In your efforts to manage your money and plan for financial security, are you sometimes persuaded to buy a product or engage a consultant’s services on the basis of claims such as:
"This is the best financial product in the whole industry."
"We are the best financial services company."
"I am the best financial consultant in the business."
Such statements are not uncommon in the financial services industry, so how do you decide whom to trust or which financial institution to place your business with? You will be grappling with these issues when you graduate and start planning your finances or perhaps even now as you take stock of your retirement plans.
Let us look at these common statements to get a clearer picture of what is truth or myth:
1. “This is the best financial product in the market”
There is no one-size-fits-all product in the market. What is suitable for one person may be unsuitable for another. A professional financial consultant should gather information about your financial needs and status before making any recommendations. You would expect your doctor to prescribe medication only after he has made a diagnosis, so have the same expectations of your financial consultant.
Ask your consultant: “On what basis is this recommendation suitable for me?”
2. “The more awards the better”
Awards do give an indication of a financial consultant’s performance. However, do keep in mind that awards are mainly measured by sales performance.
Just as a fast food chain that sells the most burgers may not have the best cooks, a financial consultant who has achieved a high sales performance may not necessarily be the most suitable person for you. He may be a persuasive salesman, but is he putting your needs first or his sales targets?
Ask your consultant: “How did you qualify for the awards?”
3. “We are the best financial services company”
Reputation and branding matter, but the key question is how much emphasis you should place on them. Different financial services companies claim to be the best, so which is really the best?
Well, they could all be the best and that depends on the basis of your measurement, for example, new business sales or assets under management.
Ask your consultant: “Best in what area?”
4. “We can source for you the best products from different companies”
This would be possible only if a financial consultant has access to all financial products from all financial institutions and the financial products can be easily compared to one another.
Unfortunately, like the theory of perfect competition in Economics, this could prove elusive in the real world. Major financial services companies still use their own pool of financial consultants as the only distribution channel for most of their products.
In addition, competing financial products usually have different pros and cons. Make sure the financial product recommended is best suited to you and not the one that is best for the financial consultant in terms of remuneration.
Ask your consultant: “How are you remunerated for the different options listed in your recommendations?”
When you come across these statements, make sure you ask the consultant to back them up. A good financial consultant will help you make investment decisions that are appropriate for your needs, and these change according to what stage of your life you are at.