These comments followed a statement from the chairman of the Independent Financial Advisors Association (IFAA) who said the body has strong objections about the “extremely ambitious and abbreviated time frame” of the reforms.
The IFAA also said the coming year will see “many casualties” across the industry, causing unemployment and a “servicing vacuum”.
However, Jessica Cutrera, founder of Hong Kong-based wealth management firm, EXS Capital, strongly disagreed with the IFAA’s perspective.
“These indemnified commission contractual saving plans which have been sold in Hong Kong for years – but are illegal in many other developed markets – are long overdue to be removed from sale.”
The changes, which were introduced by the Office of the Commissioner for Insurance, included abolishing indemnified commission and changing the make-up of Investment Linked Assurance Schemes (ILAS) for some investors.
“Struggle to adapt”
Cutrera said there was already a servicing vacuum for financial products because insurance brokers were not incentivised to look after clients’ policies, but were instead motivated to sell more new policies in order to receive the upfront commission.
She agreed, however, that the changes will create some unemployment. “The industry will struggle to adapt at first, but this is a good thing overall and will meaningfully improve the outcomes for consumers.
“An alignment of interests between the adviser and the client is critical to get the right investment and financial planning outcomes for a client. I believe the reforms are a step in the right direction.
