How to know the difference between a financial advisor and a salesman?

The whole insurance business runs on commissions - we know that. And that’s the nature of the business itself. Whether you plan to buy your insurance plan online (through the insurance company’s website or an aggregator platform like Policybazaar or Coverfox), or offline through an insurance agent - the person/ entity that makes the sale - also makes a commission. The commission they make is based on the type of product they’re selling, the insurance company, and the ticket size of the purchase, ie. the premium you’re going to pay for the specific product.

Knowing this, it is easy to assume that anyone trying to sell you insurance is in it only for the commissions. But this couldn’t be farther from the truth. In this article, we’ll learn how to spot the differences between a good financial advisor who will help you identify and purchase insurance that is right for you, and a pure salesman who is only concerned with making a sale that gets them a better commission. 

Why is this important?

Insurance, especially complex products like health or life insurance can be difficult to decipher by yourself if you do not have a financial background. Company brochures are laden with complex jargon, and websites are often filled with content written for search engines, and not us humans - that can leave you confused. To add to that - the nature of the products is that you make a payment for a promise of fulfillment in the future. 

This means that you will have to wait until the time of your claim comes to finally know whether or not the plan you bought is actually working for you. Take the case of a life insurance plan, a death benefit - where you won’t even be around at the time of a claim - and your family might be all alone, trying to figure out the claim by themselves. 

In such circumstances, it is helpful to have someone on your side. And a financial advisor can be the best resource as they not only come with an understanding of the insurance product but also know your family to help them out. 

A financial advisor or a salesman?

It is not enough to simply have someone on your side. What you need is someone reliable, someone dependable that will support you from day one - until the day of the claim. 

And this is where understanding the difference between an advisor and a salesman becomes crucial. So, what are the differences? How do you know how to spot them? And, how should you go about finding a good advisor you can depend on?

A good Financial Advisor begins with YOU

A financial advisor begins with you. Building a good recommendation begins with a need analysis. This takes time and effort - but it is the right way to do it. A good financial advisor understands your current financial situation, plans, spending habits, etc., and creates a risk mitigation plan based on all these insights. 

A salesman, on the other hand, is focused on the product. Even before they learn about you, they introduce products - saying this is newly launched in the market and you should consider it. 

If someone who barely knows your financial profile, begins a conversation with - there’s this new product I want to speak to you about - that’s a red flag. 

Now, can you identify from the message below, if you’re dealing with an advisor or a salesman?

A good Financial Advisor, will educate you and let you make an informed decision

As an advisor, it is important for them to ensure that you are well-informed about the financial decisions they’re making. They will explain the details of the product, why it is suitable for you, and help you make a decision on whether or not you’ll invest in it. Insurance brochures can be filled with complex jargon, and your financial advisor is your trusted interpreter - so you know to make an informed purchase, with confidence. 

A salesman, on the other hand, will call you repeatedly, chase you and urge you to make a decision quickly ‘or else this offer will not be applicable tomorrow’. They might even withhold information that might sway you from making the purchase, instantly. It is bad for their business - if they allow you the space to think, and you decide not to go ahead with the purchase. 

Now, can you identify from the message below, if you’re dealing with an advisor or a salesman?

A good Financial Advisor tells you even when you DON’T need a product

There are situations where you might not need a specific insurance product. For example, you might not have financial dependents at the moment, meaning you do not need to invest in term insurance yet. A good advisor knows this and will recommend that you wait a few years, and buy the plan only after you have financial dependents. This means that they lose a commission that could easily make - but they choose what is right for you. 

A salesman is focused on the sale and the sale alone. If there’s an opportunity to sell - they will not lose it. Even if it means that the product is not really helpful for you. 

Now, can you identify from the message below, if you’re dealing with an advisor or a salesman?

A good Financial Advisor owns your entire insurance journey experience

A financial advisor owns your experience from research, to purchase, and to the claims process. They are your single source of information, as well as your single point of contact with the insurance company. Further, they’re with you and your family at the time the claim occurs too. They will help you with the claim form properly, prepare the documentation, and follow up with the insurer to speed up your claim settlement process. 

When you buy from a salesman, on the other hand - they are likely to disappear as soon as the sale happens. This is very common in case you’re dealing with an online salesman. You will receive calls over calls to quickly finish your purchase - and once you do, your application will be moved to another person or even department. You might never hear from the salesman again - and someone else deals with your after-sales queries. Further, at the time of the claim, you will need to deal with an entirely different team that you’ve no personal connection to. 

Asking the advisor about his post-sales service, meeting the team that manages the service, talking to customers who have experienced the advisor’s service, and finding out the general track record of the advisor on service and claims assistance is a must, before signing them up. 

Ensure your advisor has a minimum of 5 years of experience, so they have assisted on claims before and can help you effectively when the time comes too. 

Now, can you identify from the message below, if you’re dealing with an advisor or a salesman?

A good Financial Advisor knows that reputation is more important than commissions

Financial advisors are professionally invested in the field. They get training in the insurance field and dedicate their time and effort to building a reputation. Often, when one client is happy with their service, they get several more leads through references. And this for financial advisors is far more important than a quick buck through selling a bad product. At the same time, they’re also aware of how easy it is to make one mistake with a client and tarnish their reputation within the whole circle. 

Salesmen don’t really care for their reputation. They believe that making a sale quickly is the most important part of their job, as that’s the money they can see immediately. However, they’re often blind to the truth that poor recommendations spoil their reputation, and they lose any chance of growing their business through referrals. 

How to know when an advisor does not care about his reputation? 

He won’t talk about it. He won’t have a reputation in the market when you research. He won’t be able to share testimonials or share references of customers. 

On the other hand, advisors who worry about their reputation will have an active LinkedIn profile, might have a website, and will actively create awareness about financial planning, insurance, etc.  

On the other hand, if you see any of these signs, it might be a red flag that you’re looking at a salesman, not an advisor. 

• They subtly pitch multi-year policies so that the premiums are high, and hence, their commissions too, are high
• They recommend the same product, without understanding your needs
• They recommend long-term investment products, before helping you address requirements of financial security

Now, can you identify from the message below, if you’re dealing with an advisor or a salesman?

What makes a good financial advisor?

Insurance advice is not a simple job at all. No two products are alike, and neither are products from different insurers the same. We usually do not have the in-depth knowledge or training to make comparisons and decide effectively - and rely on advisors to help us. At the same time, we don’t want to blindly buy a product because it is recommended to us. We want to be educated and informed about the pros and cons, and their suitability for our specific needs. And then, we like to make our decisions. A good financial advisor gets this. 

They bring the knowledge, experience, and perspective to help us make informed decisions. 

How do you find a good financial advisor?

Now that we know what makes a good advisor, here are some things you should keep in mind while choosing an advisor to work with. Remember this is a long-term commitment, and finding a good advisor to guide you, is just as important as finding the right insurance plan for yourself. They will ensure that you do not make any mistakes while making this long-term decision and regret them later. 

Here are some things you should watch out for. 

• They’re in this for the long haul. They’re not simply doing this as a side-gig but are committed to providing you good service for many years. 
• They will think about protection risk first, and investments later.
• They will do detailed need analysis, and understand what you need - before pushing products or offers
• They will educate you on why a specific product is suitable for you - instead of simply sharing brochures, offers of ‘this newly launched, exciting product’. 
• They will have a track record of excellent service, from helping you identify and buy the product to after-sales service and until claims support - possibly many years later
• They will own the experience and will be known for fighting it out with insurers to ensure that you get a good experience. 

So, from the example messages above you’ll see that - 

Savitha, Rohan & Uma are salespersons, while…

Rohan and Kamal are financial advisors that you can depend on. 

If you need help understanding any part of an insurance product, you can post a question on the Beshak Insurance Forum, and get answers from curated experts and financial advisors from across the country, for free!