According to the Straits Times, retrenchment doubled from 10,690 to 26,110 in 2020 alone ^[1]. COVID-19 has decimated many jobs in multiple industries, most notably airline and tourism while many companies implemented hiring freezes. As unemployment rose, there was one industry that saw a job boom in the financial services industry with over 2,000 job vacancies across different insurers.

A pandemic-proof industry

The insurance sector grows in a pandemic. Insurance is an essential tool and the pandemic served to further highlight its importance to create market demand. Technology also enables remote sales transactions despite regulations restricting face-to-face interaction. Ultimately, insurers are operating by the law of large numbers by casting their nets far and wide for new advisors. But is the job boom merely due to the industry’s nature per se?

Why are people biting the bait?

It does not take a rocket scientist to understand one’s motivations to join the industry. We simply go back to basic human instinct for survival. With many livelihoods upended by the pandemic, people are desperate. The advisory industry is far more palatable than the other options, as it promises grand dreams, from luxurious incentive trips to attractive five-figure monthly earnings. These lofty goals resonate with human greed and drives many to bite the bait.

Barriers to entry are not prohibitive either. The minimum academic qualifications are a full A’ level cert or a polytechnic diploma equivalent, which makes half of the local populace qualified. Hiring financial institutions further alleviate any fears of cashflow strain by offering a basic salary as an interim compensation before the fresh recruits are deemed fully equipped to earn a wholly commissions-based income. With all these perks, how sustainable is the job exactly?

The Insurance dilemma

In developed markets like Singapore, agent saturation is very high with an advisor to economically-active consumer ratio of 1:117 ^[2] Odds are, you would have at least one acquaintance or family member who is a financial advisor. The job boom in financial services also means greater competition between insurers, marked by aggressive marketing and sales campaigns.

Joining the insurance industry would probably be a temporal solution to tide through the storm than a sustainable option, especially for mid-career switchers.

Robo rivals 

With technology, a competitor is rising up against advisors selling investment-linked plans: robo advisors. While robo advisors offer liquidity and investment portfolios at a lower cost, this is merely a product-feature comparison. The human advisor’s value lies beyond good product offerings to providing holistic financial advice, which the industry desperately need advisors to do to create sustainability.

What will happen?

When air travel and tourism resume post COVID-19, we envision many people to re-migrate back to these recovering industries. Hence, we can expect higher attrition in the financial services industry. This is harmful for the industry as it upsets advisor-client trust. With automation providing non-biased and sustainable services, clients will deviate from traditional advisory models to technological platforms.

What’s needed for upcoming Advisors and Insurers?

We think this job boom is not sustainable for many reasons. The quality of advice will unavoidably be influenced by sales bias and the advisor’s level of product knowledge. Research has also shown that public trust towards insurers is low.  Eventually, the lack of advice consistency and quality may compromise on customers’ financial decisions and further fuel negative industry perceptions despite regulations being put in check to protect customers’ interests.

We believe insurers need to move away from traditional mass-selling and hiring processes and re-think the role of technology in ensuring congruent and sound financial advice. This may be a small step in the long run to building a sustainable and enjoyable career for financial practitioners.

Notes

^[1] Source: https://www.straitstimes.com/singapore/jobs/spores-employment-level-saw-sharpest-decline-in-two-decades-in-2020-with-foreigners

^[2] Ratio is obtained by dividing number of economically-active people in Singapore by number of active financial advisors. Source: https://www.businesstimes.com.sg/banking-finance/financial-advisers-get-1-year-reprieve-from-zero-sales-fees

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