Have you watched many Hollywood movies ? You must have seen how lawyers (in that movie) were debating in the court against another fiery lawyers. These lawyers represent their clients, they give their all for their client, everything is for the client’s interest. Why ?
It’s simple. They are legal practitioners, living by themselves, not tied to anyone. Then, the clients approach and pay a fee to these lawyers. The lawyers are not engaged to anyone, they act just for the clients who pay their fee. So, in those movies, the lawyers give their all for the client. It doesn’t matter whether the clients actually murder, rape, or other bad crimes, they will defend their clients to death.
They are called professionals. Of course, there are other learned professions out there who also behave in such manner, accountants, auditors, actuaries, architects and so on. These professionals often learn so much difficult knowledge to obtain the level of professionalism.
If we are to obtain advise, we must try as much as possible to get consultation from them. They don’t carry colorful marketing or beautiful name like “investment consultant ” or “financial consultant” with them, they merely introduce themselves as accountants, lawyers, or architects, but they are reliable and they act just for you, not some third parties. They don’t have other ulterior motives like getting more commission from you, they only get fixed fee from you and act whole-heartily for your interest only.
Such Professionalism is what we want from Malaysia. No matter what field we are in …. Buying insurance, investment, bodyguard, entertainment, or anything in Life that we spend our money for. We need the “Best Advice”, not advice from someone has hidden agenda to earn as much commission from you.
Insurance Agent
Well, no need for explanation, we all must have encountered such person at least once in our life. In short, they are salesman who sell life insurance and earn commission as long as you pay your insurance / takaful for 6 years.
Once they got you into the contract, they push you into automatically pay your premium/tabaru’ by credit card or auto-debit from bank, so while they sleep at home, insurance companies quietly take money from you (credit card/bank account). Once get the payment, agents automatically get their commission.
Who can be Insurance Agents ? Anyone can, even ones with no ability or no intelligence, can be…. As long you pass this one examination, namely, Pre Contract Examination for Insurance Agents (PCEIA). In Melaka, they hold it on Saturday at Sekolah Menengah Pay Fong. It is in either Bahasa Melayu or English. And most importantly, it was damn easy … just A,B,C,D, and the passing mark is also very low. There are 3 papers, A for Insurance, B for General Insurance, C for Life Insurance. For workshop operators who handle motor/car insurance, they go for A & B . In our case, life insurance agents, they go for A & C. I pass all these just after SPM without even studying even though I was just after SPM, it was not because I was great, but the test was just damn easy, meant to be passed. It was 13 years ago.
After PCEILI, after this low level easy tests, anyone can become insurance/takaful agents and advise people to buy insurance. Do you think it’s really fair to let your future be decided by such people ?
Unit Trust Consultant
This is the same as insurance agents, salesmen who act on commission, but it is bit harder in term of minimum requirement. You need to pass computerized exam by Federation of Unit Trust Malaysia (FMUTM).
Frankly speaking, I understand they are just merely one-sided salesmen who are only for commission, but I have some respect for them. First, it is a bit harder to be unit trust consultant. Secondly, they are true “gentlemen / gentlewomen” at least. Unlike insurance agents, they sell investment product in one lump sum, so they got no choice but go straight to the point. I always see life insurance/takaful agents go around the bush aka PUTAR BELIT, and half-lying, but unit trust salesmen are not able to do that due to the nature of products they selling.
Unit Trust Consultants are actually disadvantageous. It ls because life insurance agents also can sell unit trust, unfair isn’t it ? Life insurance companies all obtain unit trust investment license, and they indirectly sell unit trusts. But the unit trusts are hiding behind the investment linked insurance.
Life insurance agents can sell unit trust by merely passing Certificate of Investment Link Insurance (CEILI). Agents are required to pass CEILI after certain period of becoming agents. This seems is a headache among new agents. Don’t be mistaken. CEILI is damn easy, it’s just that they need to learn a bit more than PCEIA, but most of them lack ability to learn and they still need to sell some insurance at the same time. So, after passing this easy CEILI, what happens ? These people who are stupider than you can advise you on investment ?
The commission for life insurance / takaful sales is something agents eat for 6 years as long as within that period, we pay the premium/tabaru’. First year, 35%. 2nd year – 25%, 3rd – 15%, 4th year – 15%, 5th year – 15%, 6th year – 10%. For unit trust units sold by Unit Trust Consultant, they earn one time 2.5% commission. Same 2.5% also is earned by insurance agents who sell unit trusts.
In life insurance, unit trust is hidden behind investment link insurance, usually sold under the name “…… Portfolio”. The upline or senior agents usually tell the junior agents to only sell either saving insurance or Portfolio insurance. Saving insurance, I understand, agents can lie to people by saying that they will “get their money back”, believing the agent’s bullshit, people often thought they can get all their money back, so they pay a lot for premium not knowing they are being half-bulshited. Agents earn a lot from this.
For Investment/portfolio linked, for unit trusts sold, agents only earn 2.5% rather 35%, so why agents like to sell such products ? The reason, agents still get the normal 35% commission for unit trust linked insurance. It is because the so called unit linked is actually a plain normal life insurance products. They are quite costly once attached with various riders like top up premium, critical illness, medical card, acceleration rider and so on. If you pay RM200, only RM10 will go into investment. The rest go to protection, so agents earn RM190 x 35% from there, and only 2.5% from the remaining RM10. As the cost of medical card increases a lot every year, in no time the RM10 will be eaten, after that you must pay more, not RM200 anymore, and no money left for the investment. But agents like investment linked because they can lie, confuse people with the investment words.
Do you know, besides the sales target of 12 cases closed per year, they also must fulfill “persistency ratio”. “Persistency ratio” is like 75% of their customers must continue to pay premium/tabaru’. It is quite troublesome because many customers will quit after some time. But you see unit trust or investment linked insurance, these are not included in the Persistency ratio. So, that’s another reason why they push people to buy such policy.
To be an advanced countries like many great countries, government introduced Financial Market Master Plan. There were many things done , and there were even more things suggested by government but failed because rejected by insurance companies.
Nowadays agents are tied and serve for one companies, but Corporate Unit Trust Adviser (CUTA) was introduced to allow Unit trust Consultants serve more than 1 companies, so they can better advise for clients. But the requirement is RM100,000 paid up capital ! even if you get that money, unit trust companies will not let you be their agents because agents who serve for many companies are not good for their interest.
For life insurance industry, it is even worse. Everything that government suggested to protect our right were rejected by those companies. The life insurance companies lobbied for their billion dollar business and for interest of insurance agents, not us.
For example, government want them to be transparent, to be TELUS. They must disclose all the commission earned by agents from the insurance paid. Of course, they lobbied government not to do that. If we, the customers, know how much the agents eat from the insurance we pay, the agents will find it hard to sell (lie/mislead) us , the products.
Life insurance earned commission from products of companies. So, agents serve the Principal which is the life insurance, not the interest of us, the payers. Of course, they sell for commission. Of course, in front of us, they don’t tell anything, only how much “you need the insurance”. But behind our back, among the agents, they talk about sales target, talk about Million Dollar Round Table (MDRT) – it is an award for those achieve highest sales of life insurance.
They cannot speak of such thing in front of us. In front of us, they talk about how we need the insurance, how professional they are, how sophisticated agents handle the products.
Government wants to encourage professionalism. Professionalism is someone who has high knowledge and serve the customers, not the life insurers, but it seems that fails. Personally, I hate to see people being lied or misled by insurance agents, and continue being that way, believing it’s normal thing to do. I too buy insurance, but I buy from a friend who disclose everything, whether good or bad. So, that’s why he never full time in life insurance. He also earns from other business. His senior agents are mad at him because he doesn’t “want to become rich”
Altruism ? What’s is it ? It means we act whole-heartily for the interest of others. This is what government wants to encourage in financial industry. Clients pay fixed sum, not commission, and professionals act for clients’ best interest. We should be fully aware many product sellers out there who push us to spend as much as possible, to earn as much commission.
We must at least understand that. If you believe everything they boast at face value, we end up paying a lot of money for what we don’t actually need.
Filed under: Financial Planning, Insurance, Investment
