MAS embarked on its first mystery shopping survey
on practices in the financial advisory industry.
The objective of the survey was to assess the quality
of the sales and advisory process and not the quality
of advice. The survey was conducted from October
2005 to February 2006, and covered 100 representatives
from 30 financial advisers (FAs) comprising licensed
FAs, banks, insurance companies and capital markets
services (CMS) licence holders.
MAS appointed a market research company to recruit
mystery shoppers to pose as interested clients
seeking advice. The mystery shoppers were asked
to approach the FAs based on the following scenarios:
either having a lump sum of S$10,000 to invest
or a monthly budget of S$300 to purchase an insurance
policy for protection of dependents. The mystery
shoppers were not required to commit to a purchase.
In developing the survey methodology and questionnaire, MAS sought
input from a panel of industry practitioners, academics and consumer
Overall, the survey revealed that most representatives
conduct a basic fact-find before making a recommendation.
However, there are gaps in the quality of disclosure
and manner in which the reasons for recommendations
are documented. The survey also found that FAs
generally had better processes for investments
as compared to insurance sales.
MAS noted that FAs have over the last few years
put in place systems and procedures to provide
needs-based advice. However, FAs need to improve
on the implementation of these processes and
monitor their representatives to meet the standards
expected. MAS has shared the findings of the
mystery shopping survey with the industry associations
and made recommendations to help FAs address
the gaps identified.
MAS also launched two new online guides to help
consumers understand the products they are buying
and the risks involved in these products.