Having spent the last week in my old haunt Hong Kong, and meeting with former industry colleagues and friends, it seems quite incredible how far the industry is now beginning to change. The Hong Kong regulator the Securities and Futures Commission (SFC) have now introduced soft commission disclosure with a view to take this to hard disclosure in 2014. The industry is acting favourably in looking over its shoulder at the UK’s RDR and opening up to the fact that transparency and value driven services now need to be at the heart of business activities.
The Money Authority of Singapore (MAS) have gone a step further introducing their Financial Advisory Industry Review (FAIR) initiative in 2012 aimed at raising standards and professionalism and enhance the market efficiency for the distribution of life insurance and investment products in Singapore. This particular directive is interesting in that it aims to introduce:
(a) a balanced scorecard remuneration framework which rewards the provision of good quality advice to align the interest of FA representatives with that of customers;
(b) a direct channel through which “basic insurance” products can be purchased with a nominal administration fee; and
(c) a web aggregator to enhance comparability amongst life insurance products.
Although commission is still allowed (unlike the RDR) we are definitely seeing a push towards client centered professional standards in both jurisdictions.
Yet the fact that the ‘buyer beware’ strategies are still evident in marketing material illustrates further reforms are needed to bring Asia to the cutting edge of client protection in regulation. The FCA have quite clearly shown (through their drive for the application of behavioural science in regulation) that more ‘steering’ strategies are needed to ensure the industry manufactures appropriate products and suitable advice meets client needs. Its about ensuring consumer decision making and flawed or irrational behaviours are factored into product distribution and advised services.
So where does this leave Asia? Well I believe there is now a case for ‘hybrid’ firms to come to the fore and grasp the need to develop and build client centric services, along with still taking commission payments. There is the case also for rewarding sales staff for non-sales activities such as client satisfaction rates or high retention rates. This will not only go a long way to bring back client loyalty and trust, but also ensure that these firms are at the cutting edge of their profession, taking the lead in professionalism and raising their standards and ensuring the forthcoming waves of consumer protective regulation are not overwhelming, but are seen as a positive opportunity to do the right thing for their clients, their business and their industry.
