However, newcomers can opt for a “financing scheme” that acts as a base salary for their first two years in the agency. “Depending on the financing scheme tier you choose, you need to hit a certain percentage of that amount in commissions for you to receive the following payout. If not, the threshold for the commission and payout will roll over until you hit your target.”
For instance, if an agent chooses a monthly financing scheme of $3,000, they must earn $2,400 (80%) in commissions in the same month to receive the $3,000. This means the agent will need to earn $5,400 in the month or rely solely on commissions. If the $2,400 sales target is not met, the target for next month will increase to $4,800, and so on.
While the scheme may help new agents, they must reach the target percentage of the total payout by the end of the scheme; otherwise, the agency will claw back payouts made throughout the year. “So, this financing scheme is a hit or miss and this is where a lot of agents fail.”
Even so, agents should not be overselling products just to meet their goals. “A good agent will consider your personal situation before prescribing you anything. A lot of commission-hungry agents sell ILPs to mid- to late-age groups, which is very, very wrong,” says Luke.
See also: Is there a place for insurance in your portfolio?
Nethan Chew, director of Income Advisory Financial Advisers, says agents are obliged to answer their clients if they ask how much commission they are receiving from the sale, according to The Singapore General Insurance Code of Practice published by the General Insurance Association of Singapore.
Steven Teo, chief partnership distribution officer at Income, adds that if an agent is genuinely trying to earn a good commission, they would sell very long-term, high-protection plans.
When asked whether the industry needs to be regulated more strictly, Teo notes that the industry is “already very regulated”, with new regulations introduced every few months. Chew notes that agents must complete a set number of continuing professional development (CPD) hours each year to maintain their registration or certification.
See also: Lessons I learned from my insurance journey
The General Insurance Association of Singapore says all corporate agents must complete 24 hours of CPD each year for two years from the date of entry into the general insurance industry. The agent must also complete at least 15 hours of CPD training per year.
To Chew, the conversation between an agent and a client must be two-way. While agents can make recommendations, clients must also share their long-term goals.
Teo emphasises that the relationship is a true partnership between the parties. However, consumers should also understand that financial advisers are ultimately entrepreneurs and are running their own businesses.
For Chew, clients looking to make the most out of the partnership should share their plans. Beyond long-term goals, they should include their short-term hurdles and expenses. At the same time, they also have the right to ask about the benefits and limitations of any policy the agent is selling, to ask about commissions, and to have the agent review the terms and conditions as thoroughly as possible.
“It’s still time [with the agent] that clients need to invest,” says Teo, who notes that there is not much agents can explain within a short 15- to 30-minute conversation.
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