Assuming that you already decided that this is the right career path for yourself, there are 5 key things you need to look at when choosing what financial advisory firm you are going to join. The 5 key things are:

#1 – What type of advisory platform should you join? A bank, an insurance company or a multi-tied or IFA?

This depends on your target market, current network, abilities, working preferences and your view of the market development. If you are not confident of able to pull in clients by yourself, perhaps the bank environment will be a starting point for you to hone the necessary skills. If you have an independent streak and love challenges, a bank environment, then may not be suitable. If you are transiting to a second career, with good network, you might like to consider an IFA, which offers a larger choice of products for your natural market.

#2 – Is the firm credible, a market leader and has a decent reputation in the market?

If you are joining an IFA, you should ensure that the firm has strong financial backing, because IFAs are on their own and not supported by any financial institutions. It’s not surprising that smaller IFA firms can go under when the going gets tough. You should ask around trusted sources for feedback on the firm’s leadership position and reputation in the market. If you want to join, then joint the best!

#3 – Look out for firms and groups with a strong culture, and sense of purpose, and if it aligns to your aspirations of what you want to be as an adviser.

You’ll need a positive group of colleagues and role models to work with. Some financial advisory groups may be very profitable but somehow inside you when you associate with them something is tingling. That’s your cue that your inner alignment may not be suited with the style of working of this group. Be open and talk to more people, listen to your heart as well as your logic.

#4 – Join a group with Good Mentors and Training System.

Verify the track records of the manager and mentor you are going to join. Talk to both their very successful advisers and less successful ones. Ask how has the mentorship enabled them to grow in the business, ask about their experience and track record. Success breeds success, find successful mentors that can guide you, and you can see eye to eye with. Ask the advisers how they have been trained and if they can show you some of their methods and ways of developing the advisers.

#5 – Ask about the how the Marketing activities are supported by the company and group.

Most people fail as financial advisers because they did not have the right marketing activities to bring them enough profitability. The way that the group or company supports marketing activity can make a huge difference. Firstly, avenues are open to you to expand your circle of prospects, secondly with a strong culture of marketing activities, you will be motivated by fellow workers also working diligently.

To be read after you read “What’s the Competition Landscape in Financial Services in Singapore? Part II” and “Am I suitable as a Financial Adviser?”

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I’ve just posted a poll on which CFMAS Exam is the most difficult and requires most preparation time. Collectively, I think we have a better answer.

In my opinion, M5 is the driest, lot’s of memory work, best to do some cramming (2 full days before). M9 involves some calculation and understanding, thus spreading out the studying over 2 weeks (1-2hrs a day) would be better. Health insurance like M5 is a bit dry, questions can be quite tricky and not straight forward, so do lots of mock exams! M8 is not easy for those without a business diploma/degree background, so be prepared to spend 2-3 weeks of preparations, focus on practice of mock exams but understand the topic well. M6 difficulty is at least twice that of M8.

That’s just my feedback. Perhaps, collectively more light can be shed here.

Kindly participate in my poll if you have already taken the exams and help the newbies, ya?

Poll Answers

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Well there are 3 types of Financial Advisory Firms which has different licensing requirements:

1. Personal Bankers are under the Exempt FA license, but personal bankers need to take M5, M9, HI, M8. M6 is usually required to market structured products, bonds & other securities. M7 only if you advise on futures & other derivatives.
2. Financial Planners under Insurance Companies need to take only M5, M9 before being able to market life insurance products or riders without Major Illness or Medical coverage. HI is needed to market with Major Illness and Medical. No need for the rest of the exams.
3. Financial Advisers Representatives (FAR) under Financial Advisory Companies (multi-tied or independent) have the same requirement as financial planners under insurance companies, but require additional M8 to market collective investment schemes. Under M8, the FAR is required to have a basic understanding of unit trusts and other collective investment schemes in order to competently market them. M6 and M7 are optional.

M5 Rules and Regulations for Financial Advisory Services covers (100 MCQ, 2hrs):

M9 Life Insurance and Investment-Linked Policies covers (125 MCQ, 2.5hrs):

• Introduction & Basic Principles
• Benefit Design
• Disclosure & Sales Process
• New Business & Underwriting
• Policy Services & Claims
• Law & Taxation Affecting Life Insurance

M8 Collective Investment Schemes covers (50 MCQ, 1.5hrs):

Contents

M6 Securities Products & Analysis covers (50 MCQ, 1.5hrs):

Contents

Health Insurance covers:

• Overview of Healthcare Environment in Singapore
• Medical Expense Insurance
• Disability Income Insurance
• Long Term Care Insurance
• Other Types of Health Insurance
• Managed Healthcare
• Healthcare Financing
• Common Policy Provisions
• Health Insurance Pricing
• Health Insurance Underwriting
• Needs Based Analysis and Co-ordination of Benefit

You can find other resources and info below that will help you in your journey:

Forum about licensing exams at Hardwarezone

Admission Requirements, Exemptions for M6, M7  from IBF

Admission Requirements, Exemptions for M6, M7, M8 from MAS

Links for Exam Preparations:

Achieva Training: Mock Exams and Classroom lessons

CMFAS.com.sg: Mock Exams

Anyone has any other comments and advice about exam preparations? I’ll be glad to add it in if constructive.

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I thoroughly enjoyed this entertaining and insightful slideshow about six important Career Lessons by Dan Pink author of The Last Career Guide You’ll Ever Need

1. There is no plan. Try as you might, it’s usually not possible to chart an exact plan. But there is a way…

2. Think Strengths, Not Weakness. <much like Gallup Management Journal’s concept of working on strengths not weakness. See the book StrengthsFinder 2.0: A New and Upgraded Edition of the Online Test from Gallup’s Now, Discover Your Strengths>

3. It’s not about you, it’s about helping others, as Napolean Hill said “It is literally true that you can succeed best and quickest by helping others to succeed.” – Think and Grow Rich: Revised and Updated for the 21st Century

4. Persistence trumps Talent. As the saying goes:”Your Attitude determines your Altitude.”

5. Make Excellent Mistakes. “There are no failures, just experiences and your reaction to them.” Tom Krause Touching Hearts, Teaching Greatness

6. Leave an imprint.

Do enjoy and leave some comments.

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Now that you know the career path and roles of financial advisers, how would you like a crystal ball that looks a little into the future and let you see how you are faring as a financial adviser or even how you are enjoying your career?

Knowing your personality and career profile can help you avoid getting in a career you are not suited to and also look out for potential pitfalls in the future.

Personality and Career Profiling tools have been around for decades to help businesses recruit and train their workforce. While there are no best profiles, there are certainly profiles that are more suitable and certain types that are usually ill-suited as a Financial Adviser.

Personality Profiling Tools

There are a number of personality profiling tools available, of which the DISC profiling tool and the Myer Briggs Type Indicator are some of the most popular.

DISC is an acronym that includes the four elements of “Dominance”, “Influence”, “Steadiness” and “Conscientiousness”. In my experience, people with high “S” and “C”, with low “D” and “I” are the least suitable as a financial adviser. Advisers with a high “D” and “I” have the highest success rate, especially if they develop a passion for this business. Those with a high “I” and high “S” or high “C” need to be careful, as they have ideas, and are people oriented, but may be easily shaken by the constant challenges of this career.

The Myer Briggs Indicator tests your preferred choices in handling work situations. It classifies personality groups by examining four opposite characteristics of personality traits. Extroversion (E) vs Introversion (I), Sensing (S) vs Intuition (N), Thinking (T) vs Feeling (F) and Judging (J) vs Perceiving (P).

Most suitable type of personality are the ENFJ, ISFP, INTJ, ESTP, ENTJ, ESFP, ENTP not in any particular order.

Career Profiling Tools

While personality tests evaluate the matching of behavior, and attitudes in work situations, career profiling tools like the Harrison Assessment looks at how you’ll be enjoying your career and consequently how well you will perform. Based on the Enjoyment-Performance Theory, it states that an individual will perform more effectively in a job if that individual enjoys the types of tasks that are required by a job, has interests that relate to the position, and the work environment conditions correspond with the person’s work environment preferences.

It assigns a suitability score based on your task preference, interest, preferred work environment, interpersonal skills motivation, decision-making style and Leadership. When matched with the career choice, it can also give you an insight about the challenges you will face especially if there is a mis-match.

See a sample Harrison Assessment Report. Purchase a Harrison Assessment Report online.

Once you have assessed your suitability as a Financial Adviser, the nest step is to select which companies to send your resumes to.

Please read “What’s the Competition Landscape in Financial Services?” before going on to the next article where you’ll find “5 Tips to Choose the Right Financial Advisory Company”.

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Three significant changes have a lasting impact on how Financial Planning will be conducted in the future.

1. Migration of cheaper labour limiting Income Growth, threatening jobs.
2. Increasing Healthcare costs and Greying Population
3. Shorter Business Cycles due to Fast Government Intervention

This calls for a paradigm shift in traditional thinking about Financial Planning and Advising, in order to exploit the situation rather than be a victim to it.

Job Insecurity

Job Insecurity will be a certainty, with economic restructuring as a result of competition. Especially with globalization occurring at such a fast pace, one cannot assume that his job is secure or his skill is relevant in the years to come.

On a personal level, people have to constantly upgrade their skill-set to remain employable. As for financial planning, the first thing is to keep (1) an emergency fund that can last 6-12 months of expenses and (2) an opportunity fund, so as to invest in crisis in shorter business cycles.

Secondly, when implementing insurance plans, build in flexibilities to reduce monthly contributions, or even stop for a while when retrenched. This is crucial to maintain insurance coverage, as cost of healthcare is very high and rising.

Thirdly, consider building multiple streams of income, so that the dependence on employment income can be reduced over time, there is less anxiety when retrenchment comes and there is cash flow available for investing when everyone else is selling.

How can you build Multiple Streams of Income? Preview it here.

Investing Strategy – Manage Risks and Leverage

With shorter financial market cycles, there are opportunities for active asset allocation and application of leverage.

As the market rises and consequently over-heat, gradually reduce risk by moving to safer assets and reduce leverage. At appropriate troughs of the economy, gradually increase risk and employ controlled leverage based on your ability to sustain interest payments via cash flow (possibly from alternative sources).

While traditional buy-hold-rebalance according to Risk Profile, would still work on the long run, in the short run, the volatility as seen recently can easily shake the confidence of “long-term” investors with low tolerance to volatility.

Investors that do not use leverage to their benefit will also lose out to those who can appreciate the fine art of managing Good Debt.

Implication to Financial Advisers

• Build in flexibility in protection and accumulation plans, otherwise clients may have to give up their plans half-way.
• Help them build MSI through various means; this ensures they can continue their financial plans in case they lose jobs.
• Learn to advise on the use of leverage, and understand investing better, relating to the different phases of the business cycle.

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Being a Financial Adviser is not the be all and end all, in fact there are different routes in the Financial Advisory Business. What you eventually take depends on what you want out of life, your talent and passion.

Are you someone who really enjoys the challenge of “climbing the corporate ladder”? Are you someone who wants to be the person in charge, make your own decisions? Do you feel you have leadership qualities inside you? These questions need to be answered before you can really decide whether you are better suited to the Financial Adviser Career, as a Practitioner or Financial Services Manager or go along the Corporate path.

As a Practitioner, you’ll serve clients over their lifetime’s financial needs, which evolve as they grow in their careers, net worth and family situation. You have to keep up-to-date with current affairs, changing regulations, evolving products and even the competition. A good practitioner also works on building loyal lifetime clientele, which means that you must continuously value-add to the relationship. As clients grow more sophisticated, you also have to grow in competency in providing financial advice like investments and estate planning.

In the business aspect, a financial services practitioner has to systematize his business in the areas of marketing, administration/operations and most important of all customer relationship management. Your job will be to build pipelines for new business, so you have a consistent flow of referrals and leads.

With more clients, you can expect more admin work, which eats into your eyeball to eyeball time with your clients. Without a proper system of managing admin like form filling, and operational issues like Investment Portfolio adjustments, your customer care will suffer.

Clients like to be treated well, so implementing different ways of keeping in contact with them, rewarding them and enrolling them as your advocates makes the difference between a great and mediocre financial adviser.

With a well organized business system and the right clientele, you’ll be enjoying a great quality of life as a Financial Advisory Practitioner in no time.

Required: Enjoys being put into a sales and customer service role, able to think and act as a small business owner, have a passion for people and financial topics

Managers earn a portion on the profitability of advisers they recruit, called over-riding. However, in my opinion, the Management path is an over-sold concept by many financial advisory companies. While it certainly makes sense financially when you think of it as leveraging, it is only profitable if you can grow a large and loyal team of financial advisers, or a smaller group of highly profitable individual advisers.

Time notwithstanding, to grow large and/or profitable, the agency or group has better have a good system of (1) Training, (2) Marketing Activities and (3) strong Culture.

In the first few years, it can be really tough to balance personal sales, client servicing, recruitment coaching and management. Managers with little years of experience, who embark on the management career too early without a stable client base, run the risk of losing steam before his/her group gain critical mass.

In the later years, recruited advisers may leave for competitors with a better deal, due change in their career or family aspirations or even retirement. Good managers should always plan for succession and redundancies within the group structure, and constantly look for new markets and opportunities to steer the group towards.

If you have the skills and passion for coaching and mentoring young people, you’ll do very well and enjoy life as a Financial Services Manager.

Required: Enjoys being put into a coach and mentor role, able to think and act as a leader, have a passion for people and excel in strategic roles

Finally the Corporate path applies to (1) financial advisers working in a banking environment and (2) financial advisers that eventually get into corporate roles in the same industry. A corporate move can be a push into senior executive positions like Vice President or head of departments, or even overseas assignments Many senior positions in banks are often ex-Private bankers.

It can also work out for those who find themselves not suitable for front-line financial advisory, but can add value as an employee in middle office or supervisory/training roles.

Required: Enjoys working in a corporate environment, ambition to climb the corporate ladder, able to think and act as a leader or a good team member

Next: Begin a process of self-discovery by reading:

“Am I suitable as a Financial Adviser?”

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A quick refresher from the previous article, the financial advisory pie is divided into three groups: personal or private bankers, tied-agents, multi-tied or IFAs. Due to the breadth of products and services offered, they tend to appeal to differing demographic groups, customer profiles, and also require different skill-set to market services to them. Their business models also have different strengths and weaknesses.

Retail banks have a wide customer base that can best be defined by the neighborhood in which they serve. Retail banks located in the high-end residential areas tend to have more affluent customers and banks located in heartlands tend to have middle-aged or older customers. Due to the transactional nature of bank’s services, customers are more likely to be accessing a service and then redirected to personal bankers to offer financial products. Personal bankers equipped with good presentation, persuasion skills and closing techniques will fare well in this environment.

Private bankers target customers in the HNWI range (individuals with more than S$2m net worth or $300,000 income per year). They are usually highly paid professionals, senior executives or SME business-owners. Private banking clients usually visit the branch or the meeting takes place in another location. In this case, customers are prepared to listen to specific financial solutions. At this level, you’ll need a good network, have active listening and diagnostic skills, as well as knowledge about sophisticated financial products. Usually, private banks will not consider your application unless you have a couple of years experience and have a ready pool of HNWI clients to bring along. <SMU article on private banking career>

The advantage of working in a bank is the security of basic pay, walk-in customers or a captive customer-base. This would also work for those pursuing a corporate route. One of the disadvantages is a stressful quota-driven system that sometimes causes conflicts-of-interest

Tied-agents appeal more to the mass market, who can do with simple packaged products that take care of protection, accumulation and retirement needs. The barrier-of-entry is low for tied-agents, and little differentiation between companies. To create sustainable income, tied-agents have to differentiate in other ways like servicing, advisory competency and working with other professionals like lawyers or accountants. Another strategy that is popular is capturing natural markets through recruiting new agents.

The advantages of a tied-agent are relatively simple to understand products, attractive commissions and due to the long history, insurance companies usually have well-established sales training and support systems. The disadvantages are the lack of differentiating factors and the limited product range which may not suit all customer situations.

Multi-Tied or IFAs can piece together a portfolio of financial products or services (e.g. loans, wills etc) from different companies to meet their customer’s needs. Most IFAs are also trained in a wider base of knowledge like tax/estate planning and investment portfolio planning. Mass affluent clients are therefore drawn to a higher expertise and broader financial services/products IFAs and multi-tied companies can offer. Another growing clientele are the early entry HNWI which do not get very good vibes about banks. <find out more in “Going Independent”, by iFast Financial Pte Ltd, second place winner at Enterprise 50 Awards 2008>

While being able to offer a broader product/service range, thus, more objective advice, it also means that a multi-tied financial planner or IFA needs to have a wider knowledge base about financial planning and products (eventually). You can consider Multi-tied and IFA companies, which are a relatively new trend, to be a sun-rise industry, but it can struggle with branding issues as compared to well-established banks and insurance companies. <a must see “The Rise of IFAs” by iFast Insight Magazine>

Below is a summary table of what’s been revealed so far:

If you are still reading, you’ll be keen to find out more about:

“What are the Career Routes of a Financial Adviser?” or

“Am I suitable as a Financial Adviser?”

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“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” - Sun Tzu

Make no mistake. The financial services market is a lucrative and therefore a competitive one. But does that mean that as a new entrant, you cannot compete with more entrenched players?

Take for example “QB House” born in 1995, Japan, revolutionized hair-dressing by introducing the “10 minute hair-cut”, in a market where traditional hair saloons dominate. It correctly identified the needs of their potential customers and trends of a new generation of people on-the-move, with no preference for the lengthy “pre-cutting” practices.

What is necessary is adopting a “Blue Ocean Strategy”in the midst of your competitors, fighting the competitors’ weaknesses, avoiding their strengths and creating value your competitor lacks. Firstly, let’s have a look at the participants in the financial advisory pie.

The financial advisory pie can be divided into three main financial advisory groups: (1) personal bankers in the retail or private banking level, (2) Tied-agents financial planners and (3) multi-tied or independent financial advisers (IFAs).

Tied-agents are representatives of one insurance company and their products. Multi-tied financial planners have to place a significant part of their financial products with one company, typically an insurance company. Independent financial advisers typically offer fee-based advice, and have the freedom to recommend products from different financial institutions.

A significant development in financial services is the emergence of banc assurance and IFAs in the last six years.

Although banc assurance is a significant player, accounting for 19% of insurance premiums for 2007and the dominant sales distribution for unit trusts, recent events involving structured products and cases to FiDREC have shaken the confidence of banks to provide good financial advice. For personal and private bankers, this is a crucial time to build on the client relationship by communicating better, and empathizing with client’s losses, resolving them expediently with goodwill. This is a good opportunity for financial advisers to secure displeased customers of banking competitors. <see forum on investing with financial instituitions>

And since the passing of the Financial Advisers Act in 2002, IFAs have grown from just accounting for 1% of insurance premiums in 2003 to 12% of insurance premiums in 2007. In terms of investment dollars, IFAs have doubled their assets under management from $2.45 billion in 2006 to just over $5 billion in 2007. Mass affluent (individuals with more than $80,000 per annum income) and the early high net worth individuals are more attracted to IFAs who can match bank’s product offerings and be more objective in their advice.

While tied-agents have now two new forces to contend with, they must now add value through stronger customer service, competent advice and the insurance companies must continue to innovate and come up with better and more competitive products.

In the next article, you will discover the characteristics of the different customer demographics, strengths and weaknesses of the three financial advisory groups, from which you can better assess the suitability and potential of your financial advisory career. “What’s the Competition Landscape in Financial Services in Singapore? Part II”

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Of the three segments of the financial services market: mass market, mass affluent (between $80,000 to $300,000 per year income) and accredited investors or High Net Worth Individuals (personal net worth above S$2m or income above $300,000 per year), the last two represent great opportunities for you to build a profitable financial advisory career and business.

And just how many HNWI are there in Asia Pacific? Well, Asia Pacific has one of the fastest growing HNWI populations, accounting for 27.7% of HNWI population and 23.3% of Global HNWI wealth. In the Meril Lynch, Capgemini World Wealth Report 2008, listed Asia-Pacific wealth at US$9.5 trillion, with Singapore, Hong Kong, Japan having the highest density of HNWI (over 1% of population, that’s one every 100!).

In Singapore, you will not only be riding on the fastest growing HNWI market in the world, but the stable political, economical environment, and favourable tax treatment has also attracted HNWI from all over Asia and the world.

While, the ultra high net worth individuals may be best served by private banks, with more sophisticated products and services, the early HNWI however are currently under-served. Can you imagine seeing two to three different bankers in a year each giving you different advice?

In pursuit to increase their market share, private banks are not shy to lure private bankers from competitors by offering better employment terms. In the last few years, many private bankers have been playing musical chairs to the detriment of the client. Incentives to push for sales targets and a lack of a long term intention to stay in the same bank, have resulted in some unsavoury practices of product pushing.

As a result, this group of early HNWI are the best served by financial advisers with high touch and necessary professional skills.

As for the mass affluent, a most startling report published in Straits Times 12 Dec 2008, which surveyed participants earning around $80,000 per year, stated that 49.4% of surveyed have not met an adviser whom they can trust completely. 13.6% replied that they think advisers will put their interest before that of their clients. At least three quarters prefer to have the services of a Certified Financial Planner or equivalent.

New financial advisers can be sure that there is still a big pool of mass affluent investors that are just looking for an adviser they can trust to give objective, competent professional advice, and not merely a product-peddler.

Another interesting study by Nanyang Technological University of Singapore showed that the average Singaporean is under-insured by as much as a whopping 75% of what the dependents need in the unfortunate event of his/her demise. The first point is that there is still a tremendously big personal insurance market. In the study, it was also noted that many insurance products implemented were actually endowment savings plans which has little coverage while being quite high on premiums. This points to questionable advice and poor financial knowledge on the part of both advisers and consumers.

Therefore, while there are sayings that the financial advisory market is saturated, the fact is that if you can be a competent, ethical, objective and professional financial adviser, there will be plenty of people looking for your services.

The pond is big enough, but do you know who are the big fishes and who are the fast fishes? In the next article we look at “What is the Competition Landscape of Financial Services in Singapore?”

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