In March 2012, MAS launched the Financial Advisory Industry Review (FAIR), to raise standards in the financial advisory (FA) industry and improve efficiency in distributing life insurance and investment products in Singapore. After a year of consultation with consumers and practitioners, the FAIR recommendations were announced. In this issue we look at what this means to us, the consumer.
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The 3 Main Thrusts of the FAIR are as follows:
1) Making financial advising a dedicated service
Financial Advisors must focus on providing quality financial advice. They cannot engage in any other businesses that
a) conflicts with their financial advisory service,
b) tarnishes the image of the FA industry, or
c) leads to them to neglect their FA role.
How this affects us
We will have a better chance of receiving professional advice and followup services. Our Financial Advisors will not be distracted into trying to market other products; from “land banking”, multi-level health products or even lending money.
2) Lowering distribution cost by enhancing market efficiency
Distribution cost is incurred when buying insurance. This includes commissions, company overheads and costs paid to the distribution channels.
How this affects us
A 'web aggregator' would be set up to allow comparison of the benefits and pricing of basic products. This results in greater transparency and competitive pricing, benefiting consumers.
Do note that this tool is limited to basic products and will not be suitable for those who want specialized advice, tailored solutions or ongoing personalised services.
3) Promoting a culture of fair dealing.
A balanced scorecard framework will be set up to assess Financial Advisors, using non-sales indicators such as:
A) Quality of Advisory and Sales Process;
B) Suitability of Product Recommendations;
C) Adequacy of Information Disclosure; and
D) Customer Complaints
How this affects us
Advisors who violate the above risk losing the income connected to the violations. This means Financial Advisors would be more advisory driven rather than sales driven, giving us a better chance of receiving quality advice.
In Summary
The FA industry is becoming more advisory based and less sales focused. This FAIR act would up the quality of advice and service for consumers like us. For more information, please refer to the full FAIR Dealing Response by MAS. You may also wish to approach your Personal Financial Services Consultant.
