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Personal finance in the age of social media
IN THE business of insurance, where cold calls and roadshows were the norm, Instagram stories and LinkedIn messages are now preferred channels as financial advisers in Singapore turn to social media to reach the younger, more tech-savvy generation.
The pivot towards digital has accelerated with safe-distancing restrictions in recent months, with major insurers here reporting a spike in online client engagements. While the wide-reaching nature of social media helps to amplify awareness of financial planning, industry watchers caution that cookie-cutter content may not be appropriate for a mass audience.
Concerns of cherry picking and misinformation also arise, amid regulatory grey areas in managing financial content online.
Mark Wightman, EY Asia-Pacific wealth and asset management advisory leader, tells The Business Times: "Social media platforms are very relevant channels for communication with the younger generation, but financial advisers have to be very careful that the advice they are providing is appropriate to the audience."
A recent OCBC survey found that only 30 per cent of 1,000 respondents can sustain themselves for over six months if they were to lose their jobs now. That statistic points to a pressing need for good personal finance habits, made more urgent by the impending recession facing Singaporeans today.
On a promising note, millennials here are generally keen to invest and buy insurance polices, but many do not find themselves knowledgeable in these areas, according to a separate survey by OCBC last year.
Data from the survey showed that 71 per cent of 866 respondents want to start investing, yet only 38 per cent consider themselves knowledgeable about investing.
Considering the average millennial's media consumption habits, it's no surprise that financial advisers have turned to social media to generate fresh leads.
"Advisers want to be where their customers are," says Daniel Lum, director of product and marketing at insurance firm Aviva Singapore.
From bite-sized infographics to interactive Q&As, younger financial advisers here have been making considerable inroads on platforms such as Instagram, LinkedIn and Facebook.
From a cost perspective, this strategy makes good business sense.
With a target audience comprising undergraduates and young working adults who probably have limited spend, conventional roadshows or coffee chats are nowhere near as cost-effective as the use of social media for mass outreach, says KPMG head of financial serves advisory, Chia Tek Yew.
Prudential Singapore's chief distribution officer Odd Haavik tells BT more than half of its 5,000 financial advisers here use social media apps to connect with their clients.
These financial advisers have access to a library of content that has been developed for social media use. They include bite-sized product-related posts and "at-a-glance" images for sharing via WhatsApp and WeChat, says Mr Haavik.
At AIA Singapore, the majority of its financial advisers are using social media platforms and messaging apps, which has become "the norm" to keep in touch with clients, says Wong Sze Keed, the firm's chief executive officer designate and chief distribution officer.
Aviva's financial advisers "recognise the need to move out of their comfort zones (such as road shows, cold calling, street prospecting) and experiment with other lead generation methods", says Mr Lum.
Ben Tan, Great Eastern's managing director of regional agency, financial advisers and bancassurance, tells BT that digital communications have become more widespread and complementary to face-to-face interactions.
As an AIA financial adviser notes: "If you don't use social media, you're kind of losing out because everyone else is doing it. Clients will also compare and ask why you're not on (these platforms)."
Making it relatable
For consumers, pretty infographics detailing the best savings plan and myth busters on investments breathe life into an otherwise dry and intimidating topic.
"One of our biggest problems in financial services is how to make such content emotive. If you were to ask people if they would sit down for an hour and talk about their retirement savings plan, or spend 30 minutes watching the latest series on Netflix, most would go for Netflix," says EY's Mr Wightman.
He notes that social media content can create an effective call to action for the younger generation to start retirement planning early.
A financial adviser who uses Instagram to show how he leverages his personal savings to pay for a dream holiday, for example, may appear more relatable than a straightforward sales talk, says Mr Wightman.
An industry notorious for sales calls and pressure selling, social media also enables financial advisers to build trust and credibility with prospective clients over time that will "eventually help them make the sale", says Tuck Chung, associate professor at the marketing department of ESSEC Business School Asia-Pacific.
A common three-step social media strategy looks something like this:
* generate content on social media platforms to garner interest;
* invite prospective clients to webinars for deeper discussions;
* follow up with a one-on-one appointment to learn more about their needs to recommend suitable products.
Some financial advisers also use social media to share client testimonials, publicise upcoming webinars, host giveaways, and tell personal stories to boost their street cred.
Though these strategies hardly lead to fast sales, most believe that the long-term plan will pay off.
Aviva's Mr Lum tells BT: "Many advisers acknowledge that social media doesn't necessarily translate to sales because it takes time to build your brand and following. But it's a very useful tool to help advisers establish a brand and presence with existing and prospective clients."
As it is, only about 10 per cent of Singapore retail investors believe their investment adviser or firm always puts their interests first, compared to the global average of 35 per cent, a 2018 study commissioned by the CFA Institute found.
"Through consistent engagement, customers feel more comfortable to open up to the advisers on their financial concerns," says Aviva's Mr Lum, noting that some of the firm's advisers have been successful to secure video appointments to complete new policy sales.
But here's where it gets tricky. The marketing of financial products and solutions is unlike selling yoga pants online.
As social media outreach evolves into an organisation-wide strategy among most insurers, the wealth of in-house content readily available for financial advisers to tap on may not be as safe proof as it sounds.
"The lazy ones - or those who are rather new and don't know much about investments - will merely push buttons and blast these commercially-made content on their social media without understanding the content fully," a financial adviser from a major firm tells BT.
Consequently, there is a risk of misinformation when consumers start raising questions.
ESSEC's Prof Chung says: "Some young financial advisers might not know a product or a concept as well as they should.
"It takes a lot of experience - talking to different customers with different needs, being thrown difficult questions, and taking more courses - to realise what they don't know and how to learn from there."
To be clear, licensed financial advisers are required to take several exams on rules and regulations, and product knowledge and analysis. This comes under the Financial Services Act (FAA) by the Monetary Authority of Singapore (MAS).
While the qualification system ensures that financial advisers have the right knowledge, a lot of the work they do goes beyond textbook-level information.
"Experience does matter too. This is why consumers need to ask the right questions of their advisers to make sure they've got someone helping them, with the right experiences and their best interests at heart," says Jeff Pirie, executive director of corporate finance advisory at Deloitte South-east Asia and Singapore.
It doesn't help that social media content is designed to be "snackable", which means content may be overly simplified or taken out of context.
"Social media messages are typically short and sweet. The person pitching the idea or product has to understand it very well in order to convey the message accurately," says Chan Fook Leong, executive director of advocacy at CFA Society Singapore.
Zack Ng, a senior financial consultant at Prudential, tells BT that it is challenging to curate content on social media.
"We always have to weigh between the breadth and depth of the topic to cover. We have to ensure that the amount of content is just right to keep our audience engaged, without compromising on the comprehensiveness of our content," Mr Ng notes.
To be fair, insurers here tell BT they host regular training sessions and have mentorship programmes in place for their representatives.
That's the way the cookie-cutter crumbles
When it comes to investment-related content, the rise of cookie-cutter advice online has also sparked debate on what is appropriate for mass consumption.
"You can't mass stream investment advice to everybody because their needs are very different, even if they belong to the same target segment," says EY's Mr Wightman.
"As soon as you go into specific investment advice, you're heading into dangerous waters because clearly, you have to be licensed and you need to know who you're talking to," he further cautions.
What's considered investment advice remains debatable. But as a base example, sharing information about investment options for retail investors (such as unit trusts and exchange-traded funds) is seen as neutral and educational, compared with calls to invest into a particular fund or enter the market at a specific timing.
Though most major insurers tell BT only approved content can be shared, the informal nature of social media presents a unique challenge: it can be difficult for consumers to differentiate between content representing the views of the firm, and the adviser's personal opinions.
While some create separate social media accounts for work, others mash their finances talk with personal posts.
Checks by BT found that some financial advisers here advocate strong messaging such as "cash is trash", and recommend specific products on social media. Disclaimers, while present in some instances, are not consistent.
These views are typically backed with screengrabs of media reports that support their claims, and performance graphs of major stock indexes such as the S&P 500.
ESSEC's Prof Chung explains why investment advice backed by trends and the latest news may not hold in the current climate: "When it comes to Covid-19, no one knows what is going to happen in the next six months, not even the government."
This matter is further complicated with the risk of cherry picking data to support claims.
For example, an Instagram post seen by BT, by a financial adviser, promoted an investment-linked insurance fund offered by a major insurer in Singapore.
The post had only shown the one-year returns of the fund. Checks by BT found that the fund is categorised as "higher risk, narrowly focused sector", which was not communicated.
The adviser also wrote that the fund being promoted is part of a particular client's portfolio, which saw over 20 per cent growth in a few months. It was not clear what the weightage of the fund in the portfolio was.
ESSEC's Prof Chung says: "There are many ways to present numbers. Sometimes, the way you present your numbers can mislead others, and direct their attention to certain things intentionally."
Ideally, investors would know that there will be more disclosures when they decide to buy a product. They will do their research and talk with their peers, says Prof Chung.
"But most new investors do not have the time or capability to do their own extensive research, and turn to financial advisers extensively for help," he notes.
To that end, the onus is on the insurers to ensure that their representatives communicate in an upfront manner online, with the intention to educate before selling, say observers.
"The point of social media should be to provide useful insights to help consumers understand what their options are, and follow up with advice relevant to individual needs," EY's Mr Wightman notes.
Safeguards in place
Insurers here have stepped up to ensure strict social media rules are in place on top of churning out pre-approved content.
Prudential's Mr Haavik tells BT the firm does not offer any form of financial or investment advisory to individuals online. Its financial advisers are not allowed to "portray opinions as facts", or share confidential or sensitive information on social media channels, among other guidelines.
Prudential's Mr Ng further tells BT: "We are advised not to offer our personal opinions when it comes to investment, even if we do investment on our own personal capacity."
AIA's Ms Wong says the firm's set of market conduct guidelines is further complemented with a social media monitoring process.
While there may be some regulatory grey areas in the marketing of financial products on social media, industry observers believe that, overall, the multi-layer safeguards put in place by MAS are sufficient to protect consumers from buying unsuitable products.
Before a sale can be completed, supervisors of the financial advisers are required under the FAA to ensure the advisory process has been properly conducted by the adviser, and the recommended products are suitable for the customer.
Financial firms must also disclose to customers all information on an investment product, such as potential risks and benefits and fees.
Even after a sale, consumers can change their minds and cancel the purchase within a cooling-off period. For unit trusts and unlisted debentures, it is seven days from the point of investment. For life policies, it is 14 days from the date of receipt of policy documents.
Perhaps, of greater concern is the lack of basic knowledge among consumers, such as what to look out for when buying financial products, says EY's Mr Wightman.
"A lot of people don't fully know what they need to know, such as the fees they are paying, how much the person selling the product is paid, and what projected returns really mean. It's still an area that needs work," he says.
KPMG's Mr Chia adds: "MAS's regulations help to safeguard consumers when they actually want to buy something. What is needed is a bit more education; people should be aware of their rights, and the ways to avoid scams and to easily resolve disputes."
Consumer due diligence
Ultimately, consumers should do their own due diligence to protect themselves from bad purchases.
Apart from independent financial literacy blogs, books and seminars, there are also digital advisory tools online that offer interactive guidance. DBS's NAV planner is one such example.
"What's on social media isn't tailored, so it shouldn't be the only input for consumers. Fear and/or peer pressure are bad reasons for anyone to invest and not a basis for financial planning," says Deloitte's Mr Pirie.
ESSEC's Prof Chung adds: "Online content is something all countries have problems controlling, because there's so much information that changes so fast."
Over-regulating the insurance industry could stump its growth, he cautions. "If everything has to go through MAS, that would stifle how things flow in the market."
KPMG's Mr Chia reckons that the bigger threat on social media will increasingly come from foreign firms.
"The problem with social media is that content accessible to us may be posted by someone outside of Singapore. Those are the ones that usually do higher-risk transactions, such as cryptocurrencies and crypto assets. There's nothing to stop them from blasting investment advice globally.
"The local regulator cannot govern the world, so the buyer has to take some responsibility and do research," says Mr Chia.