Customers come first in Financial Advisory Industry Reviewfi

To protect and benefit customers of life insurance and financial advisory services, the Monetary Authority of Singapore (MAS) will be launching the Financial Advisory Industry Review, or FAIR. This was announced by MAS Managing Director Mr Ravi Menon at the Life Insurance Association’s 50th Anniversary dinner.

The five key thrusts of the review include:

1. Raising the Competence of Financial Advisory Representatives
   The current minimum entry requirement of four GCE “O” level passes for Financial Advisers (FAs) will be reviewed to  keep pace with Singapore’s rising educational levels,  the increasing complexity of products and higher public expectations.
   
2. Raising the Quality of Financial Advisory Firms
   MAS will review the management expertise and financial resources of financial advisory firms to ensure that they are well managed and financially sound.  The review will also be taken into consideration when admitting new firms.
   
3. Making Financial Advice a Dedicated Service
   Noticing a worrying trend of FA representatives branching out to conduct other activities, some of which are in conflict with their advisory role, FAIR will  review the activities that FA representatives can conduct outside their advisory role to ensure that representatives continue to put their customers first and will not be distracted from their professional focus.
   
   It will also review the practice by FA firms and representatives who tap on “introducers” to reach out to customers, as well as the scope of financial advisory activities conducted by insurance brokers.
   
4. Lowering Distribution Costs of Insurance Products
   To make insurance more affordable for consumers, MAS will also review the commission-based, multi-tier distribution structure, where representatives in upper tiers have a share of commissions earned by lower-tier representatives.   The review will examine if such a structure aligns the interest of representatives with customers’ long-term interests, or adversely incentivises representatives to sell products that pay them higher commissions.
   
5. Promoting a Culture of Fair Dealing
   FAIR will also promote a culture of fair dealing by financial institutions, to instil customer trust in life insurance and financial advisory services.  

Read Mr Ravi Menon’s full speech “Financial Advisory Services: Putting the Customer First”.