Alignment of Interest - Isaac Fang CFA, ChFC, CFP Alignment of Interest - Isaac Fang CFA, ChFC, CFP
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Understanding the concept of alignment of interest is absolutely critical in a person’s wealth management journey. How can we navigate living in a world with information overload and multiple gurus appearing with all sorts of ideas and online advice clamoring for our attention? Is there a concept to make sense of this all? Yes. And begins with a story.

Chicken and Pig were living in a farm together with other farm animals. They were particularly fond of the farmer’s son, Jack, who was 10 years of age with a fondness for American breakfast. So Chicken said to Pig,” Hey Pig, shall we make American Breakfast for Jack?” And to which Pig replied,” Absurd, the egg is just a contribution from you whereas bacon requires a commitment from me.

The concept of conflicts of interests has been widely explained and understood, but alignment of interest is more subtle and hard to detect at times. In the book Freakonomics, the scenario of a property agent whose commission is 1% of the sale price, is not going to be motivated enough to sell a $1million home for $10,000 more (decent quantum to you) because it is only a $100 difference to his earnings.

Then there are life encounters of people who throw ideas to benefit themselves (generally good but relative betterment of themselves) and expect others to commit time, resources and energy to make the ideation a reality. Hence, the Chicken & Pig in a farm story. The selling of a dream but a difference in the contributions and commitments required between persons involved.

You should be on alert and guard against persons who get you into commitments with no regards for potential buyer remorse that might manifest in future. Covid19 made many defeat their own financial plans with capital losses arising from the early surrender of insurance plans. Insurance is a contingent need versus the immediate need to put food on the table. When push comes to shove, immediate concerns trump over contingent ones. Yes sometimes when it rains, it pours, and being uncovered when the insured peril hits makes matters worse than before. However, a balance has to be struck to ensure budget sustainability.

To answer the question from the start, it pays to first understand the motivations behind the information presented in front of you. Some are motivated by commissions over your best interest. Some are motivated to direct your attention with click baits that lead into another pathway. Understand your own priorities and take charge of them, or others will seek to reorder them for agendas that are not your own.

Want a process that will help your understand your best interests, and subsequently seeks to rank choice selections to match your nuanced individuality? Click on the only hyperlink in this entire post.

I offer better alignment of interest. If you would like me to work with you on your financial journey, please do not hesitate to reach out to me.

This is my last post for Yr2020. Merry Christmas and a Happy New Year 2021 !

1 Comment

  1. […] Driven Remuneration – Such a set up does not guarantee an alignment of interest between the planner and the client. As the industry still largely works on a proposal-acceptance […]

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