When I first join Promiseland, a financial planner – who had many decades of experience – advised me the importance of “underwriting” a client before proceeding with the business proper. (Underwriting is an insurance jargon describing the process of the insurer in assessing the risk of the proposed insurance coverage and to decide whether to increase premium, impose exclusions or decline the business). Of course for myself, in this context I am not referring to medical underwriting but rather in assessing the occupation risk in doing business with a new prospect. Occupation risks associated with new prospects are:

1) Money laundering: where huge amount of money from questionable source are to be invested by the client. An example of a sign of money laundering is when the client buys an insurance policy with huge amount of money only to exercise his free look later on. This is known as “layering.” A sign that money laundering could occur is when the size of the money is relatively out of proportion with respect to the client’s life stage and occupation. Also, refusal to perform a fact find may indicate intention to hide material information.

2) Other illegal activities such as the request by the client to invest CPF monies and in return asking for a commission rebate. This is equivalent to indirect withdrawal of monies from CPF which is prohibited by the regulator. A sign that such a client may ask for such rebate is when he openly tells the adviser to charge any sales charge and wrap fee he likes. No genuine investor will ever do that. Every “normal” person will ask for a quotation of the sales charges and fees.

3) Window shopping prospect. A window shopper is a client that goes around asking for quotation and advice but had no intention to buy anything. A sign that a prospect is a window shopper is when he has a history of consulting many advisers and every adviser seemed to require another “second” opinion.

4) Using medical insurance to get a free medical checkup. I know of an adviser who sold a disability income insurance which the insurer called for a medical checkup. After the checkup was made, the insurer accepted the insured on standard risk for which the insured subsequently declined. As he did not pay the initial premium initially, the cost of medical insurance was borne by the adviser which turns out to be a three figure sum. To hedge against such risk, I always ask the applicant to pay the initial premium together with the application so that in such a scenario, the cost of medical will be deducted from the premium already paid.

5) Highly calculative individual down to the dollar. I am wary of individuals who place undue concern of charges or fees or quotations down to the very dollar. Such overly cost conscious individual may create future problems such as termination of insurance policy, exercise of free look and complains against poor servicing if he could find another source that can give discount, free gifts, rebates or perceived better service. The early termination of insurance policy and exercise of free look and complain against poor servicing could generate huge amount of compliance queries and invite unnecessary attention from the regulator.

6) I-know-everything-client who thinks all other advisers are wrong. Such a prospect could be a highly knowledgeable in finance matter but is a troublemaker. I know of one such person who has the habit of boasting his knowledge in finance in a public internet forum at the expense of condemning all other advisers in the industry. The ego of such a person will be too hot for anyone to handle.

7) A person who asked so many difficult questions but never endingly satisfied with the answer could potentially indicate a lack of trust. The professional financial adviser – at the end of the day – requires that the prospect or client place a certain level of trust. Although nobody is infallible, a lack of trust cannot provide conducive environment for a professional relationship.

8) The free loader. Such a prospect has the habit of asking for free advice. While advisers should not be calculative in giving free advice, any advice given comes with unlimited liability. It is not the interest of the adviser to give free advice to unknown, questionable persons.