​Financial advisory process

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05 Nov 2018 | 7 min. read

Getting financial advice begins with a fact-finding process and an analysis of your needs. Find out what the financial advisory (FA) representative needs to do and what you can expect when you meet.

Key takeaways

  • Recommendations are based on what you disclose, so be truthful about your financial situation and any medical conditions.
  • Know your goals, how much you can afford to spend and how much risk or loss you can take.
  • If the recommendation doesn't feel right, you don't have to buy it.

What the FA representative needs to do

When you're meeting an FA representative for the first time, they will introduce themselves, the company they represent and the products they can sell you.

After which, they will go through these steps:

1. Assess your financial situation and needs

Your FA representative will ask you a series of questions about your finances, needs and goals. They need to gather enough information to assess your financial situation, protection needs, and investment objectives. This fact-finding process is called financial needs analysis (FNA).

As part of the FNA, your FA representative must identify your financial objectives and risk tolerance through an FNA. They will also need to know your employment status, financial situation (including your assets, liabilities, cash flow, and income), and current investment portfolio, including any life policy.

If you're considering buying a life insurance policy, your FA representative will also need the details of your dependants, as well as the extent, and duration of financial support for each dependant.

Note: If you're dealing with a digital advisory service, where there is no human intervention, you may not need to provide all the information described above.

For Specified Investment Products

Your FA representative will also assess if you have the relevant knowledge and experience to buy (or trade) a Specified Investment Product (SIP), as you may be recommended such a product.

Note

If your FA representative finds that there are no financial gaps to be addressed, they may not recommend a product to you at this point.

2. Make a recommendation

Your FA representative must have a reasonable basis for their recommendation. They must take into account your financial situation, particular needs and investment objectives.

They must explain why the financial plan or product recommended is suitable for you, and disclose information on the product such as the benefits and risks of the product, the premiums and charges that you need to pay, and implications of any early withdrawal or surrenders.

Your FA representative will not recommend a SIP if you are assessed to have not met the Customer Knowledge Assessment (for unlisted SIPs) or Customer Account Review (for listed SIPs) However, if you are interested in buying such a product although it was not recommended, you will be responsible for ensuring the suitability of the product.

3. Provide all documents needed

Your FA representative must give you the full details of the products that he or she is recommending. You should receive the following documents:

For insurance
  • Documentation of the FNA - Contains the information you shared with your FA representative and the basis of the recommendation.
  • Cover page – A document highlighting the key information from the policy illustration and the product summary.
  • Product summary - An overview of the features, exclusions, limitations, fees, and charges of the recommended product.
  • Product highlights - For Investment-linked insurance policies (ILPs). It describes the key features and risks of the relevant ILP sub-fund.
  • Policy illustration - Provides the benefits or projected amounts payable in a claim or early termination of the policy. Including total cash values and death benefits, premiums and cost of distribution and charges. Cost of distribution includes the commission the insurer pays to your FA representative or agent. The illustrations are projections, and you may not actually get the returns set out.
  • Bundled product disclosure document – For bundled insurance products. It sets out the principal features of the bundled product and contrasts against the most comparable term life insurance product. Consumers can consider buying, at lower cost, a term life product for insurance protection, and investing the difference in premiums on their own.
  • Other documents - A copy of Your Guide to Life Insurance and a checklist to confirm that you have received and read the relevant documents.
For investments
  • Documentation of the FNA - Similar to FNA for insurance products.
  • Product information - FIs are required to disclose the features, risks, and costs of investment products to you. Depending on the product you are considering to invest in, you may receive documents such as a prospectus or product highlights sheet.

4. Review your policy

Your FA representative should contact you to review your policy or your investment portfolio with you regularly, in order to help you see if your needs are being met.

If your objectives, personal or financial circumstances have changed, e.g. you have difficulty keeping up with your premium payments, you should approach your FA representative for advice.

What you should do

Your financial information will help your FA representative recommend a suitable product.

Without accurate and complete information, your FA representative may not be able to fully assess your financial situation and needs. If you're not comfortable to provide your details, ask them how this will affect the recommendation.

When you meet your FA representative

At the first meeting, ask the FA representative to provide you with:

  • Their name
  • Name of the company they represent
  • Type of financial advisory service that they're authorised to provide
  • Type of investment or insurance products they're authorised to provide advice on

Use the Register of Representatives and Financial Institutions Directory to check if the FA representative and the company are authorised to provide financial advisory services.

While going through an FNA

Do:

  • Provide complete and accurate information. Be clear about your goals and risk tolerance. Fully and accurately disclose any pre-existing medical conditions you may have.
  • Understand what you're buying. Do not rush into buying on the spot. Take time to understand the recommendation, how it addresses your needs, and the financial commitments required of you.
  • Ask questions. Prepare your questions in advance (or use the checklists below).
  • Check all information before signing. Make sure your personal details, e.g. education level, income, language proficiency, and risk profile are accurate.

Don't:

  • Feel obligated to sign or buy anything on the spot. If you're not sure of the recommendation, take the time to think about it. If necessary, discuss it with your family and friends first.
  • Lose sight of your financial goals and the reasons why you want to buy insurance or invest in the first place.
Reviewing the recommendation

You should discuss the recommendation with your FA representative and assess if it meets your needs. If you're not happy, you may ask them to show you something else. Do not feel compelled to buy the product, even if there is a 14-day free-look period for some products.

If you disagree with the recommendation, tell your FA representative what you really need. For example, if you want protection coverage and not investment, be clear about this. Otherwise, you may end up paying for something you don’t need or want. Do ask for other recommendations.

If you decide not to take up their offer and choose to buy a different product, it is your responsibility to check if the product you selected suits you.


After buying insurance or investing

If you change your mind, remember that you should do so within the free-look period. You can go back to the product provider to inform them. The free-look period enables you to cancel your policy for any reason.

  • Insurance: 14 days from the date you receive your policy documents
  • Investment: 7 days from the point of investment

Remember to:

  • Pay your insurance premiums on time to prevent a policy lapse
  • Review your policy when your circumstances change, e.g. if you're having another child. You can go back to your FA representative for advice
  • Review your portfolio regularly – if your objectives are not being met, you may want to save more or invest more whether through other financial products or the current product

Checklists

Be prepared when you meet your FA representative. Use these checklists to go through what to do and ask before, during and after your meeting.

Meeting your FA rep

Think about your financial goals and needs

  • Ensure your family is financially sufficient in the event of unforeseen events up until your youngest child can start work? (protection need)
  • Protect your income if you're injured or fall ill? (protection need)
  • Save for your child’s university education? (savings goal)
  • Retire by a certain age? (savings goal)

(If you want to invest and build savings) Ask yourself how much risk you are prepared to and can afford to take

  • Is it important that you don't lose any of the money you invested?
  • Can you afford to lose some of, if not all the money, even if the product offers higher returns?
  • When would you need the money that you're planning to save or invest?

Gather your personal details

You will most likely be asked for:

  • Your income, borrowings and savings, and cashflow
  • Any insurance policies or other financial products that you already have
  • Details of your partner, children and any other dependants (e.g. age at which they are no longer dependent on you)
What to do during your meeting

It is essential to understand what is discussed during your meeting with your FA representative. Use this checklist to help you.

Take notes of what is said – This is so you don't have to rely on your memory later.

Ask about anything you don't understand

  • Check through the information to make sure what you have provided has been accurately documented
  • You should be comfortable that your ability to afford the product or take risks is not over-stated

Ask for the basis of recommendation and any explanation of the product in writing

  • The proposal must state why the product is suitable for you. This will help minimise any misunderstanding between you and your FA representative.
  • It will also be useful when you review your financial plans for the future.

Ask what you can do if you’re not satisfied with the product

  • Is there is a free-look or cancellation period? If so, find out the period within which you can cancel your purchase.
  • Ask about the procedures for doing so, costs involved, and terms and conditions.

Don’t be pressured into signing up on the spot – Don’t sign anything unless you have read and understood the document.

Note

Your FA representative will assess your financial situation and recommend products based on what you provide. So make sure the information you give is full and accurate.
What to do after your meeting
Check and keep all records
  • Make sure the documents reflect your financial situation.
  • Read the completed FNA and contact your adviser if there are any inconsistencies, or if you have further questions.
  • Consider the recommendation carefully and whether it suits your needs.

Track your investment and review your needs

  • The FNA only provides reviews of your financial needs at one point in time. Your financial situation can change. For example, when you get married, have a child, or there is a change in your income.
  • It is essential that the financial products continue to meet your needs. So review your financial situation regularly to take these changes into consideration.

Pay your insurance premiums on time – Otherwise, your policy may lapse.

Last updated on 15 Mar 2019