Keep commission model, say financial advisers, managers

SINGAPORE - An ad-hoc alliance of about 15,000 financial advisers and managers are hoping to sway a review panel, which is considering, among other things, doing away with the commission model that most insurance and financial advisory firms use.

The alliance is arguing that the move towards a fee-only model - essentially a fixed fee for advisory services - would endanger the livelihood of the financial advisers. 

It is also refuting an assertion by Monetary Authority of Singapore (MAS) Managing Director Ravi Menon that the commissions can amount to 160 per cent of the annual premium of a product. 

The alliance includes the Insurance and Financial Practitioners Association of Singapore and insurance firms, among others.

Read full text: http://www.todayonline.com/Singapore/EDC120829-0000048/Keep-commission-model,-say-financial-advisers,-managers

LIA Press Statement in response to MAS' Mystery Shopping Survey Findings

The Life Insurance Association Singapore (LIA) provides guidelines on the sales advisory process for life insurance products as well as the requirement for certain product disclosure documents. In the sales advisory process, insurance advisers are required to offer a choice of fact-find options, namely, full advice, partial advice, product advice or no advice.
  
Proportions of sales based on full or partial fact-find process have increased. In 2011, 74 per cent of life insurance policies purchased were based on full (10 per cent) or partial (64 per cent) fact-find as selected by the clients.

We note the specific findings of the MAS mystery shopping survey and the shortcomings, which require the industry's further attention.

The LIA supports the recommendation for industry to undertake mystery shopping exercises. We see this as a further initiative to enhance the effectiveness of the life insurance sales advisory process.

A recent consumer survey commissioned by the Life Insurance Association also provides insight. Door-to-door interviews of 800 respondents representing Singapore’s demographics were conducted between November 2011 and January 2012 by an independent market research company.

A majority of Singaporeans and permanent residents perceive the Singapore industry well and trust the life insurance representatives who serve them.

• 72 per cent are “Very Satisfied” and “Satisfied” with the life insurance industry as a whole.
• 69 per cent of Life Insurance Users rely on only one trusted agent.
• 92 per cent of Life Insurance Users who went through a full/partial fact-find in the past 3 years say they benefited from the process.

The LIA survey shows that consumers who have an on-going relationship with a representative are generally well served.
   
Both LIA and member companies will continue to support MoneySENSE initiatives as well as contribute in various ways toward raising financial literacy levels among Singaporeans.
 
Tan Hak Leh
President, LIA

Source: http://www.lia.org.sg/node/3200

Fee-based model could deter many from taking out policies, says Prudential's Asia insurance chief

The chief executive of insurance at Prudential Corporation Asia fears that moving the remuneration model to a fee-based one could leave even more people underinsured.

Hong Kong-based Mr Tony Wilkey said a fee-based system where the client pays up front for advice could deter many from taking out policies.

In a recent interview with The Straits Times, he said: 'It is a different value proposition for the consumer to write a personal cheque in advance to get the advice before a product is delivered.

'The affluent customer is more likely to pay, but historically in other countries, the mass market consumer has not been seen as willing to write cheques.

'This concerns me because if they are unwilling to pay for advice, then the likelihood of them purchasing what the family needs could be impacted. Theoretically, we could end up increasing the underinsurance gap.'

Great Eastern chief executive Chris Wei and Manulife chief Annette King have also raised similar concerns.
Mr Wilkey was commenting on the sweeping reforms that are likely once the Financial Advisory Industry Review (Fair) set up in March by the Monetary Authority of Singapore is completed. The review's aim is to lower the cost of insurance products while raising the quality of advice given by agents.

A key proposal is to relook the tiered remuneration structure where the customer pays commissions not only to his agent but also his supervisors.

The 13-member review panel, which comprises representatives across industry associations and other stakeholders, will make its recommendations by the fourth quarter of this year.

Mr Wilkey said: 'Within Fair, we embrace the proposals focused on qualifications of advisers, and those that increase professionalism in the industry.

'However, the variable income basis that rewards advisers on what they sell has worked quite well so far. Changing to a fee-based structure can have unintended consequences.'

Source: The Straits Times - 3 July 2012