The financial turmoil experienced in recent years and the bewildering array of financial products in the marketplace have made investing and planning for the future increasingly perplexing for the average consumer.
This is why many seek the expertise of financial consultants to make sense of it all.
Today’s financial consultant has evolved to meet the ever-changing demands of the industry and the needs of a more sophisticated consumer, thanks to more stringent industry regulations and changes in the financial environment.
Over the years, the insurance industry has witnessed regulatory changes that have been introduced to protect consumers and to establish greater professionalism in the industry.
The Financial Advisers Act, introduced in 2002, ensures that financial consultants meet minimum entry and examination requirements and are certified “fit and proper” before they can sell and provide advice on financial products.
More recently, in 2009, the Monetary Authority of Singapore introduced fair dealing guidelines to ensure that financial consultants are able to provide a sound basis of recommendation and offer products and services that adequately cater to customers’ needs.
The guidelines were also implemented to ascertain that representatives are trained, competent professionals who can perform their jobs effectively.
Such guidelines help to protect the consumer against unjust practices while elevating the standards of the industry.
The importance of trust
Even with savvier customers and better-trained financial consultants, trust between the two parties remains central to a successful customer-financial adviser relationship.
To be a trusted adviser, the financial consultant of today needs to be multi-dimensional by being technically knowledgeable while having the ability to understand his customers’ financial goals and find the best combination of products to help them reach these goals.
With a move to a more needs-based and holistic approach to selling, the financial consultant needs to ascertain the customer’s risk profile, where he is in his financial planning journey and what he wishes to achieve before providing any financial advice.
While the onus is on the financial consultant to ensure that the right products are offered to meet a customer’s needs, the customer also needs to be more transparent with the financial consultant.
This is to enable the latter to dispense the right advice and recommend the relevant products based on information he gathers during the initial fact-finding interview.
The current state of volatility in the global economy has also created an air of uncertainty as people become more cautious about their financial decisions.
Given the pervasive sense of insecurity, what customers expect are sound advice and a firm guiding hand to help them find solutions to specifically fit their needs.
In this climate, it has become even more pertinent that financial consultants are equipped with the right skills and information so that they are able to offer reliable advice and quality service to their clients.
This has compelled financial institutions to invest in more training resources to develop their consultants and to equip them with the most effective tools to improve their efficiency.
Also appearing on the horizon is the Customer Knowledge Assessment that will be implemented in January next year.
Designed to protect inexperienced investors from losing their savings, this new measure calls for financial institutions to conduct an assessment with consumers to ensure that they are financially knowledgeable before they are sold Specified Investment Products.
For a healthy progression of the industry, it is vital that financial consultants display high standards at all times.
As the insurance industry endeavours to move towards higher standards, the practices and processes of the professionals have to also evolve accordingly.
With increasing affluence, and as consumers generally become more knowledgeable about financial matters, financial consultants need to ensure that they are savvier, more knowledgeable, more technically competent and more customer-focused to be able to meet the expectations of their more sophisticated customers.