End of Free Financial Advice

The FSA of UK (equivalent to MAS) is introducing this new measure in 2012. It will have great impact on how financial products are sold. Our approach in Singapore is modelled on the UK - so I expect that similar measures will be introduced here. It will prevent the sale of financial products that are bad for customers.

From the Telegraph in UK, 25 Nov 2008
The days of consumers getting "free" financial advice look numbered under new regulatory guidelines which are aimed at improving the way financial products are sold.

The Financial Services Authority (FSA) has outlined new guidelines that effectively outlaw commission payments, which have been seen by many consumers as a way of getting "free" advice.

The FSA has made it clear that it is concerned that these payments are used to disguise the cost of financial products, and may create bias in an adviser's recommendations.

A spokesman for the FSA said it hoped its proposals would restore consumers' trust in the financial services industry at a time when many "need real help and advice with their retirement and savings planning". The changes are due to come into force in 2012.

The regulator's review contains three key proposals. Probably the biggest change is to the way advisers are remunerated.

For the first time all advisers, whether they are independent financial advisers or sales agents, will have to declare and agree with the customer in advance exactly what the advice costs. Consumers will then have the option of paying for it in advance or opting for the cost to be taken from their savings over a period of time.

A spokesman for the FSA said: "Commission as we know it will disappear for ever. We want to sever the providers' involvement with the advisers' fees." The FSA has not ruled out banning commission completely at a later date.

Another major change is that all advisers will now have to take advanced qualifications, equivalent to the first year of a degree course, if they are offering full advice to consumers. At present 80pc of advisers do not have these qualifications.

Andrew Fisher, the chief executive of Towry Law, a firm of financial advisers, said: "This is brilliant news for consumers. The smoke and mirrors, lies and obfuscation that have been used to disguise consumer fees will be stopped.

"Individuals thought that commission meant 'free' advice but it was always paid for, either by raising product charges or by reducing the value of a consumer's investment. For the first time, any commission charge will now explicitly be linked to consumers' savings and will have to be agreed upfront."

The FSA said its framework would provide a mix of services, so "less sophisticated" investors who could not afford to pay for full advice were not excluded. Many companies are expected to offer "guided sales", where consumers are given basic financial information.

If this led to a recommendation to buy a certain product, however, the sales person would still be required to have the appropriate professional qualifications and be upfront about any product charges. The FSA said: "It must always be made clear at the outset whether consumers are paying for independent advice or a sales service."

Trevor Matthews, the president of the Chartered Insurance Institute said these proposals should "kick-start" the process "of moving to higher levels of competence and and professionalism". He added: "The biggest challenge for the long term future of this industry is to restore trust in financial services, which has been dented for too long." He said today's proposals go some way to addressing this issue.

David Elms, the chief executive of IFA Promotion, said he welcomed the proposals but was awaiting details on how they would be implemented.

He added: "We want to see the same standards applied to all advisers, whether they are recommending products from across the spectrum of providers or selling just one company's products.

"This should enable consumers to understand the choices available to them."

Singapore Dance Theatre performs Nutcracker

Dear Friend,

Singapore Dance Theatre performs Nutcracker
I hope that, in spite of the stress from the credit linked notes, your family is still in the mood to celebrate the December holidays.

I suggest bringing your family to watch the performance of the Nutcracker by the Singapore Dance Theatre. More details (i.e. ticket price, performance dates, booking instructions) are shown in this video clip:
http://www.youtube.com/watch?v=5WSo2D-nMjY

Performing nights: Dec 12, 13, 17, 18, 19, 29.

I am the deputy chairman of the SDT. If you can support the SDT, it will be much appreciated.

Tan Kin Lian

Suggestion: how to approach legal action

Dear Mr. Tan

I would like to suggest the followings:

1) Use the online petition, one for each product (Minibond, High notes ....), to gather all investors who are in favor in legal action

2) Call a meeting for all interested investors to have a preliminary discussion and to select a committee to conduct a feasibility study.

3) The meeting will identify the scope for the feasibility study.

4) The feasibility study may include :
a) study the sales brochures/newspaper advertisements/prospectus to identify common grounds for the law suit (consult financial experts/lawyers if necessary)
b) cost and return analysis
c) study other similar class action cases (US, Hong Kong, Taiwan …)
d) identify the parties for the law suit (Lehman Brothers, FIs, MAS…)
e) identify where to file the law suit (local or US)
f) work out an action plan

Pang

REPLY
I agree with you. I shall organise the survey (using online petiton) to gather the investors willing to take action.