Choosing the Right Adviser for Insurance Needs
From Financial Literacy Wiki
How to Choose the Right Financial Adviser for your Insurance Needs
Many of us have realize the importance of insurance in our financial planning. But most of the time we leave it to our insurance adviser to recommend the 'right' product and plan the right mix of protection for us. Thus selecting the right adviser is very important is we are to have a more concrete financial security plan. Below is a list of questions you could ask your adviser to aid you in selecting the right one.
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What services can you provide?
This question is to find out if the adviser is selling insurance solutions from a variety of product provider or from a single provider. Further to this question would be the products that your adviser is selling comes from which insurance providers. Are they reputable or not?
Who else could benefit from your recommendation?
An adviser who promotes insurance, unit trusts and stocks may have separate tie-ups with product suppliers. He may have other business relationships that should be disclosed to you, for you to make a better judgment.
What are the risks and disclaimers?
Do not hesitate to ask the adviser any risks, potential downside risk or restrictions that may apply to products he recommends. For example, what are the requirements for changing beneficiaries? What happens if you do not pay the premium for X months? Reading about other people's claim history and financial books can help you in what in-depth questions to ask.
How do I pay you for your services?
Payment to adviser can take several form:
- Commissions paid by a third party for the sale of products, usually a percentage of the amount you invest in a product. Understanding the commission structure of each product would be a great help.
- Fees based on a percentage of assets you invest.
- Combinations of commissions and fees.
- Salary paid by financial planning firm.
How many years of experience and what experience you have?
Find out the number of years and quality of these experience. A reasonable rule of thumb is that an adviser should have three years of relevant experience.
What qualifications do you have?
Ask the adviser what qualifies him to offer financial advice. Check out the qualification that he has.
When you have asked all these questions. Preferably ask him to put the answers down in writing for future references. Another thing to note. When the adviser is recommending a financial products, he should give you the following documents:
- A summary of your financial information such as investment objectives, current financial situation and personal financial needs, long-term and short-term.
- Recommendations made by the adviser and its basis for recommendation.
- A copy of the benefit illustration and product summary for insurance products
- A copy of the prospectus of unit trusts or funds invested in ILPs
- The name of the firm he represents and the type of advisory service he is licensed to provide.
