TODAY’S ARTICLE DEALS with a type of deep-sea fish, the shark.
Sharks are alive and well. They are unlikely to fall sick or die if you swim among them, particularly the financial sharks. You need to be able to recognise shark-like behaviour and take defensive action in spending your money wisely.
The first step is to understand the nature of a financial shark. This can be anyone for whom it is possible to place himself between you and any product or service with the expectation of earning some of your money. It depends on their behaviour whether they are shark-like on not.
Possible everyday titles include financial advisers, agents, accountants, stockbrokers and similar designations. Most of them are trained to uphold high professional and ethical standards in all that they do. Yet, there are some among them who may exhibit shark-like behaviour..
Most agents are linked to a particular company’s product. They earn commission on the sale of the product. This can compromise their independence since they are likely to limit their advice to the particular company’s products. They may tend to suppress any obligations to tell you of opportunities elsewhere.
So, from the time you choose an agent who is paid a commission, you can expect some partiality in the recommendations. It is possible that you will not be exposed to the best deals in the market. This is a major caveat and long-standing limitation of utilising agents.
Some agents try to cover up this bias by smooth talking and hurrying the transaction. This is shark-like behaviour.
Another typical characteristic of the financial shark is the propensity to be hasty and unclear in explaining. By providing a smoothly said yet muddling explanation, the financial shark can create a desire in their clients not to be bothered with the details in fear of looking ignorant.
A prime example is the shark-like behaviour that can be involved in the sale of life insurance. Nearly all such insurance is sold through agents for a particular company. An agent would approach a new entrant to the workforce with much vigour. The goal is to complete the sale as soon as possible, before the prospective client is won over by another agent.
In such cases, the agent may place little priority on asking the right questions and gathering information to make the correct match to an insurance product.
The more appropriate approach to the sale of a life insurance policy would, however, require an analysis of the client’s life stage, the prospects for the future, his dependents and so on. Many questions should be asked and the responses carefully analysed. On this basis, a true financial adviser may be in a better position to give unbiased advice.
Yet, seeking a financial adviser may lead to another financial shark, too, as that adviser may be tied to a particular line of products on commission. The main point is for you, the client, to be careful purposefully to seek the product and service that suit your circumstances.
You can cause or contribute to the mismatch in product or service to your needs; it is not always faulty service by the shark-like agent. By limiting your questions when you are not clear, by withholding relevant information which you consider private, and in misrepresenting your situation in order to look smart and prosperous to your agent or adviser, you may end up not getting the entirely appropriate advice, service or product.
Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. Email LouiseFairsave@nationnews.com.
This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.
