Recently i have my clients and friends asking me whether should they buy insurance products from banks or from me (tied agent)?

Well personally i felt that the answer is the same as you asking yourself ‘Should you go directly to manufacturer to buy products or you should buy from a distributor’ Same things but different pricing. The price that you pay if you go direct to manufacturer is so much cheaper compared to distributor where they will mark up the price by abit to earn the margin.

In our context, buying insurance from us(manufacturer) is more beneficial compared to from the bank(Distributor) 

 First of all, ask yourself this question: ‘Is the agent from the bank going to be your long term consultant or do you think the one from tied agency would possibiliy be the one staying long term?’ Which one has the incentive to do their work better? I believed the answer is quite obvious. The moment you signed on the documents inside the bank, the liability lies directly between the insurance company and yourself. The bank consultant cannot be seen inside your future financial planning process. On the other hand, the tied agency agent will continuously be there to service you making sure that you are covered for every single thing from head to toe.

Of course, i would like to make a disclaimer first by saying not all tied agency agents are Mr or Mrs nice guy/lady or they will choose to stay long term. Nevertheless tied agency agents have more incentives to do their work well. Just take a look at lehman brothers and you would know why i say so.

Second of all, ask yourself this question: ‘ How is the consultant being compensated inside the bank?’ Is it through commission by clearning sales target of different kind of products? Over in bank, most of them are rewarded based on their overall sales target for different kind of products. Meaning to say that if they failed to hit one type of products then they will not be entitled to full commission. However for tied agents, we are rewarded for any products that we recommend to our clients. We does not have a particular sales target to clear and therefore we will always recommend based on client’s need.  Again my disclaimer for this would be that tied agent MUST disclose their commission to clients to show if they have any bias towards any policies sold.

Last question that you can ask is whether bank consultants do a fact-find or rather understand you first before they sell you any products? How long do you know a bank agent before you decide to buy from them? Comparing to a tied agent where he/she will spend quality time knowing and understanding you, who do you think will recommend products based on your needs. Time spent does matter because without a proper understanding of client’s needs, it is hard to be able to properly recommend a product that suits their needs.

Involving financial planning is a time consuming decision process and many of us are not really keen on going through. Many felt that any plans will do the magic but they are all wrong. One wrong commitment may turn out disastrous in long term. It is always good to find the right agent who possesses the passion and interest in their career. Only with the right qualities, they will put your interest in the first priority because they live by the theory that if they take care of their client, their client will take care of them! =)

Note: Above are my two cents worth of thoughts. It does not constitute to any financial advice. Please do your own research before deciding on doing anything on your futre.

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Yes, the problem was that most of them are having a regular endowment saving plan from insurance company as their first policy! Some of them even took up a saving plan that amounts to 20% of what they take home. Personally i find it being too ridiculous to pay so many for a saving plan when the person has not even taken up any life insurance!

Guess this is what happen if a person buys a plan off the street without a overview of his/her financial situation. Some consultants will make sure of their ‘charm’ to ask customers to buy big amount of saving policy when they are young, claiming that the more you save the more you will get for retirement. While this is true but it only applies if you have settled for the wealth protection of an individual. Imagine how can one effectively builds up his/her retirement when he knows that the moment he is struck with illness, all the so-called money will be gone! Hence in my personal opinion, an individual should always meet up with his/her financial planner a few times before deciding on a policy and most importantly, get a life insurance or hospitalisation policy before anything else comes along.

Another reason why people will buy a saving plan first is also because some unethical consultants instill the idea that by getting a saving plan, they are comparable to a normal insurance as they also gives some life coverage. While it is true that saving plan comes with insurance coverage but they have to understand that the amount of insurance is too little to be enough for a person’s coverage. An ideal coverage should take up 10 times of the person annual income so anything less thatn that, it will be considered under-insured.

Saving plans are good but it will come in useful only when you have enough money to start preparing for your future! Before that, please get a life policy which can cover you for death, disability, major illness, accident & hospitalisation benefits. Hopefully by reading this story, people out there will be more cautious on getting a saving policy first!