The second famous saying is “all products are about the same and it’s only the service which differs”. Obviously this saying has been propagated by salespeople who do not want prospects to shop around.

The first point is that the saying is a blatant lie. Products of different companies are definitely not the same in all aspects. I have used one simple example to debunk this saying. The CPF Minimum Sum Scheme allows the retiree with CPF to purchase annuity. At one time, the CPF displayed the annuity product of the companies which have this product. The annuity (monthly payments) given by each company differs from the others and the difference can be “frightening”. Imagine a person taking the one with the lowest payout out of ignorance.

Or you can take term insurance, the most basic life insurance product offering protection only and no cash value. The premiums differ significantly from firm to firm.

Is saying “all products are basically the same” a lie, a half-truth or the truth? The answer seems to depend on who says it.

Let us take for example the tied agent who sticks strictly to his company’s products only, and is not interested to know about other company’s products.

The problem is that if he does not know other companies products, making this statement is a lie in the first place. If he quotes his manager, he is perpetuating a lie.

As an independent Financial Adviser and having looked at the product offerings of many companies, I know for a fact that even simple products differ from firm to firm, what more the product with unique features added in.

True there are some copying of features between firms, but the fact is that there are still many differences.

Differences sell – this is the marketing buzz phrase which proves that the saying “all products are the same” (or basically the same) is a lie.

All salespeople know that it is not similarities that sell, but differences.

But how can the tied agent sell on differences when they do not know what are their competitors’ products and the difference between these products?

It is not easy to keep the truth and speak the truth in a sales line. Skeptics and cynics even doubt that a sales can be made if all the truth be known. The Devil sold Eve on a lie. But the good news is that even when there is no perfect product, given the full picture, a person can still be happy to buy that product.

My belief is that the salesperson’s duty is to help the client to buy the best solution and product or combination of products. His is not to sell but to provide advice and help the client to buy.

The next time a Representative says to you “all products are the same”, say to him: Go show me the comparison of the product offerings of all the companies.

The proverbial salesperson is defined as one who is able to sell coal to Newcastle or ice to the Eskimos.

Definitely distributors play an important role to bridge the gap between product manufacturers and consumers.

And the gift of the gap is said to be all-important.

But what happens when there are vast gaps between truth and reality in what the salesperson claims?

What happens when there are vital information which is not disclosed to the consumers?

Can we hold salespeople to the standard upheld in court of witnesses to tell the truth, the whole truth and nothing but the truth?

In other words, can we expect honesty and integrity?

I like to examine a few famous sales sayings which have gained mantra status but which may not pass muster in any court.

There are several famous sayings in sales and business which on the surface look good but on closer scrutiny qualify more as malpractice.

For example, “Insurance is not brought but sold”.

This can mean that prospects do not seek to buy insurance on their own and the salesperson must do his best to sell the product. Nothing wrong with this.

But it can also mean that the salesperson will have to present the benefits of insurance in such a way that moves the prospect to act.

It is this motivation to make a sale which often leads a salesperson to emphasize the good points and play down the bad points and in the process often misinform and under inform, and can lead to misselling.

When I was a Supplies and Purchasing Manager of firstly a large public-listed company and also a large multi-national company, my job was to buy what my firm needed. It was of paramount importance that I went through all the merits and demerits of each product and each supplier and satisfied myself that our company only purchased the “best”. For smaller purchases, quotations were called. For bigger purchases, tenders were called to ensure that there was a clean competition.

The buying process was a rational and systematic process which could stand scrutiny by superiors and internal audit.

Shouldn’t insurance and investment decisions be rational, and systematic analysis and comparison of alternatives available?

The rational answer is YES, but not many people actually do it. WHY? Because insurance sales people and many advisers and bank relationship managers have been trained to discourage a rational buying attitude and instead, encourage buying on trust, friendship and sometimes obligation.

Trust is important, but trust can also be misplaced and when it comes to monetary transactions, it pays to exercise prudence.

The reason for discouraging prospects from being analytical and rational is simple – the more the prospect uses his mind, the slimmer the chance the salesperson has to make the sale, especially when there are choices. So there is a training course on overcoming objections whereby the salespeople are trained on how to deftly bring the client back to the sales track. Salespeople are trained to take control of the sales process and to get prospects to agree and to “massage” prospects so that there will be a response to buy if possible on the spot.

Recently, I experienced a classic case of a sales presentation done by a holiday club which presented all the benefits of joining the club and offered a hefty special discount which only applied if I decided on the spot. For obvious reasons, I turned down the offer.

It is obvious that the less “competitive” the product and the product provider, the more important “selling skills” become and a large part of this is to make the buyers buy on factors which have nothing or little to do with the products. One large insurer prides itself in having the best sales force because it could have a large market share in spite of less than competitive products.

I am not against appealing to the emotions when it is ethical to do so, but there is obviously a danger that prospects are led to buy based on reasons which they would regret. Thus the use of the term “buyer remorse” which can only mean that after a good night’s rest or checking with a spouse or a friend, the person realizes he has been had.

Thankfully there is the “free look provision” in insurance and investment sales which allows a person to cancel his purchase without any penalty.

One reason why many people do not put on their thinking cap when it comes to buying insurance and investments is that they are not familiar with the subject and don’t want to display their ignorance. And some salespeople capitalize on this.

Although insurance and investment are not that complex and technical, they are not simple either.

The Lehman Brothers episode drives home the point that we should not buy anything we don’t understand and a good salesperson should be able to explain things in a simple manner. A buyer has every right to ask a salesperson to explain all relevant matters to his satisfaction before he commits himself. If the amount of money is small and the buyer feels bad about using the salesperson’s time, he can see him in the office.

While it takes time to check up facts, and the pros and cons of different products, the good news is that seeing an independent Financial Adviser can save you much time.

Although no IFA in Singapore has access to all the insurance companies, some come close and can distribute for the majority.

Thus always ask for the list of companies which each IFA can “represent”.

So far, insurance may be more sold than bought. The next time however, make sure you put on your buyer’s cap.

Whether you subscribe to the basic Christian belief that all humans are sinners and have the sin nature which predisposes them to sin, or not, it is easy to see that malpractices are more prevalent than best practices.

The most common cause of malpractice is self-interest over the interest of others i.e. selfishness.

It was said of Timothy, one of the Christians named in the Bible, that he took a “genuine interest” in the welfare of others. This was contrasted with the common behaviour of others who “look out for their own interests”. (Philippians 2:20-21)

There are other causes of malpractice and greed ranks high on the list. But well-intentioned people can also slip due to laziness and complacency Afterall, it takes time and effort and money to look after other people’s interest.

After discussing the bright side of best practices, it is necessary to now look at the dark side of malpractices.

There are many malpractices even in our fairly regulated environment.

My knowledge of what have gone on and may still be going on is gathered from advisers who are in the know and from feedback gathered from others. This is for clients to be wary of the motives and methods of the crooks in the industry.

That there have been malpractices and will continue to be, is to be expected as there will be some people who will fall into temptation. “The love of money is a root of all evil” and many who are driven by greed or the need to provide for their families or repay loans, will be tempted to make money by all and any means.

Some people take short cuts and cut corners to do business faster, which may compromise standards.

I will highlight only the more prevalent and serious malpractices.

On top of the list, CPF Investment Scheme churning.

Clients are induced by Representatives to use their CPF funds to invest in unit trusts and are given cash rebates. Client’s money are churned frequently and they get the cash rebates but often suffer a rapid depletion of their CPF funds because of the fees paid out and often losses in investment.

Clients may or may not be aware that under CPF rules, any cash received is to be returned to CPF.

This practice is also in breach of the FAA because cash rebates are not permissible if they are an inducement for the client to make the purchase. Often, in the desire to get more money from this malpractice, Representatives resort to getting the clients to sign blank redemption and purchase forms so that they can “trade” using the client’s money.

This has led to “syndicates” headed by people outside the industry with many runners to look for clients and these transaction forms are then channeled to Representatives of companies either set up to do churning, or infiltrated and infested by churners.

Churning of a client’s money can be easily detected if it is done by the same Representative in a firm, or even between a few Representatives in the same firm.

To avoid detection, the syndicates resort to moving their deals from firm to firm so that each firm has only one buy trade and sell trade for a particular client. This way, the practice gets under the radar of each firm.

The number of Representatives involved in taking this form of business from the syndicates is also reportedly large and they can be commissioned Representatives or employees of the firms.

When these Representatives sign on the Know Your Client forms without knowing who the clients are, they are breaching the FAA.

Some Representatives or the syndicate and their runners may resort to forging the signatures of clients on the forms to authorize sale and purchase of the investment.

Clients with financial problems and who need cash urgently will be tempted to get cash from their CPF through the churning route. Reportedly, some loan sharks have also joined the bandwagon to lend money and forcing the borrowers to pay back using the churning route.

The change of CPF ruling to tie up the first $20,000 in both the Ordinary Account and the Special Account will go some way to protect the CPF money of those who may otherwise be tempted to siphon out their CPF money. But there will be CPF account holders with bigger sums who may still be tempted to do trades on their money to siphon out their CPF money.

Representatives who are tempted to join the bandwagon should remember that they are liable for giving reasonable advice for each trade. Even if the investor does not complain, if the malpractice surfaces through MAS inspection, the Representative and the firm can be fined for missselling and wrong advice, besides other disciplinary action and even cancellation of license.

Firms who have benefitted financially from the churning trade must remember that the money has come from people who have little funds and would have a bleak future especially when their CPF retirement funds are depleted.

When syndicate groups are involved, these firms must realize that they are party to a crime of unauthorized and unlicensed people carrying on business. If unauthorized loan companies are involved, these firms are wittingly or unwittingly encouraging their business.

There is also the loss of reputation.

The name of the firms allowing or actively involved in churning are known to many and good reputations have been tarnished.

There is a saying that “evil will out” and it is a matter of time that the law will catch up with the lawbreakers.

Closing of a business may be a big financial blow, but it is the loss of reputation and self-respect which will be far greater.