Throughout our lives, we often get approached by friends or family to tell us all sorts of “KangTao/Lubang”(tips). However, more often than not, the "KangTao" is usually in the best interests of themselves.
Unlike in the U.S, whereby the Department of Labor will be implementing the Fiduciary Rule next year, which will help to put the other’s needs before anyone else, otherwise they can get sued if they wrong them. In Malaysia, there's no such a rule yet except having "Avoid Conflict of Interest (BNM)" or "Integrity (CFP)" as one of the code of conducts and ethics.
So how do you protect yourself?
Here are the 3 Ways to Protect Yourself From Bad Financial Advice:
1. How Are They Being Compensated?
Be it an introduce-r, agent or advisor, the person should put in writing all the fees and commissions he or she will be receiving from all sources. Do they get certain percentage from the money you invest? Do the products they recommend contain charges that they will receive? Part of the problem with them is that they will make you focus on your potential return and not telling you exactly how much money they make in what they’re selling you. Put everything (written form) on the table.
2. Is Their Advice Conflicted?
They should give a “reasonable basis” for the advice they are giving you. If they recommend a product or service, you should know if they are getting a commission or other fee through the transaction. Also ask if they will receive bonus or incentive trip for making recommendation. They should always make recommendation because it’s in your best interest (which they always claim to be), not theirs.
3. Are They Qualified to Give You the Advice You Need?
Learn from the right people, not just anyone. You need to know if they can give the advice that’s tailored to your financial situation and not like anyone else? (Others have it doesn't mean you should have it too!) Are they qualified or in the right position to give you the right financial advice? You’ll probably need to find a licensed financial advisor with CFP or RFP certification. Again, you need to know if your advisor can provide un-conflicted advice in these complicated areas.
Keep in mind that without the Fiduciary Rule in force in Malaysia, you’re on your own! There is no government body forcing the fiduciary rule on anyone. So in the meantime, seek out advisers who abide by the fiduciary standard. They are generally certified financial planners, chartered financial analysts, certified public accountants and licensed financial advisers.
Avoid those who are merely introduce-rs, agents, brokers, “registered representatives” or “wealth managers” who are not fiduciaries, whereby they probably not going to find you anymore after the sales. So the next time any KangTao comes up to you, remember to ask these questions to protect yourself from bad financial advice!
Till then. ;)
In supporting of upholding ethical conducts!