This is quite personal thus the entry here (and not on the financial blog) ……
Alert ones out there who may have / may not have taken note my latest tweet at the time of writing detailing my frustration with a client’s ‘vague and non-commital’ response …… Just to give some background, the situation is like this :
When I did my annual investment review with client back in early March, client expressed the need to temporarily suspend/terminate the regular saving plan (into unit trusts) due to cash flow issue. The cash flow issue is due to addition of new born (twins). As we went further into the review, I also found out that said client has already/recently committed to some plans for the children via his/her insurance adviser who is a tied agent (meaning can only represent 1 company’s products).
As some of the saving/budgeting issues were discussed during the previous 2 reviews, in this case, client has cash flow issue – part of it comes from daily needs and expenses, the other part, probably overbudgetted for the childrens’ financial planning, thus what has to be sacrificed, in this case will be parents’ retirement and protection needs (the protection needs in particular should take a higher priority than expensive children education plans).
Based on the above, it is pretty obvious that cash flow and budgeting is an issue and it should be the 1st main priority to address. 2ndly, as client has twin boys, protection / risk management needs for both parents is just as important as well.
For all CFP textbook principles as mentioned above, a lot of times however, most parents in all that excitement and europhia, start to commit to expensive plans that hardly meet their real needs.
Wait ….. sounds like a very bold statement to make!
Well, in this case, like I mentioned, to quote client’s words “I’m not sure how much I am paying in total every month. I let my agent plan everything and caculate for me.” ….. Like I said, said agent is a tied agent that can only recommend products from a single company. And based on the track record of agents from ‘that company’ , it sounds like an ILP (CMI product) + 3G Insurance Plan (which may I add, is an expensive and very mis-marketed product) that in total, upon more analysis creates very little value for the client taking into consideration the kind of $$ they are committing month in month out.
So I came up with another alternative solution and followed up with client over phone today. however he sounded vague and noncommital about his intentions and plans. From his tone, I doubt he has even seriously looked through the proposal. In addition, he was supposed to fax me the plans that he did but till today, I have yet to see any fax.
So is it a procrastination issue or simply an issue of a closed mind?
1stly, although client thinks that he is well taken care of by his agent/adviser, why is there a cash flow/budgeting issue? When the agent proposed the plans, was cash flow/budgeting issue taken into consideration? Or adviser just let client drive the sales process and happily propose something that sounds good to the client from a marketing point of view (but in reality does not work out as good as it sounds)? And why the vague and noncommital answers – which give off the vibe of want and don’t want at the same time. Character issue? The thing is if he feels that every aspect of the financial plan is well balanced and well thought out, why did client ask more questions about what we have? Why did the client say he has ‘no time’ to look into further detail and used busy-ness as a reason to delay making a firm decision? …….. If what was originally proposed was that suitable, I’m very sure all these questions would never have come up ……
Do note that this is not a post to trash tied agents and their products/recommendations …… but based on experience of talking to clients and from reviews, I did note that their product recommendations do follow a very standard pattern, and being restricted already in terms of products/solutions just compounds the whole situation/trajectory …..
So how does this relate to the title of this blog entry? To put it simply, shopping for products based on company’s brand name is akin to buying meat at a market – i.e. Piecemeat Approach. Maybe the steak that you are eating today is a guilty pleasure (imagine it medium rare) …… but you know that eating steak everyday is not substainable and it is a balanced diet consisting of moderate amounts of carbohydrates, protein etc. that will keep us healthy in the long run …… There is no such thing as zero carbohydrates in the diet (sorely for purposes of immediate weight loss) but the point that I’m trying to make here really is that everything is all about BALANCE, and managing priorities and expectations …… And in the context of financial planning, buying/collecting products is akin to piecemeat approach as versus to a thorough action plan that takes into account goals and objectives and prioritizes them accordingly, and allocates cash flow accordingly in order of importance …… because cash flow is the key thing will determine whether you have a 5 or 6 figure bank account, the amount you have for daily expenses and future short and long term goals ……
As I have mentioned in my financial blog (refer to this entry), we all live with unlimited dreams/wants/desires and yet we only have limited resources to meet them/acheive them one step at a time …… So it is our role as financial advisers to anchor our clients with a proper and systematic road map and steer them towards their goals and dreams ……. always remember that products is ONLY A TOOL to reach their goals and dreams …… The challenge here is that to get the client to commit to save for emergency needs and future growth, it takes a lot of commitment – from adviser to constantly communicate the message and provide encouragement …. from client, particularly a spendthrift who places more priority on material wants, the commitment to change some inherent habits and work towards longer term goals like adequate emergency funds and comfortable retirement ……
That’s why I always bitch and rant that financial planning is a roadmap process and not a products buying exercise. Just buying products without well thought-out rationale and keeping in mind the bigger picture only spells disaster. Which is why product selling approach (practised by the 3 major tied insurers + banks) will rear its ugly head in the long run …….
If you are wondering why am I bitching so much, 1st, because I care. 2ndly, this is my personal blog and if I don’t even have the freedom to express my thoughts out aloud, something is not right. 3rdly, writing about the issue/frustration/situation helps me reflect and take stock better and is my way of composing/fleshing out my thoughts and this post will be a good reminder/wake up call of the things that I SHOULD NOT DO in my daily practice!!