Wednesday, February 27, 2008

MAS Consultation Paper

Mr. Tan,
What is the key proposal that you will send on the MAS consultation paper?

My key message is:
1. MAS requires the board and senior management to "put consumer interest first".
2. However, these parties are also required by their shareolders to "increase shareholder value", i.e make more profit for shareholders
3. More profit for shareholders mean more charges (and lower returns) to customers
4. As consumers will not pay higher charges, the life insurance company has to hide them, i.e. not transparent
5. It is difficult for the board and senior management to balance this conflict of interests
6. It is not realistic to expect that consumers can be eduated sufficiently to identify good financial products from bad ones.
7. MAS needs a new approach to look at safeguard the interest of consumers

I will be suggesting a new approach.


Anonymous said...

#1.I suggest that products must be of value to the consumer and to give maximum benefits for retirement, saving or for any wealth accumulation and protection.Individually they must achieve maximally any of the benefits. The products must not be complicated and it must not be a repackaging of a few products to confuse the consumers like some products in the markets now.
#2. The approach to consumers' needs must not be by selling or product selling but by need based approach and to be made mandatory.
Internal audits to be conducted.
#3. The current adviser must be retrained and be given time to upgrade to an acceptable qualification or diploma level of competency.New entrants must meet new educational requirement at diploma level for licensing.
#4. Consumers must be warned of their right to redress in the event of malpractice or misconduct. Consumers be alerted to FIDREC telephone number or any complaint mechanism.
#5.CEO and senior managers and supervisors to be made responsible for any act of misconduct by advisers.

Anonymous said...

It is important that the supervisor be made liable for the agents'
product recommendation. This is first line of check. The supervisor must check for inappropriate product,mis-selling, unethical, misrepresentation and others before approval.Further check should also follow. The onus is on everyone from the agents to the ceo, so that no one should disavow any knowledge of malpractice.
MAS should also impose fines if the company is found to have mismanaged
and accountable for laxity and lapses of supervision.It is company's liability as far as MAS. Finger pointing or blame game is internal business. Internal discipline and self regulation is company's business. It should be a total company's business to ensure fair delivery of good service to the consumers.


Anonymous said...

MAS must raise the entry requirement for future advisers if they want to see better and higher standard of advice. The current insurance agents who want to be advisers MUST upgrade.It is to be made compulsory by certain time frame.
The current entry requirement is too low.It is long overdue. The change must be made now if fair dealing outcome to consumers is desired.
The recommended minimum is an Associate Financial Planner(AFP). AFP provides an overall grounding on personal financial planning. The certification covers insurance planning to investment to retirement planning. This certification allows you to sell unit trust too without the need to take CMPAS module 8. Although it is basic it is still so much HIGHER than the current requirements for licensing. If the industry is serious about moving from product selling to advisory , this is a good start. 2 large insurance companies are already working with Financial Planning Association (FPAS)to have their advisers*(agents) certified based on the syllabus. Of course, SCI can help out with certification provided it sets equivalent standard. Standards must not be compromised if the industry is dead serious about providing the best to the consumers. Advisers must be serious about acquiring skills and knowledge and not some "ABC" titles
to give best advice to their clients to prove their sincerity to want to give the best.
I hope the guidelines will address the issue of commission driven sales process with this change of advisory approach, ie. to make it compulsory for every adviser to conduct the need analysis before recommendation of products. This is
to catch up with other countries like , US, UK,Australia, Japan etc.

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