- The agent who did not care for 5 years

The agent who did not care for 5 years

Written by Wilfred Ling

Friday, 03 October 2008

Yesterday morning I had a discussion with a client in my office related to investment planning. It was revealed to me that she has 3 investment-linked policies (ILP). 2 policies are single premium ILP using CPFIS while another is a regular premium ILP. The policies were bought 5 years ago. The client complained that the agent had never met up with her within those 5 years despite her repeated request to meet up. Due to the recent market volatility, she was very concerned about the sharp drop in the fund values of these 3 ILPs.

By right from 2003 to 2007 the market was in a bull run. So seeing all the profits become losses isn’t a very nice feeling. However, her agent just said, “everything will be fine and invest on a long term” but the agent still refused to meet up. A few months ago, she decided to switch some of the funds to money market funds as she feels very uncertain about the market situation. She did this by herself without going through the agent. Through this she learned something about investments and also the procedure for transaction.

I asked her to show me the asset allocation of the ILPs and immediately she login into her ILP account through the website via my notebook and showed me the asset allocation. I nearly fainted to uncover her agent’s “style” of asset allocation. Apparently 80% was in Asia. Out of the entire portfolio 20% was in India and another 20% was in China. This means 40% of the entire portfolio was just in two countries. Dunno what kind of asset allocation is it. So on the spot I advised her how her funds should be allocated using the insurer’s existing choice of funds (I must say that insurer’s funds are terrible. Super underperformance regardless of market condition). I told her that I will be able to review her 3 ILPs investments on a yearly basis despite the fact that I cannot be the servicing agent. She found this to be a good arrangement afterall what she require is someone to advice her – she can do the transaction herself without getting anyone else involved. The client also started a separate investment portfolio with me. Here are my comments:

My client did the right thing. Instead of complaining of her agent’s lack of support, she helped herself by reading up and finally did the transaction herself. Many people like to complain about this and that but really the solution can never be from complaining.
Not everybody has the time nor is absolutely passionate about reading up on financial matters although minimum education is still required. For such a group of people, they can always find another adviser who is willing to “take care” of the client’s existing investment portfolios even though this was not bought from the adviser. But the initiative has to come from the consumer. The “adviser” will not appear from the sky. These days with modern era of fast information, it is not difficult to seek help.
It is not entirely necessary for the client to “sell-off” all their investments and “buy-again” from the new adviser. If this is not done carefully, this can be akin to twisting in some cases. For investments that are not “parked” under the adviser, the client should seriously consider compensating the adviser in some equitable fashion. Wrap fee cannot be the model here because the assets are not park under the adviser. The only other way is through a separate arrangement such as a fixed cost retainer fee or variable cost retainer fee under the regime of Financial Planning.

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