“From the protection stance, it looks like payments will be roughly the same as before. For the regular savings plans, it doesn’t look like there’s any significant difference at all. Ironically, some of advisers could even be better off,” the source said.
The 55% cap, which was due to come into force in January 2016, was delayed by a year by the Monetary Authority of Singapore (Mas) after industry feedback said firms needed more time to implement the commission cap rules.
Under the new rules, commission payments are restricted to 55% during the first year, with the rest paid out over the next five years or over the premium payment period of the policy, whichever is shorter.
Implementation slow
The source had heard from two providers in Singapore, one on the protection side and one on the regular savings side, about how they intend to apply the cap.
“We only have verbal confirmation at the moment. We haven’t had anything physically in writing and we don’t know how it will affect all the providers we deal with. We expect that to come soon. Based on what we have heard so far, it is not going to have a negative impact on the cash flow of the business.”
When asked about how much of an impact the Financial Advisory Industry Review (Fair) and commission cap will actually have, the source said: “The objective of Fair is to give clients greater transparency and ensure full disclosure”.
“Many in the industry feared it was focused on cutting or reducing overall commissions, but in reality it hasn’t been about that. The initiatives have not centred around reducing the costs or making products cheaper. It has been primarily about the way commission is to be distributed and paid.
“Mas has ensured that advisers are remunerated over a period of time, rather than all up front. The regulator wants to make sure that advisers focus on best advice and client service rather than allow them to be ‘one hit wonders’ or ‘hit and run’ salesmen.
“It looks, based on initial understanding, that advisory firms won’t be worse off.”
