Disrupting The Financial Advisory Industry With A Fee-Based Approach

Interview with Financial Advisory Firm's CEO Christopher Tan

Christopher and I met a few years back after I got to know one of his ex colleagues at a training workshop.

Prior to that I have never heard of Providend and was intrigued with their unique approach.

Most of us would have some form of insurance policies. And many of us probably would have bought many wrong ones.

I know I did.

It started when I was in National Service. I bought an insurance-linked policy (ILP) which I couldn’t service with the measly amount of pay I was getting.

A few years later I bought another ILP from a random (and very pretty) agent that approached me on the streets.

Along the way, one of my ex colleague became an insurance agent and sold me the ILPs her company carry.

Trying to be nice and supportive, I again bought in.

As I wise up, I realized many of these products were sold to me not because they are the most suitable. But because they provide the agents with the highest recurring commission.

You can read this post by SG Budget Babe on some financial literacy lesson regarding insurance.

Providend takes on a fee-based approach. That means they charge you a flat fee for their work and product commissions will be refunded to the customers.

This is because (and I totally agree) they firmly believed then and still do, that taking commissions when giving advice creates a conflict of interest and is the root of all ethical problems.

 

1. Please share a bit about what you do.

I founded a firm called Providend and am currently the CEO running. It is an independent financial advisory firm that is licensed by MAS.

We are a registered fund manager as well. We have a subsidiary company called Logos Learning that does purposeful and intentional leadership development.

I am a certified action learning coach as well as an executive coach with Logos Learning.

 

2. When you were a kid what did you want to be when you grew up?

Honestly, I had no idea what I want to be when I was a kid.

Like most kids, I just wanted to have fun!!

In fact, Given my small in size, and having come from a poor family, I grew up feeling pretty inferior. So I didn’t think much about my future then.

 

3. What were you doing before starting this business?

I spent 3 years as an insurance adviser with a large UK insurer.

Before coming into the financial services industry, I was with Johnson and Johnson doing sales for a short while.

This was to tie through the 1997 Asian Financial Crisis. Prior to Johnson and Johnson, I spent 6.5 years as a career army officer.

 

4. How did the idea for your business come about?

During the late 90s, when this whole idea of financial planning came about, I was very keen as I like the idea of being able to give good advice and provide assurances to clients, very much like how doctors would give assurances and comfort to patients, and lawyers to their clients.

Providend Team photo

But back then, there were no licensed entities that provide true financial advice because the Financial Advisers Act was not in place yet.

So if you want to do this kind of work, you either join the insurance companies, the banks or the stock broking houses. So I joined an insurance company.

I did very well in those three years. I was No 2 rookie adviser in my first year and by my third year, I was already in the top 25 list in the entire company.

I was earning good money, being well recognised and going for at least 2-3 incentive trips a year.

However, when I was into my 3rd year, I read an article on Business Times that featured an interview by Genevieve Cua on a well known US financial planner Suze Orman.

She said something to the effect like: “If you sell whole life insurance to your clients, you are like serving them with a plate of poison”.

As expected, I was angry with her. I sold plenty of Whole Life then! I thought then that it was the right thing to do!

I spent another 6 months researching into this and found out, “unfortunately” that she was right. There were better options, such as using Term Insurances.

Also, at that time, I realised that I wasn’t fulfilling my passion of providing clients with independent, comprehensive financial advice.

I was simply a product salesperson. So, I made the painful decision of leaving the insurance company and venturing out on my own.

So when I started Providend, I wanted to start right. I made it very clear to all our people that the purpose of Providend is to give clients the most honest, independent and competent financial advice.

So we started since day 1 as a fee for service firm. In fact, we are the first fee-only financial advisory firm in Singapore.

Clients pay us a fee for advice and we rebate 100% of the commissions back to them if they invest with us. We advocate the use of low cost Term Insurance.

We put in place processes and structures to minimise all conflict of interest. It was a crazy move then as no one have ever done financial advisory this way.

 

5. What sacrifices have you had to make to be a successful entrepreneur?

There were many sacrifices I had to make. But I think the people who sacrificed more will be my family members.

When I ventured out from the insurance company in 2001, I left with the assumption that the Financial Advisers Act will be in place.

Unfortunately, when Sep 11, 2001 happened, I think the government decided to focus on security and the plan to have it up that year was placed on hold.

So between 2001 to March 2003 (when we finally could operate with a license), we could not practice.

That means, the company had no revenue and all of us then suffered financially.

I had to downgrade my car, and also let my domestic helper go.

My family had to live with very little savings as much of it had gone into the company.

At one point in time, my wife sold all her jewellery to help pay for living expenses. We also had to dig out all our coins (we had plenty!) to use it.

My children and us lived a very simple lifestyle then. They had no luxuries like other kids. I could not bring them for any holidays.

Even when we could do business in 2003, it took a few more years before life became better.

But it was an experience that although I wouldn’t want my family to go through again, I deeply treasured it.

That was the time when the people in our firm huddled together and our bond was built. That was the time where I saw how much my wife loves me.

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That was the time where I learnt to live simply and my whole perspective about money changed.

It was during this period that many of my core values were formed.

 

6. How did you get funded?

When we started, it was all from our savings.

 

7. How do you go about marketing your business?

As a small firm, we had no marketing budget.

So we did a lot of talks and I was also very thankful that I had the attention of media.

I had many opportunities to appear on both print and broadcast media. At one point in time, I was contributing monthly to the Business Times.

 

8. Could you describe your first sale and how it came about?

I can’t really remember

 

9. Describe/outline your typical work day?

My work day has changed over the years. Now that my kids are much older (18 and 15 years old), this is my typical work day:

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6 a.m. – 7.p.m: Morning devotion
9 a.m. – In office (my typical work day is usually one that is flooded with meetings)
6 p.m. – Leave office
7 p.m. – Dinner and family time
8 p.m. – Clear up some work if any
11 p.m. – Rest

 

10. What has been your proudest moment in the history of your business and why?

A middle aged lady called me one afternoon and said she was asked to call me. Her husband is a taxi driver and she said she has no money to pay our fees.

But she really needed help to look at her insurance needs. She was told that Providend can be trusted and will never cheat her.

We did her case for her pro-bono and also rebated her 100% of the commissions.

That was one of my proudest moment. I thought then: “This is why we exist”.

Just recently, a pretty wealthy lady called my office and insisted that she speaks with me.

When I got to talk with her, she told me that she was recently approached by a few advisers, all advising her to buy some products.

But somehow, she does not feel at rest and that troubled her for a few days. She heard about us, googled and called in.

After hearing her situation, I gave her some general advice over the phone and basically told her that those products are really very expensive and not suitable for her.

I assured her that her situation is really quite simple and can be solved easily without spending a lot of money buying products.

That was another reinforcement to my belief on why we exist. I live for moments like this.

To me, Providend is not just a business. It is a calling.

 

11. What was the lowest point for you in this business?

It has to be in Dec of 2008. It was the peak of the Great Financial Crisis and like everyone else, all our portfolios were hit badly.

Many clients called in as they were understandably worried. It was a difficult moment for us all.

We also made some bad investment calls that affected portfolio performances. Since then, we have put in a more robust process for our investments.

I think the biggest lesson I learnt from the GFC of 2008 is humility.

Never be overly confident of your own abilities. There are many things in our life that we cannot control.

We can put in place the best structures and processes. But never be complacent.

 

12. What’s your revenue numbers over the past year?

About $4 million.

 

13. Who has influenced you most when it comes to how you approach your work?

I am a Christian and as a believer, we look at our work as worship. Everything flows out of worship to God.

And when we worship God, we want to please Him. We do what is right – with integrity, with honour and to the best of our ability.

 

14. If you could go back in time to speak to your 20-year-old self, what would you tell him?

Don’t be proud. You can be right in principle. But be right in your posture too.

 

15. What’s the worst piece of advice you ever got?

Haven’t got one that I can remember

 

16. What’s your business focus for this year?

a. Strengthening our advisory DNA

Continue to build robust processes that will give clients the most honest, independent and competent financial advice.

b. Improving our investment offerings

This year, we are reviewing the investment processes for all our investment portfolios. We want to ensure that we follow a certain discipline that will allow the clients to get the expected returns.

We are also in the process of working with an investment partner to bring in their investment fund to execute our investment strategy.

This is a very good quality product that I have waited more than ten years for. When it comes, we would probably be the first in Asia to use it.

c. DIYInsurance enhancements

DIYInsurance is Singapore’s first life insurance comparison portal.

We started it in June of 2014 to provide a platform where there is transparency in the insurance products, allowing consumers to do some self planning, choose what they want and if they need advice, they can get it over the phone or email.

The advisers are all salaried-based and when consumers finally buy the insurances, they receive 30% rebate off the salesperson’s commission.

The overall experience is one that is without sales pressure, getting what you really need and at a lower cost. This portal has done very well since 2014.

We are in the process of enhancing the portal to make it even more user friendly for the consumers in 2016.

 

17. What’s a productivity tip you swear by?

I don’t really have one. But there is a life principle that I always share with people:

Do not make a financial decision and then let your life decisions follow that financial decision. First make a life decision, and then let your financial decisions follow that life decision.

 

18. Is there an app or tool you can’t live without?

I can’t “live without” my Macbook Air! I carry it almost everywhere I go. It is my laptop, “iPad” all in one.

 

19. Where can people find you online?

They can go to our websites and like us at Facebook to be connected.

www.providend.com and https://www.facebook.com/Providend/
www.diyinsurance.com.sg and https://www.facebook.com/diyinsurance.com.sg/

Please note: I reserve the right to delete comments that are offensive or off-topic.