my existing clients who actually complained to me that I was “slow”. In fact, one client (not really a client then but a potential one which we use the jargon “prospect”) even issued a formal complain against me. It was indeed so discouraging. Then I also discovered that my paycheck was below poverty line. I knew that I had the knowledge and competency. I know I worked hard – sometime harder then others. But what then was the problem? At first my colleagues told me that the problem must be me ! But what was that problem? Then I discovered that my problem is the problem that ALL advisers had experienced and accepted as part and parcel of their occupation. The problem was indeed me which was the lack of understanding on the true meaning of “The adviser is not paid until the client signs on the dotted line.” Without fully appreciating the impact of this statement, I was practically indiscriminately giving free advice and service to people. Then I became wiser and discovered people using my advice and proceeded to buy the recommendations from some other people because of rebates or discounts. Then others who wanted second opinion came to me (without telling me that they will never buy anything from me if my recommendation is in line with the first opinion.) Some would also use my recommended investment portfolio and do-it-themselves (DIY) through discount online portals.

Then I knew I had to do something. So I installed “filters” which are actually mental categorization of the various people I meet. I would categorized them in order of priorities. Ideally I would serve those who are the most sincere and serve the “free-riders” last. But I got it wrong many times due to inexperience because this kind of thing is very subjective. But there isn’t seems to be a short-cut as the only way was to continue to refine my mental filters. Through experience I got quite good in it. At the same time I also discovered very good clients recommending me to their friends, spouses and relatives as referrals which I would place them high up in my priority category for obvious reasons.

Yet the number of clients who wants to see me gets more and more. Perhaps it is because I like to write for magazines and it tends to be many people calling me. Sometime they don’t know my handphone number but they would call the office who will give them my handphone anyway if I am not in the office (my handphone is free-incoming call and so I have no worry. Also I am not worry about salesmen calling me to sell things because I will my sell stuff to him first! Haha!). So the problem of being “slow” still persists because of my busy schedule. Then I discovered that my productivity increases significantly when I meet clients at my office during working hours. Perhaps it is because both client & myself are alert during those hours. At the same time, I started charging fee for consultations. These have served some clients very well because they know upfront that there is completely no obligation to buy anything because of the fee that already paid. The conducive room with a properly adjusted air-con is so much better then a noisy KFC or McDonald. When I started asking new clients (or prospects) to come to my office during working hours, I discovered a new range of clients coming in. These are those who are not just merely looking for insurance or investment portfolio advice. They came with all sort of problems. Some with martial problems, some with terminal illnesses (am not exactly sure whether they are still alive now or not), some with extremely complex estate planning problem because they are too rich (!!) and those with “secret” occupation that they don’t want to tell me but I can guess of course! Also, I come across all sort of cases which at this point I can say that nothing surprises me nor is it too embarrassing for me to now. Some of the secrets are so secretive that not even their spouse or parents know about it. But I have to know due to the nature of my work. At times they have to tell me so that I can appreciate the magnitude of the problem in order to give an appropriate financial advice and other times because these are material information that I must provide to the insurer which otherwise would void the policy contract. I am very sure that none of these could have happened at the noisy KFC or McDonald in which there is absolutely no privacy whatsoever.

Insisting new clients to come to my office has its drawbacks. Some clients (or prospects) just go for the convenience. So when I told them my venue and schedule, they would just go along with another adviser if the adviser can visit to at the place of their convenience. At times I felt that I have lost so many cases just because of the rather strange way of doing things. Now, I know what my existing clients are thinking – if I am going to lose such cases like these frequently, will I still be around anytime soon? One thing is for sure is that prospects frequently ask me this question: “What will happen if you leave the company or industry?” They are afraid that their policies or investment will be left unattended or orphaned.  I cannot tell the future but I can state the fact based on historical data. For the first five months of this year, I was considered a top producer of the firm for 3 months which was namely January, March and May. Also one particular product manufacturer has invited me to an oversea training trip lasting five days at a capital of a far far away country (not the immediate neighboring countries lah is my point) because I was considered as one of the top. As what I understand, there are only such 40 (if my ears didn’t fail me) individual IFAs in the entire Singapore who qualify for this trip. [Unfortunately I have family commitment, so no trip for me. Family is number 1, not trip]. As far as investment is concerned, my AUA (Asset Under Advice) is a healthy 7 figure number and I don’t think it will go down anything soon. For one thing is that I’ll stay longer in the industry then the average Joe. There are only two reasons which I’ll leave the industry – early retirement (I preach that to my clients and so I must practice what I preach!) and death (which the day is unknown but guaranteed to happen one fine day). OK lah, I’ll stop work once a while for a few weeks for holiday, and maybe tuition my kids if a major exam is coming.

Enough of a blog tonight. A 1843 words blog entry has made me tired. Good night!

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