Financial Advice Standards Have Improved, MAS Finds

Financial advisers have enhanced their standards and raised the quality of advice provided to customers, MAS found in a mystery shopping exercise.

MAS (Monetary Authority of Singapore) has released the findings of its third mystery shopping exercise, flagging firm culture and high ethical standards as key factors that lead to good quality financial advice.

The results from the exercise show that the majority of product recommendations made by Financial Adviser representatives met the mystery shoppers’ investment and protection needs, MAS said.

Based on results from 500 representatives from 12 insurers and licensed financial advisers, the percentage of suitable product recommendations improved from to 88 percent, compared to 70 percent in the 2011 exercise.

MAS said most representatives also helped shoppers make accurate and complete disclosures of their medical conditions, and properly explained the investment returns illustrated in insurance policies.

Firms whose boards and senior management placed emphasis on delivering fair dealing outcomes and put in place robust policies and controls generally fared better in the mystery shopping exercise, MAS says.

One firm had 100 percent of their product recommendations assessed as suitable, following years of investment in instilling high ethical and conduct standards among its representatives, and a “strong tone from the top” to put customers’ interests first.

“MAS will continue to look to the Boards and senior management of FA firms to drive good conduct outcomes for customers,” the regulator said.

The mystery shopping exercise highlighted a need to improve representatives’ conduct at roadshows, which had higher incidences of unsuitable recommendations or inappropriate influence through the use of gifts or incentives, compared to sales closed through customer referrals.

The majority of representatives also failed to properly identify if the mystery shoppers were vulnerable customers, though this did not affect the suitability of products recommended.

MAS has required the 12 financial adviser firms to address the deficiencies uncovered by the mystery shopping exercise, and has also pledged to also review its rules to improve roadshow conduct and enhance safeguards for vulnerable consumers.

In recognition that there is a reduced need to obtain the full set of customer financial information for simple or low-cost products, MAS said it will also review its requirements to allow for greater fact-finding flexibility.

“FA firms have progressed and enhanced their standards of practice to raise the quality of financial advice provided to customers,” said MAS assistant managing director Lim Tuang Lee.

“High standards of practice require systematic and focused attention by Board and senior management of FA firms to ensure that FA representatives put customers’ interests as top priority. This includes the proper onboarding and training of representatives, active supervision and monitoring of their sales and advisory activities, as well as putting in place appropriate incentive and remuneration policies and robust disciplinary frameworks.”

Lim said MAS will work with financial adviser firms to continually raise standards of conduct and embed a culture of fair dealing in the financial advisory industry.

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