This would improve the professionalism and reputation of the industry. In particular, the regulatory balance favouring banks and insurance providers needed to be redressed to help IFAs compete fairly.
“We’ve got to professionalise the whole industry. That will involve embracing the Securities and Futures Commission,” said David Halley, managing director in Hong Kong for Capstone Financial, during a panel debate on the future of the advisory industry in the city.
“The IFA community here has avoided regulation like the plague. Going forward, we should embrace it and see it as an opportunity to take on the banks,” he said.
Raising standards would help IFAs in Hong Kong to enjoy the respect that their counterparts elsewhere in the world enjoyed, according to Edward Harris, managing director of Globaleye.
“When you meet people in the United States and you say ‘I’m a financial adviser’ it’s almost like you’ve just said you’re a doctor or a dentist, because in part the barriers to entry are hard tough exams that are difficult to pass,” he said.
Harris believes that the problem the IFA industry had found in other offshore jurisdiction was that the barriers to entry were so low, and said some advisers were not giving good advice, but didn’t realise.
“There is a case here for setting out a charter saying ‘this is how we expect the financial advisory industry and its practitioners to behave,’” said Alan Armitage, chief executive for Asia and Emerging Markets at Standard Life. “Whether that’s conduct or minimum criteria for qualifications I think it can only help.”
Standards need raising
Graham Brown, managing director, Forth Capital, said the Independent Financial Advisers Association in Hong Kong was working with Chartered Insurance Institute in the UK to try to raise standards for continuing professional development.
“Standards are arguably low in Hong Kong,” Brown said. “All you have to do is pass three exams which you can do in two weeks if you have half a brain and then there’s nothing thereafter.”
Capstone Financial’s Halley said IFAs with Type 4 licences also usually need Type 1 work. That meant holding millions of Hong Kong dollars on deposit – and few small IFAs could afford that.
“That’s where the industry is going to change. Smaller IFA firms are going to disappear. The emergence of bigger and better capitalised IFAs would, in the end, protect clients better,” Halley said.
