Yesterday, MAS held a press release session to present the Financial Advisory Industry Review (FAIR) Panel report.
After months of discussion, the panel finally came up with a list of suggestions.
I felt that the suggestions having the most direct impact to consumers will be the development of a web portal to allow people to compare all the simple insurance products, the ability to buy direct from the insurance company online (pay no commission) and the capping of first year’s commission (with flattening of subsequent years’ commission) if you buy through an agent.
The total banning of commissions was not implemented but in suggesting a buy direct channel with zero commission, the FAIR panel has effectively pushed through their no-commission agenda in a smart way without agonizing those lobbying against such a move.
So now consumers have a choice. Do I want to go through an agent and pay commissions, or go direct and pay zero commissions?
On the flip side, agents might be taken for a ride with some unscrupulous people seeking their advice (for free) and then going online to buy directly.
To prevent such a thing from happening, some advisers might be forced to charge a fee.
Some consumers will probably not mind paying to seek advice and then do their purchase of insurance directly online. With no commissions to influence the recommendation, consumers will know they are getting company/product unbiased advice.
Of course, the fee charging adviser has to really bring value to the table otherwise most people can just use the web portal to make their own comparison and decisions.
Overall, the suggestions are a step (although small) ahead for consumers, and those agents who are unable to convince people to buy from them or provide valuable advice will be forced to leave the industry.
However, all these are just suggestions, and some of the implementation might be easier said than done (eg the common web portal). There are also many details that needs to be worked out and it will take time for the “suggestions” to become law.
I do have some points of concern. One of them is that complex products like investment-linked plans will not be available on the web portal. So more agents might end up “pushing” those kinds of products instead.
Another is that the line between financial consulting and providing financial advice is not so clear.
When a financial adviser representative provides financial advice but does not sell a product (eg tell client to buy directly online), is that defined as financial consulting?
The present FA Act is such that “providing financial advice” is always associated to selling a product.
A few financial adviser representatives are doing some kind of financial consulting and training now. The report has a suggestion to limit financial consulting and training to not more than 5% of a firm’s revenue, so how can a fee-only consultant operate?
You can find the full FAIR report here: