Tales from the dark side: unscrupulous advisers and their crooked companies
While most independent financial advisers are honest and professional, some will do whatever it takes to get clients to hand over their money.
A former adviser from a large multinational firm talked to Money Post about some of the tactics he was told to use.
The adviser wants to remain anonymous, which prevents Money Post from naming the firm. However, the firm and its tactics are well known in the advisory community.
The adviser tells a story that could come straight from the pages of Glengarry Glen Ross, or the play about desperate salesmen reduced to high-pressure sales and cons to hit unachievable targets.
Staff at the advisory firm were coached on ways to gain a client's confidence. For example, they were told to only wear white shirts to make them look like bankers and, therefore, more trustworthy.
Handshakes were important, too, and staff who were nervous were told to grip a table leg before they shook hands with a client, so their hand would be cool, not sweaty.
Once they got down to business, the aim was to sell customers an investment-linked assurance scheme (ILAS), due to the big selling commissions.
They were told to "sell the dream" to clients, asking them if they wanted to turn left to first class, or turn right to economy, when they got on a plane.
The commission paid on an ILAS varies according to the sum clients put in each month, so advisers were taught to play on people's vanity to get them to commit as much as possible.
"We were told to tell people that the average amount paid into one of these products was HK$30,000 a month. When we said this, men nearly always say: 'Well I will contribute HK$40,000 a month,'" he says.
At the beginning of a session, advisers were told to ask clients who made the financial decisions, they or their wives. "Men always say they make the decisions. Then later, when we recommended a product, if they say they needed to check with their wives, we were told to say: 'But you told me you made all the decisions,'" he says.
The firm was just as aggressive with its own staff. It invited people to work abroad for a large salary. When they arrived they found they would only earn commission on sales.
The firm also charged employees rent for their office space, and they were expected to supply their own laptop and supplies and even pay for their own photocopy paper.
They had no salary and hefty expenses. This meant they had to follow the firm's model of selling high-commission products, regardless of whether they were right for their clients.
The firm would even allow people to work before obtaining authorisation from the regulator, simply getting an authorised member of staff to sign off on any of the products, for a cut of the commission.
Advisers were also pressured to get referrals from new clients. The adviser describes a bizarre, and effective, pressure tactic where they would write the numbers one to three on a piece of paper, and push this across the table to the client. "We did not look at the client until they had given us the three names," says the adviser.
He says some people went a step further, and would access clients' Facebook and LinkedIn accounts to get names of friends and colleagues.
They would then call them and pretend their client had referred them, he says.
After four weeks, the adviser who spoke to Money Post quit in disgust and joined a firm with more integrity, he says.
"It's disgraceful what goes on," he says. "I'm not sure how these guys sleep at night."