Pros & Cons of Buying Insurance from Financial Advisors vs Insurance Agent vs Bankers
Thinking of purchasing an insurance policy but not sure who to buy from?
We’ve all been there – on top of determining what insurance policies we should get based on our current life stage and lifestyle, we also need to figure out who we should buy it from. The various options out there in the insurance world could be intimidating for newbies.
In this short article, find out some basic pros and cons of buying from different types of insurance sellers: Financial Advisor versus Insurance Agent/Representative versus Bankers/Relationship Managers.
[All opinions expressed in this article are Moneyline.SG personal viewpoints and experiences of the writer.]
1. Financial Advisor
Pros – Personally, the biggest benefit of buying from an FA is the variety of insurance products the FA will be able to let you access and compare quotations for, based on your personal needs and preferences.
There are two types of FAs in the market, the tied ones and the not tied ones. Tied ones are basically owned by certain insurers and their product mix are lesser than the non-tied ones (with the exception of those that do not bear the name of the insurance companies). Regardless, they are more equipped to objectively and flexibly address your specific needs, while an FA pushing for any particular company products might be a possibility, most FAs will most likely present a range of options for their clients for their discerning views.
Moreover, FAs usually chose this path as a career choice and their ambitions might differ from other types of agents. It would be fair to say that all good advisors are from FAs but not all FAs are good advisors. At the end of the day, looking out for their client’s well-being would be a priority since they partly depend on repeated clients and word-of-mouth referrals. With this being paramount, their servicing standards must be up-to-par to gain trust and long-term clients.
Cons – On the flip side, FAs won’t have access to some insurance companies’ products that only distribute via their in-house agents. If you would like to seek out information on those specific companies’ products (eg. Prudential, Great Eastern), you will have to get in touch with their own tied agents.
Unlike the bigger insurance institutions, the management and structure within FA firms vary and are highly dependent on the system and training of the individual branches to mould the advisors. There are instances where FAs are more prone to sell certain company’s products with higher commission pay-out and incentive.
Lastly, some smaller FAs are susceptible to acquisitions by bigger counterparts or insurers. There is also the risk of insurance companies terminating their distribution with the FAs and resulting in policy-servicing issues in future.
2. Insurance Agent / Representative
Pros: As earlier mentioned, a benefit of seeking out an insurance representative or tied agent is that you can access and get quotations for certain products that you might already be keen on.
With a large network of agents and employees, getting your policy from such institutions might offer you a greater sense of security, which would help in creating a relationship with your agent as well as the company. There are certain insurers that provide exclusivity to their agents and do not market their products through various channels.
Cons: Contrary to an FA, insurance agents are pretty much tied to selling their own companies’ products, which may not provide their clients with the most objective views, depending on the type of policy you are searching for.
Moreover, similar to advisors, agent philosophy may be influenced by various agencies leader that are tied to within the insurance firm. There have been many instances of agents hopping insurers with huge buy-out packages, resulting in them encouraging their clients to switch their old policies to new ones in the new firm.
This may be done in detriment to their client’s interest in hope to meet their new sales target as they have to fulfil their buy-out package obligations.
3. Banker / Relationship Manager
Pros: Banks and financial institutions give us a sense of security when backed by the government. With your savings and credit cards already managed through them, purchasing your insurance policies from a banker may make things more convenient, with the services literally being “under-one-roof”.
There are also more flexible financing options through the bank’s partnered insurer products, which can be provided in-house to give consumer the edge in purchasing from the bank, as compared to getting it through Agents and FA whom have very limited access to the bank’s financing services.
Cons: If you are keen on buying your policy through bankers, I would say that even more homework and research is necessary on your part, as bankers are known to be aggressive product pushers, in order to meet the bank’s target.
Unlike agents and advisors, bankers have monthly/quarterly targets to meet and are known to lose their jobs when they constantly underperform, due to the cut-throat culture. These bankers typically do not receive recurring commission and their targets are reset every month/quarter regardless of the type of policies sold.
Furthermore, with the turnover rate of bankers being notoriously high, it will be pretty inconvenient for you to follow up on your policy and navigate the complex insurance claims, if your banker really leaves the bank or when the insurer distribution agreement with the bank ends. You might also find your policies being serviced by some unknown agent/banker tagged on by either the bank or insurer.
Nevertheless, not all these observations are mutually exclusive, and you should definitely take the time to assess your own needs and diligently compare any policies presented to you. This will help you judge the level of services of the various intermediary and whether they truly have your interest in mind.
Just remember to do your own homework instead of fully relying on whatever the salesperson tells you, and take as much time as you need to decide. When you feel comfortable, this could be the sign signalling you to purchase your insurance from that particular agent or platform.