A spokeswoman from the regulator said: “Arising from industry feedback that it needs more time to implement the spreading and capping of commissions (SCC) rules, the SCC requirements will take effect on 1 Jan 2017.”
The cap, which is one of several initiatives to be introduced in the wake of the Financial Advisory Industry Review (FAIR), was due to come into force in January 2016.
This fresh rule, which comes under the New Financial Advisers Remuneration and Incentive Regulations, will impose an introductory 55% cap on first year commissions.
The remaining 45% will be paid out over the following five years or the remaining premium payment years, whichever timespan is shorter.
Chris Gill, general manager for Friends Provident International’s southeast Asia division, said the company has already done all the heavy lifting when it comes to being ready for January’s kick-off date.
The life insurer launched a project 18 months ago to implement system changes and move towards fee structures based on the assets under management of the plan values.
“All the work has already been done to meet the requirement,” Gill said, adding however that the MAS could have let the industry know about the 12-month delay sooner than three months before it was due to be implemented.
“Anything that is linked to regulation will always take top priority, quite rightly. So as soon as the project is no longer linked to regulation, it will move down the list of priorities,” he said.
“The profile of the project will reduce on the basis that it is no longer a regulatory requirement.
“We now have an extra year to have those conversations about how advisers can structure their business to ensure they have a sustainable business for the long-term,” he added.
Unintended consequences
Gill said there is always a concern that changes to regulation will have unintended consequences, but argued the MAS has taken a “reasonably pragmatic approach” by not forcing advisers towards a completely fee-based model and risking an ‘advice gap’ similar to that experienced in the UK.
FPI is positive that FAIR will help align the interest of both advisers and clients, and Generali International also agreed that encouraging a culture of fair dealing and raising the minimum standards of financial advice are important to the future development of the life insurance industry.
Head of sales at Generali International Nick Griffin argued that for FAIR to be successful, it is essential for the MAS to “engage fully” with the industry and “take account of the reality of day-to-day business and the challenges faced both by life companies and advisers”.
“We take an active involvement in the FAIR-orientated industry consultations that relate to our business,” Griffin said.
“It is crucial that all companies partake in this such that emerging laws and regulations are optimised and robust.”
