Describe what suitability and quality advice look like in an actual recommendation.
Hafiz is 32 and Nadia is 30 (an invented example). They have a three-month-old daughter and a new HDB flat with a mortgage. They have also saved S$15,000 for their daughter's education. Hafiz has a group life policy through work, and the fact-find shows he has almost no life cover beyond it.
Wei Ling is the representative who will meet them. Her firm has just launched a savings plan for young parents, with a brochure showing babies and graduation caps. The plan is designed for exactly Hafiz and Nadia's segment. Her manager mentioned it twice at the Monday meeting, and she is tempted to go into the meeting with that plan already in mind.
The second fair dealing outcome requires firms to offer products that are suitable for their target customer segments. This is a product-level test. The firm decides who a plan is for, checks that its features fit that group in general, and builds the marketing around that group. The young parents' plan may pass that test easily.
The test you face in a meeting is narrower. A product can suit a segment as a group and still be wrong for one client in that segment. A segment description does not show a client's existing savings, existing cover, protection gaps or cash-flow limits. A couple like Hafiz and Nadia might already have education savings, and they do: S$15,000. They might have so little life cover that a death or disability would leave them unable to pay the mortgage, which would make protection the more urgent gap. Their cash flow might have room for only one new premium. Treat the segment as your starting point. It tells you which questions to ask, and only the client's answers tell you what to recommend.
The third fair dealing outcome requires quality advice and appropriate recommendations from competent representatives. Quality advice is advice where you can trace a line from what the client told you to what you recommended. Sometimes the line runs the other way, from a product you wanted to sell back to reasons you found for it. When that happens the advice is not quality advice, however good the product is.
To check which way the line runs, look at the order of events. Did the need come up in the fact-find before the product was mentioned? Can you find something in the client's own words that the product does? Then ask yourself the question Wei Ling asks before any recommendation: if the client had said something different in the fact-find, would I be recommending something different? If the honest answer is no, you have "a product looking for a client".
Quality advice also includes advising the client not to buy. The client may already have the cover they need, for example through an employer such as Nadia's, or nothing new may be affordable right now. In either case, telling them so is the recommendation.
Most representatives can explain what a product does when everything goes to plan. Competence means knowing what happens when things go wrong. That covers the total cost to the client, including charges that do not appear on a premium notice, and what happens if the client stops paying, say in year three. It also covers the exclusions and any waiting periods. For investment-linked policies, it covers what happens to the value when markets fall and which charges keep being deducted regardless.
You do not have to know every answer from memory, but you must not guess in front of the client. Before you recommend a product, read its product summary, the policy wording on exclusions and the surrender terms, and work out how you would explain each one to the client. If you do not understand part of the product, ask the firm's product team before the meeting rather than after the client has signed.
For the read-aloud test, imagine a reviewer sitting with the fact-find in front of them. Read your actual reasoning aloud to them: what the client needed, why this product, why this amount, and what else you considered. If any part makes you uncomfortable, the advice is not finished.
These are the usual warning signs:
the amount was chosen to meet a target, when it should fit the client's cash flow you never asked about existing cover the honest reason for choosing this plan over another is that it pays you better
Each one means going back and fixing the advice before the client signs. Tidying up the file afterwards does not fix it.
When Wei Ling runs the test on her plan for Hafiz and Nadia, the young parents' savings plan fails. A protection recommendation passes, because she can point to the sentence in the fact-find where Nadia said, in effect, that she could not keep the flat if something happened to Hafiz.
Writing the link between need and product in plain sentences is the habit that makes all of this visible. Lesson 4.1, "What a reasonable basis looks like on paper", covers how to write the full recommendation rationale in detail. For now, three sentences are enough: what the client said they needed, what you recommended, and how the one answers the other. The activity below asks you to do that for one recent or practice case.
Pick one recent or practice case and write three sentences connecting what the client said they needed to the product you recommended.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).