In Malaysia, it’s very common for insurance agents to pass themselves off as financial planners, when the truth is, most of them are only selling, well, insurance. Unfortunately, many people buy into this façade, not realising that the intent behind pushing these pseudo-investment plans is the high commission rates behind them, rather than the buyers’ own personal wellbeing. Here, we highlight how the industry is predominantly agent-based and how you can protect yourself against ambiguous investment schemes that don’t add much value to your portfolio, let alone the appropriate insurance coverage.
What's covered in this article?
Insurance Agents and Financial Planners – The Difference
The main differences between real personal finance experts and insurance agents basically lie in two aspects.
Firstly, the accreditations; financial planners and advisors are licensed and certified under official governing bodies such as Bank Negara Malaysia and the Securities Commission, and require certifications under various programmes like the Registered Financial Planner (RFP), Financial Adviser Representative (FAR) and Chartered Financial Consultant (ChFC) programmes. Some insurance agents have these qualifications or have moved on to become certified, but most are pretty much just product peddlers with limited knowledge, qualifications and tools.
The second major difference is how the money is earned; financial planners and advisors charge a consultation fee for assessing and organising your finances to fit your best interests, whereas insurance agents earn commissions based on the products they sell – and therein lies the root of the problem. Their interests lie in selling you the products with the highest commission rates, rather than what truly adds value to you, whether in terms of insurance or investment.
What Insurance Agents Peddle
While many insurance agents would push their plans as solid investment tools to complement your portfolio, a significant chunk of your payments actually goes towards insurance. Now, here’s where you need to be on top of your insurance coverage – are you already fully covered, and if yes, is the coverage value enough? If the answers are no, by all means, consider taking up one of these plans, as they provide at least the basic forms of coverage.
On the other hand, if you’re happy with your current coverage, be very cautious, as these agents would likely try to pass off these plans as investment tools under the guise of retirement plans, fixed deposit substitutes or even alternatives to property investment. The main thing to realise here is that your money will be tied down for a very long period of time, incurring substantial penalties upon early withdrawal or cancellation.
Additionally, insurance agents would typically have a very limited number of plans available for you; as most would carry only the Pre-Contract Examination for Insurance Agents (PCEIA) and Certificate Examination in Investment-linked Life Insurance (CEILI) qualifications. True financial planners and advisors, on the other hand, would assess your investment profile and recommend various types of tools such as mutual funds, stocks and shares, commodities, and property to balance risk against returns depending on your financial situation.
Introducing E-Policies
But what if you are looking for basic insurance cover butdon't want to be hustled by a sales agent. And neither do you feel like forking outfor the services of a financial planner? Well, there's good news.
Beginning in 2015,insurance coverage can now be directly purchased online. Recognising the high number of Malaysians who do not have even basic insurance coverage, Bank Negara Malaysia recently issued guidelines on the provision of insurance e-policies to increase accessibility, visibility and connectivity for both consumer and insurance provider. These efforts aim to provide secure, transparent and educational online channels for inexperienced consumers to discover the typesof insurance policies, and cover themselves accordingly.
Although relatively young in Malaysia, the online personal insurance market has already been initiated by several parties at very competitive rates with the hope of evolving the industry over time. The plus point?
Research by our own editorial team hasshown it to bevery much cheaper for the consumer than purchasing via other means! If you are looking for a basic insurance cover, this would be a good place to start.
Conclusion
Unfortunately, the number of insurance agents in Malaysia is far more than financial planners. Add to that the significant commissions they obtain from selling their products and a loosely regulated industry, it’s no surprise that the personal finance industry is pretty much dominated by aggressive insurance agents, dictating the investment choices of less savvy consumers.
Education is the greatest tool one can have in this context. Learn up on the different types of investments available to you through online portals or family and friends, and know what investor profile you fall under before committing to anything. Most importantly, stay on top of your personal insurance coverage. Remember, if it sounds too good to be true, it probably is, especially in the context of personal finance and insurance.
Other than that, if you're in the midst of looking for insurance for your car, motorcycle and travel, do check out our insurance page to get an instant quote for FREE and purchase it right away if it fits your needs.
FAQs
A financial advisor can offer comprehensive advice on different areas of financial planning, including insurance. An agent, meanwhile, can help you buy an insurance policy. You might get advice from your advisor first, before reaching out to an agent to take the next step.
Can life insurance agents call themselves financial advisors? ›
A Few Differences with Financial Advisors:
Many insurance agents call themselves Financial Advisors. If all they sell are annuities and mutual funds offered by their insurance company, I would never consider them a Financial Advisor. They are insurance agents.
Why do so many insurance agents fail? ›
Insurance agents succeed when they prioritize their customers' needs over their own profits. The most commonly cited reason insurance agents fail is that they fail to listen to their customers and take the time to find the best product to suit their needs.
What is the hardest part of being an insurance agent? ›
An agent who is only out to earn a commission, regardless of the needs of the client, is not likely to last long in the business. Agents and brokers who listen carefully to what their clients and prospects say will be able to earn their trust, which is the hardest part of their job.
Do people do better with a financial advisor? ›
Not everyone needs a financial advisor, especially since it's an additional cost. But having the extra help and advice can be paramount in reaching financial goals, especially if you're feeling stuck or unsure of how to get there.
Is an insurance agent the same as a financial advisor? ›
An insurance agent's main job is to sell you an insurance policy, not necessarily give comprehensive financial advice. A financial advisor who's also a licensed insurance agent, on the other hand, can do both.
What financial advisors don t tell you? ›
10 Things Your Financial Advisor Should Not Tell You
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
One of the primary reasons insurance agents can accumulate wealth is their commission-based income structure. Unlike salaried employees, agents earn a percentage of the premiums they sell to clients. As they build a client base and generate more sales, their income potential increases.
What is the disadvantages of being an insurance agent? ›
Unpredictable Income
While the insurance industry is stable and the income is lucrative, it can sometimes be hard to plan ahead and know where your next paycheck will come from, since your income may be solely based on sales made. To succeed in this field, you must be a go-getter.
What percent of insurance agents succeed? ›
Dear Friends, Somewhere around 80% of new insurance agents hired by independent marketing organizations fail and quit within their first 12 months of getting their license. And then within 5 years, 80% of the remaining new insurance agents will struggle and quit! That is a 90% failure rate for new agents.
High Paying Insurance Jobs
- Health Insurance Specialist. ...
- Insurance Broker. ...
- Liability Claims Representative. ...
- Insurance Adjuster. ...
- Insurance Manager. ...
- Final Expense Agent. ...
- Life Insurance Actuary. Salary range: $79,500-$98,500 per year. ...
- Insurance Loss Control Surveyor. Salary range: $79,500-$98,500 per year.
If you have a great work ethic and are willing to place yourself out there to establish relationships with clients, you will get more opportunities to earn a higher income. Selling insurance may even make you a millionaire.
Why did I quit being an insurance agent? ›
#1 Low Motivation
To be a thriving insurance agent, you have to want to succeed. Failure to work hard is one of the top reasons people in this industry want to call it quits. While it's true that this job isn't easy, it's also true that it can be very rewarding when you allow it to be.
Is 2% fee high for a financial advisor? ›
Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.
What are the disadvantages of having a financial advisor? ›
Potential negatives of working with a Financial Advisor include costs/fees, quality, and potential abandonment. This can easily be a positive as much as it can be a negative. The key is to make sure you get what your pay for. The saying, “price is an issue in the absence of value” is accurate.
Is one fee for a financial advisor worth it? ›
But, if you're already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they've helped you accomplish. For example, if they've consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain.
Can anyone call themselves a financial advisor? ›
There is no entity that requires someone calling themselves a Financial Advisor (FA) to meet minimum requirements. No education standards. No licensing.
Can you call yourself a financial planner without a CFP? ›
CFP vs.
There's no specific licensing or certification process required for someone to call themselves a financial advisor.
What is financial advisor in life insurance? ›
A financial advisor helps people create long-term strategies for building wealth and managing risk. They can help you track, manage and balance your investment portfolio. They can also provide helpful advice on lots of other financial issues and decisions.
What do you need to be called a financial advisor? ›
Required Financial Planner Education
Becoming a financial advisor requires at least a bachelor's degree. Some employers seek a bachelor's in accounting, business, law, or economics. Financial planner education includes coursework in taxes, investments, and risk management.
