Independent Financial Advisor

For those who are looking at building a long-term career in financial services industry that has a bright future are urged to seriously look at what the new Independent Financial Advisor (IFA) platform can offer.

The opportunities to build a bright career in financial planning has arrived. The contract to use now is the FA representative contract with an independent financial adviser (IFA) company, instead of an agency contract with a life insurance or unit trust company.

The FA career is for those who can see where the industry is moving in the future, judging from what had happened in Singapore, Taiwan and Australia.In contrast, the agency contract has passed its time.

There are many attractive points when you understand the new distribution channel that Securities Commission (SC) and Bank Negara Malaysia (BNM) are promoting.

The Independent Financial Advisor (IFA) channel is backed by its own set of legal framework and the ecosystem, including the existence of well organised IFA companies and the support system of product providers, which are now in place.

I can list a few key points of difference between a career using the IFA channel versus one based on an agent contract.

Fa representative owns the clients
In IFA framework, the licenced financial advisor representative (FA Rep) owns his or her clients.If the FA Rep decides to move on to another IFA company, he or she brings along the clients.

The legal framework regards FA Rep as a professional, thus he or she has the duty to continue servicing the clients. Thus the FA Rep is allowed to bring his or her clients in case he or she moves on to a new IFA company.

This is in stark contrast to holding an agent contract. When the insurance or unit trust company terminates an agent contract, usually due to the agent’s failure to fulfill the sales quota, the agent gets nothing.

All the clients belong to the principal.

The fact that FA Rep owns his or her clients gives the FA Rep the opportunity to be able to retire from the business in the future, and he or she is allowed to sell the business to another FA Rep in the same FA platform. This is critically important be-cause there is no way an insurance or unit trust agent can sell his or her business for a value.

FA Rep can exert his or her independence
In IFA platform, FA Reps are not chained by the sales quota imposed by the life insurance or unit trust companies. Thus FA Rep can build and focus his or her energy on serving the needs of the clients with much more flexibilities.

He or she also has the freedom to select the best and most innovative products from among the companies in the IFA panel of product manufacturers that most suit the clients without undue pressure from product manufacturers.

Again this is in total contrast when compare to an agent holding an agency contract with a product manufacturer. Life insurance or unit trust companies impose new sales quotas on all its agents.
Thus the agents are at the mercy of the companies because in the agent contract, the company has the power to terminate the agents for failing to fulfill the sales quotas set by the management, which can change from time to time.

This result in the lack of job security and career future for the agency force, contrary to what is presented in their frequent career opportunity advertisements and seminars.

For those who still have doubts about what I have discussed, just reread the termination clause in your agent’s contract.

The problem with the industry now is that an agent is only allowed to represent one principal company for life insurance or unit trust company, and two principals for general insurance agents.

Some overzealous companies even try to tell their agents that they are not allowed to do other types of selling activities once they have signed the agent contract. With the relatively high turnover of life and unit trust agents experienced in the industry, consumers may not get the service and support they expect.

IFA beginning to enjoy good support from panel of product manufacturers
Contrary to what some people say in the market, IFA companies begin to receive good back-up support services from product manufacturers. Some of them see the IFA as another strategic distribution channel that has the potential to grow in the near future.

If the experience from my FA Reps are of any indication, then the future of IFA platform indeed looks bright. Now at least five out of the eight panel life insurance companies in the SFP platform have set up their separate FA department manned by a managerial rank personnel.

The departmental head is supported by staffs with executive level.The rest of them all have designated persons in their KL headquarters to service FA reps.

Some international life insurers already have experience supporting IFA channels in other advance markets like Taiwan and North America.

To my pleasant surprise, one particular insurer has even designed products that appeal to IFA channel, including offering preferred premium rates!

So far, the support from some life insurers has exceeded even my own expectations.
All these new developments in the financial services industry are positive and in the end, the most important thing is that the consumers benefit more from it.

Source - Borneo Press