As of 1 January, investments sitting inside those ILAS products available in the region’s retail market must now be authorised by the Securities and Futures Commission (SFC).
The change means that only professional investors are allowed to invest in open architecture ILAS products, which continue to offer an open investment platform.
In October last year, the Hong Kong Federation of Insurers (“HKFI”) issued a letter to those insurers selling products in the region informing them of the changes, one of which referred to the recent ban on indemnity commission.
Advisers are now expected to adopt new procedures to comply with the new regulation and to ensure their clients investing in open architecture products fulfil the professional investor criteria.
“Remain very positive”
Old Mutual International’s Hong Kong general manager, Mark Christal, said: “Whilst we expect a transition phase following the introduction of all the new requirements applicable to ILAS products, we remain very positive about the Hong Kong market.
“There remains a strong demand for offshore solutions and we believe that the majority of clients who would normally be the target customer segment for open architecture products should be able to meet the professional investor qualification criteria.”
Christal said the firm has introduced a new offshore solution for clients who do not meet the professional investor criteria: the Wealth Management Plan.
The strategy offers a range of SFC authorised funds when a client is a resident in Hong Kong, while also giving internationally mobile investors the flexibility to access a wider range of investments if they are residing outside of the region.
Despite the fact that open architecture products have been in existence in Hong Kong for over 20 years, Christal points out that the regulatory landscape has evolved, particularly after the financial crisis in 2008.
He said the changes to ILAS products is down to their open platform nature, which “has meant they are seen as more sophisticated products and are no longer considered suitable for the local retail investor”.
