As Singapore seeks to be a major financial hub, the financial services industry promises to be the industry of the future. Manufacturing, which had been the industry of Singapore’s economy for many decades and had contributed most to Singapore’s economic progress and prosperity, is contributing less and less to the total pie. Services, and particularly financial service, will be the key economic driver in the future.

Legislation, especially the Financial Advisers Act which came into effect in October 2002, has led to convergence and consolidation. Whereas there were once business barriers between banking, finance, insurance and stockbroking, the scene today is that of an open playing field. Everyone of these firms (banks, finance companies, insurance and stockbroking) can now provide a wide range of financial services and products.

The buzz word today is DISTRIBUTION. Clients have a choice of getting their financial needs met by many channels of distribution. This can be confusing. And making an uninformed choice may lead to limited choices and paying higher costs than necessary.

Financial Services Consultant

Who are Financial Services Consultants?

Financial Service Consultant is a title which is not regulated by the financial services industry. The titles which are regulated and which protect the consumers are Financial Adviser and Financial Adviser Representative.

"Financial Adviser" refers to the company which has to be licensed by MAS.

There is a difference between licensed Financial Adviser and Exempt Financial Adviser. "Financial Adviser Representative" refers to the individual adviser. If the individual adviser is in a licensed financial adviser firm, he has to pass the strict screening for "fit and proper person" to qualify for a license which also has to be renewed. At the moment, only the individual representatives of licensed Financial Adviser (firms) are scrutinised and licensed by MAS. The representatives of Exempt FAs (firms) such as banks, insurance companies, stockbroking firms and general insurance broker firms still do not have to be licensed individually.

The majority of individuals who use the title "Financial Services Consultant" are tied agents of life insurance companies. As agents they represent the interests of their company and legally do not represent the interest of their clients. They are also not licensed individually by MAS. As tied agents they are only able to distribute one company's products.

"Financial Adviser Representative" may or may not be individually licensed by MAS. If the representative comes from a licensed financial adviser company, the representative has to be individually licensed by MAS.

Customers should also note that financial adviser firms may or may not be INDEPENDENT. One way to tell is whether INDEPENDENT is in the company name.

e.g PromiseLand Independent

Another way to tell is whether it is a licensed financial adviser, as most exempt financial advisers are NOT independent either because they are owned by insurance companies or stock broking companies or general insurance brokerages.

Independent Financial Advisers representatives are required to provide “fair and objective” advice which is not influenced by the commissions of products, and they must be able to select products for clients from at least four product providers. Independent Financial Advisers may generally be expected to be able to provide more competitive products and terms. They may, however, vary in the number of product providers which they can transact business with. It is important to check which are the product manufacturers or providers they are able to place business with to ensure you have wide choices.

Financial Advisers who are not independent may not describe themselves as such. The representatives of these firms are from Exempt FAs (banks, stockbroking firms, insurance companies), and some licensed FA firms which have decided not to subject themselves to the more stringent requirements for claiming to be “independent”. Representatives of firms which do not claim to be independent are expected to give “reasonable basis” advice, which is defined in the Financial Advisers Act, and not “fair and objective” basis. Under reasonable basis, the representative has to base his recommendation having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person. The representative must give such consideration to, and conduct such investigation of the subject matter of the recommendation as is reasonable in all the circumstances.

What should customers look for in a financial adviser or consultant?

1.Trusted advice and trusted adviser
2.Trusted and best solutions from many, if not all, product manufacturers and providers (e.g. fund managers)

While training can help one improve his score on advice, only independence and multirepresentation of product manufacturers (insurance companies, fund managers, etc.) can improve his score on solutions.

Be sure to go behind the job title to find out:

i) Which company only or companies he represents
ii) Whether he is independent or not
iii) Whether he is individually licensed