Tan Kin Lian's Blog: Financial advice

Wednesday, December 17, 2008

Financial advice

Dear Mr. Tan

Please see newspaper Today B1: MAS clearly said, if a broker recommended aproduct to an investor and convinced the investor to buy the product, then the IFA or broker is not longer acting merely as an introducer or executor but is providing financial advice. In this instance, the relevant provisions of the Financial Advisors Act would apply.

DG

11 comments:

Anonymous said...: You can see how dirty is MAS.What about the bank RMs? Which investor wasn't advised to buy? Which investor walked in and announced that he was yearning to buy? Were people queuing up to buy?; December 17, 2008 9:36 AM
Anonymous said...: Wow does it means that MAS is clearly washing their hands off this issue by this announcement. Poor investors :(; December 17, 2008 10:10 AM
Anonymous said...: Yes, we bought minibonds because
ABN AMRO sent emails to us and asked us to buy.

Now they wouldn't even settle with us more than one month after we asked for a full refund.; December 17, 2008 1:18 PM
Anonymous said...: So what? Investors still get the rejection letters for compensation from the broking houses.

You have to fight it in court. No other way.; December 17, 2008 1:27 PM
Unknown said...: i see an immediate counter

the 'sales person' could simply walk up and offer to introduce a variety of investment options...

WHICH the investor voluntarily took up

that case it isnt so much a matter of recommending, rather its just we-ask-if-you-might-be-interested-you-said-yes-we-showed-you-you-took-up-yourself situation, thats all

ZERO RESPONSIBILITY. you are THE interested investing party, not us!; December 17, 2008 1:31 PM
Chan J C said...: Dear DG

Could you kindly help to extract the article and post it here to share with the rest?

Regards
JC; December 17, 2008 1:35 PM
Anonymous said...: Actually what nonsense is MAS saying as obviously all investors invest their money after being convinced and dont tell me anyone will be so silly to invest without being convince and just part with the money. Or MAS is trying to put another way, as long as no GUN is pointed at the investor's head during signing, point blank all are convinced investors ??!!; December 17, 2008 4:11 PM
Anonymous said...: I am puzzled by the comments here. If I understand the blog post correctly, what MAS said is actually to us investor advantage.

Currently our broker/IFA claim they are just executor/introducer implying not subject to any regulation therefore no case.

If MAS says the broker/IFA is subject to the FAA regulations then there is a case.

Of course the case will still very likely result in rejection, as we all know by now how evil they are.; December 17, 2008 8:26 PM
Anonymous said...: Stuck in the middle

Kelvin Chow

kelvinc@mediacorp.com.sg

NOBODY wants to be caught in no-man’s land, especially where money is concerned.
.
But this is exactly where some investors in the Minibonds programme found themselves in, after trying to seek recourse from both the brokerages they bought the structured product from and the independent financial advisers (IFAs) who steered them to the investment.
.
This is because some brokerages claim that they are just distributors, who execute orders on customers’ instructions and do not provide any financial advice. Thus, they cannot be held responsible if there is a mismatch between the customers’ risk appetite and the financial product.
.
At the same time, the investors cannot hold their IFAs or the financial advisory firms liable if anything crops up. This is because the IFAs say they were acting as introducers to bring the investors and brokerages together.
.
It is a common practice for IFAs to introduce customers to financial institutions for services such as housing loans and investments, and the referral fee for the introducer, which is paid by the institution, could range between 0.25 per cent and 1 per cent of the amount loaned or invested.
.
As an introducer, an individual doesn’t dishout financial advice, and the customer acknowledges this in a form. If there is any form of remuneration, also known as a referral fee, from the financial institution to the introducer, the customer is told about it and also signs a form :acknowledging this.
.
:This opens the system to abuse as the unscrupulous IFAs may, as some investors have claimed, have solicited customers to put money into unsuitable products, then hid behind the introducer role to absolve themselves of responsibilities.
.
What happens if the investor finds himself buying into an unsuitable product? He cannot approach the IFA or his firm because they are just the introducers, and they cannot approach brokerages whose business models are execution-based only.
.
Currently, if investors are unhappy with their investments, they may lodge their cases with the Financial Industry Disputes Resolution Centre (FIDReC). In the case of Minibonds, the brokerages have agreed to have the cases heard by FIDReC.
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However, the centre usually requires investors to first bring their complaint to the financial institution affected. It is only after no settlement can be reached between the investor and institution that the complaint is raised with FIDReC.
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For investors stuck in the no-man’s landbetween brokers and introducers, they may have a tough time getting either side to hear their complaints, especially if they do not have the critical mass of thousands of investors clamouring for compensation, as in the case of the Minibonds.
.
:The Monetary Authority of Singapore (MAS) said that recourse for these investors would have to be taken on a case-by-case basis.
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:“It depends on the facts and circumstances of each case,” said MAS in reply to queries from :Today:. “If an independent financial advisor or broker recommended a product to an investor and convinced the investor to buy the product, then the IFA or broker is no longer acting merely as an introducer or executor but is providing financial advice. In this instance, the relevant provisions of the Financial Advisors Act would apply.”
.
Even so, investors could do with a better idea about where they stand. After all, when someone — described on his namecard as a financial adviser — tells you about a certain investment product,it is hard to say if he was offering his advice or if he was merely “introducing” the product to you.

Kelvin Chow

kelvinc@mediacorp.com.sg

NOBODY wants to be caught in no-man’s land, especially where money is concerned.
.
But this is exactly where some investors in the Minibonds programme found themselves in, after trying to seek recourse from both the brokerages they bought the structured product from and the independent financial advisers (IFAs) who steered them to the investment.
.
This is because some brokerages claim that they are just distributors, who execute orders on customers’ instructions and do not provide any financial advice. Thus, they cannot be held responsible if there is a mismatch between the customers’ risk appetite and the financial product.
.
At the same time, the investors cannot hold their IFAs or the financial advisory firms liable if anything crops up. This is because the IFAs say they were acting as introducers to bring the investors and brokerages together.
.
It is a common practice for IFAs to introduce customers to financial institutions for services such as housing loans and investments, and the referral fee for the introducer, which is paid by the institution, could range between 0.25 per cent and 1 per cent of the amount loaned or invested.
.
As an introducer, an individual doesn’t dishout financial advice, and the customer acknowledges this in a form. If there is any form of remuneration, also known as a referral fee, from the financial institution to the introducer, the customer is told about it and also signs a form :acknowledging this.
.
:This opens the system to abuse as the unscrupulous IFAs may, as some investors have claimed, have solicited customers to put money into unsuitable products, then hid behind the introducer role to absolve themselves of responsibilities.
.
What happens if the investor finds himself buying into an unsuitable product? He cannot approach the IFA or his firm because they are just the introducers, and they cannot approach brokerages whose business models are execution-based only.
.
Currently, if investors; December 18, 2008 8:29 AM
Anonymous said...: MAS is playing up to FIs by sacrificing the FAs to distract the attention.; December 18, 2008 11:58 PM
Anonymous said...: DG, which newspaper, which edition, page ref no?

I would like to read this article.

tks

Richard Woo; December 19, 2008 12:45 PM