In Singapore, the financial industry has become over-saturated. In 2023, it was reported there were 20,000 financial advisors in Singapore. Singapore only has a population of 5.45 million. Assuming everyone has insurance, this means each financial advisor can get 273 clients. That is if they were to stay in the industry long enough.
This story is based on close friends’ experience and you should do more research into this. In this article, I would like to share the dark side of the financial industry, what they don’t share, and what you might need to prepare yourself if you plan to work in this industry.
Life as a New Advisor
Let’s get to the real numbers. 80-90% of financial advisors fail and quit within the first three years of business. This means only 10-20% of financial advisors are successful. Most deals they close only get them about $100 up to $1,000 a month. To live in Singapore a married couple will need $4,862 per month. Similar to starting a business, the life of a new financial advisor is tough.
Always New Blood Coming In
If you experience working in the financial industry, you will know the older birds would never want to associate themselves much with the younger folks. That’s because the people who join come and go so easily.
Schools never ever teach students how to be a salesperson, it’s a tough learning process. Young advisors are hired by the corporation to maintain breaking down pre-written scripts on how to answer or sidestep inquiries so that the advisor’s job of selling the plan is made easier. These new advisors typically struggle to adjust to life because they are not accustomed to the numerous rejections that this sector is known for. Most young advisors have to go through a minimum of 10 to 20 rejections before actually landing one.
Most advisors aim to be like the older birds, making tens of thousands of dollars without much to run for sales. The big difference is that these older birds have already worked a lot in their early days for customer acquisition. It’s no secret that the longer you stay in the industry, it pays dividends. With young advisors leaving and new ones coming in, those contracts sold plans will be given to the older or more experienced financial advisors in the industry to manage.
New blood will always be introduced into the industry because of its “welcome package”. Most young advisors are typically tricked into working for the company because they love to use different names to avoid the bad reputation name of financial advisors. Names like wealth manager, financial consultant, personal development manager, and so forth. It annoys people honestly that these companies will do whatever it takes to hire more advisors into the firm since they will be rewarded with cash incentives.
Financial Planning doesn’t pay well
The job of a financial advisor doesn’t pay well but they have the potential to compound over time. A $100 per year commission can be earned again next year if the client doesn’t laps(forgo) the contract. To make the most income from selling plans. The only plan that has the potential for advisors to make a “livable income” is through investments. Investment plans have a higher deposit amount, depending on the company, they can give a huge cut from it.
Another way a financial advisor can make an income is by bringing in newcomers. It’s pretty easy income since most students can simply sign up at no cost to start taking the financial exams. To make more money through recruitment, advisors need to be of a certain ranking to earn a portion of the newcomer’s income. That means more passive income for the older birds.
The Numbers are Rigged
On Indeed.com, financial advisors on average make $4,372 per month. These numbers are badly manipulated. We should be looking at median income to truly look at where the most amount of money is going since the industry earning is heavily based on commissions and 80 to 90% of newcomers leave the industry. Therefore, the older birds are the ones that are carrying the numbers to make the average income earned a lot higher.
More platforms out there making financial advisors redundant
With online brokers and quick and easy online insurance. People are now learning to take finances into their own hands and manage them. It’s pretty easy now that Youtube and many platforms are sharing their take on personal finance. That means lesser people are looking to rely on a financial advisor.
Apart from that, online brokers have free incentives and rewards that anyone can get started with right away. If you would like to invest in stocks, you can download Tiger Broker or WeBull where these platforms would actually reward new users with cash incentives and stocks.
Compared to the real estate and banking industry where sales talk is considered understandable. No one likes to hear financial advisors talk. The difference between these industries is that it feels like the financial industry loves preying on the weak-minded. Financial advisors sell the fear(poor health, lack of money, insecurity) to make money. It’s gloomy to hear about all these things. Whereas when we hear about the other sectors, they sell you the potential of a brighter future. Better living space, a well-secure retirement plan, and most importantly, nothing to worry about for the future.
Is it a Ponzi Scheme?
All this negativity has brought up whether the financial industry is a legal Ponzi scheme. The key elements of a Ponzi scheme are as follows:
- New investor funds to pay prior investors
- Representing that the investor returns are generated from a purported business venture
- employing artificial devices to disguise or defer the lack of economic substance or losses
Yes, it does look at first appearance that the financial industry is like a Ponzi scheme. But, unlike a Ponzi scheme, the old birds in the financial industry don’t cash out their earnings. Most of them would rather invest in the company’s plans to further grow its potential. This one important factor makes the financial industry, not a Ponzi scheme.
That said, any industry can become a Ponzi scheme once trust is lost. We have seen such scenarios in the Evergrande real estate crisis in China. Where top officials cashed out and fled the country. If any of our financial industry were to do any of that. They will be marked as a Ponzi business and will be fined and jailed.
Is Succeeding in the Financial IndustrAchievablele?
Although I may be sharing a lot of friends’ bad experiences, I ultimately believe if you work hard and long enough in any business to provide value. They will ultimately reward you with equity. Similar to any business, the reward will compound over time the longer you stay and improve yourself.
If you plan to join the financial industry, it’s hard not to be money driven rather than value-driven since the industry is heavily based on commissioning. You need to start asking yourself whether you can provide value by joining the industry and whether you can make a difference. Only when you are hungry and desperate enough, maybe then can you survive in the financial industry. As for my friend, he only sees the end of the journey.