In a letter sent to all regulated advisers in the city state late last month, the Monetary Authority of Singapore (MAS) said advisers must begin to implement the initiative, one of a series resulting from its Financial Advisory Industry Review (FAIR), conducted over the past two years.
The regulator said from April, financial advisory firms will be expected to begin implementing the Balanced Scorecard review process, although the MAS added there would be a one year “grace period”.
The new initiative is designed to improve the quality of financial advice by giving each adviser a grade from A to E. Advisers who are given a grade E are to be supervised for a minimum of three months.
Document accompanying the letter clarified that an Independent Sales Audit (ISA) unit, which each firm is required to have, can be outsourced to an independent third party or can be incorporated within its existing risk management function.
This new unit will be responsible for submitting quarterly reports on each adviser to the board of the company.
Findings from mystery shopping exercises and complaints will be reviewed and assessed to determine the number of cases with infraction, which will thus effect the percentage of variable income which the adviser is entitled to.
“Tweaked slightly”
Tim Searle, chairman of Globaleye, said: “Most companies already have in-house management sectors in play, including us, so outsourcing is not something we are looking at.
“It’s likely some groups will have to spend a lot more to ensure things like monitoring systems and client surveys are in place, but for us the costs will be directly related to the increase in operational headcount.”
Non-sales key performance indicators (KPIs) must be incorporated by each firm to measure each adviser’s performance and ensure they are meeting specific business objectives.
Searle said many firms make use of non-sales KPIs already, including Globaleye, which might need to be “tweaked slightly” in order to “fall in line with the Balanced Scorecard”.
He added: “This framework is no shock as it has been discussed by industry partners for a while. Those firms which are here for the long term shouldn’t have an issue with it.”
“Raise our game”
General manager at The Fry Group, David Pugh, said: “The MAS have been quite descriptive which just means our own KPI system will need to evolve a little bit, but it’s not a huge change for us.
“We will just need to raise our game a little bit.”
The latest notice comes after MAS issued a consultation paper on draft legislation in October last year under the Financial Advisory Industry Review (FAIR).
“There are still many unknowns,” said Andrew Shaw, operations manager at Global Financial Consultants. “At this stage we have still not seen exactly what the scorecard should look like so it’s hard to fully assess.
“I imagine that our own standards will be as high if not higher than those imposed by MAS. That being said, anything which gives our potential clients more confidence in our company and the industry in general, we are fully supportive.”
