MAS sets out new measures to tackle mass movements of financial advisers

Singapore

THE Monetary Authority of Singapore (MAS) on Wednesday proposed four measures to address large-scale movements of financial advisory (FA) representatives from one FA firm to another.

It is calling for a public consultation, after which it will then be decided if these measures might eventually become regulations.

"We'll see what the response is. We haven't decided. This is what we think the industry should do. It's co-created with the industry and we'll see," Ong Chong Tee, deputy managing director (Financial Supervision), MAS, told The Business Times on the sidelines of the Life Insurance Association Singapore's (LIA) annual luncheon.

For a start, the LIA will be issuing the proposed measures as guidelines for the association's member companies and related parties next week.

Patrick Teow, president of LIA, told BT: "We have gone through many rounds of discussions between MAS and our member companies and finally, MAS is agreeable on these four areas. LIA is taking the forefront by going with a guideline first."

The first proposed measure recommends that the first-year sales target tied to sign-on incentives should not be higher than the representative's average annual sales in the preceding three years.

"Sales targets for subsequent years should be set at a reasonable level based on the representatives' past performance, and would be subject to supervisory review by MAS," the central bank said.

The measure aims to reduce the risk of representatives engaging in aggressive sales tactics to meet inflated sales targets.

The second measure suggests that sign-on incentives be spread over a minimum six years. The first-year payment should be capped at 50 per cent of the representative's average annual remuneration in the preceding three years. The remaining sign-on incentives are to be spread over the next five or more years.

The third measure proposes that FA firms be required to claw back the representative's sign-on incentives if the percentage of insurance policies serviced by the representative at the previous FA firm and which remain in force, falls below a threshold of between 75 per cent and 85 per cent two years after the representative's departure.

The last measure states that FA firms will need to undertake "enhanced monitoring" of newly-hired representatives' sales transactions for at least two years. This includes appointing an independent external party to conduct customer call-backs to verify that the sales and advisory process has been properly conducted.

MAS said that the last two measures apply only to the mass movement of 30 or more representatives from one FA firm to another within a 60-day rolling period.

The public consultation will end on April 9.

In the second half of last year, BT reported that a total of about 300 financial advisors from Great Eastern moved to rival AIA's newly set-up FA arm, AIA Financial Advisers, in what was seen as the biggest migration in recent years. It was understood that a smaller group of AIA financial advisors was moving to the new FA firm.