The importance of setting realistic sales targets

LIKE all other industries, poaching is common business. So it's no surprise that it happens in the business of insuring people, especially in a tight labour market.

Insurance agents or financial advisers are generally paid low basic salaries. The bulk of their income is derived from commissions on sales made.

From an employer's perspective, the easiest way to recruit agents and advisers is to offer a buyout package. That way, you get the "plug-and-play" types - the ones with experience and customer base.

The truth is, why should an agent or adviser jump ship unless there is a sweetener of sorts?

There is no specific regulation governing the licensed financial advisers (LFAs) on buyout packages, perhaps for anti-competitive reasons. The closest thing to some sort of directive is the Life Insurance Association Singapore (LIA) guideline for tied agents that recommends buyout packages to be capped at 150 per cent of past annual income. But even this is not binding and financial advisers are excluded from it.

Still, if it is any consolation, a committee member of the Association of Financial Advisers Singapore (AFA) said the association does align itself to the LIA guideline.

But industry players remember cases where buyout packages, particularly for senior advisers, went beyond this.

Here's the problem. Buyout packages usually stipulate a certain sales target for a specific insurer's products.

At what point do we say it is unethical?

No matter the level of target, how can one say for certain that the product recommended to the client is based on need and not because the adviser is under pressure to meet sales figures?

That is not to say there would not be win-win outcomes where the adviser manages to offer the most suitable product to the client while hitting his sale targets.

The Financial Advisory Industry Review proposals will go towards aligning the interests of customers and financial advisers in some ways.

However, many policyholders end up having to deal with new advisers or agents because their trusted advisers or agents have moved on. Then there is the problem of switching which caused a ruckus about five, six years back.

At the start of July, Merlyn Ee, an executive director at the Monetary Authority of Singapore, rightly pointed out at the AFA's annual conference that while regulators can set rules on what is permissible, it is not possible to impose a corporate culture. These changes must come from within.

It is up to companies' board and management to set and execute fair-dealing principles and set realistic sales targets, something that industry players quietly acknowledge is missing.

While striking a balance between growing a company and setting realistic topline targets will always be tricky, setting targets that would require an insurer to acquire the market share of a fellow insurer overnight would be what one describes as impractical, to say the least.

Companies need to understand that fair-dealing principles should not be an option because missteps are inevitable when senior executives and advisers are under pressure to keep their jobs.

Having fair-dealing practices will also help retain experienced advisers and groom new entrants.

Pushing advisers to meet unreasonable targets might work in the short term, but will the business be sustainable in the long term if it is plagued by customer complaints and bad reputation?

As we all know, building trust is a time-consuming and delicate matter - one that takes years to build but mere seconds to wipe out.

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