Monetary Authority of Singapore Annual Report 2012/2013
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Raising the Bar for the Financial Advisory Industry

On 26 March 2012, MAS announced the commencement of the Financial Advisory Industry Review or FAIR. The aim of the review was to raise the standards of practice in the financial advisory (FA) industry, and to improve the efficiency in the distribution of life insurance and investment products in Singapore. The review focused on the following five key thrusts :

  • raising the competence of FA representatives;
  • raising the quality of FA firms;
  • making financial advising a dedicated service;
  • lowering distribution costs by enhancing market efficiency; and
  • promoting a culture of fair dealing.

FAIR adopted a consultative approach so as to ensure that the recommendations were balanced and took into account the interests of all affected constituents and stakeholders. On 2 April 2012, a 14-member FAIR Panel chaired by MAS and comprising representatives from the industry associations, consumer and investor bodies, academia, and media, was formed to deliberate and propose recommendations on the five FAIR thrusts.

As part of the FAIR process, MAS solicited and received more than 1,300 feedback responses from the public and industry practitioners on ways to improve the FA industry. An external consultant was also appointed to conduct a comparative study of the FA industry in Singapore with that of other jurisdictions to ensure that FAIR took into account international developments and best practices. The feedback responses and results of the comparative study were considered by the FAIR Panel in its deliberations.

On 16 January 2013, the FAIR Panel announced its recommendations. There were a total of 28 recommendations made under the five FAIR thrusts. The key recommendations for each thrust are as follows:

  1. raise the minimum academic qualification for new FA representatives from 4 GCE “O” level credits to a full GCE “A” level, International Baccalaureate qualification, or a diploma awarded by the polytechnics in Singapore, or the equivalent. This is to ensure that FA representatives are able to meet the needs of a more well educated Singapore population in an increasingly complex financial environment;
  2. raise the operating requirements for licensed FA firms to improve the quality of management and to ensure that these firms have adequate capital;
  3. impose restrictions on the conduct of non-financial advisory activities by FA firms and representatives, as such activities could pose conflicts of interest and lead to neglect of their FA role;
  4. require insurers to offer basic insurance products through a direct channel, so as to cater to certain underserved customer segments and help alleviate the state of underinsurance in Singapore; and
  5. require FA firms to remunerate their representatives using the balanced scorecard approach, to supplement the current volume-based remuneration model with qualitative factors that promote fair dealing with customers.

On 4 June 2013, MAS concluded a three-month public consultation process to seek comments on the recommendations of the FAIR Panel. MAS will study all the feedback received carefully before finalising any policy position, and will give the industry sufficient lead time to implement any new rules or regulations arising from FAIR.

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