Half or more of the investment advisers surveyed were found to fall short of established standards for fact-finding about the shopper’s investment experience, financial objectives and risk preference, MAS said.
MAS said it had commissioned what it is calling its Mystery Shopping Survey last year, in order to assess how well Singapore’s financial services industry was complying with guidelines on “fair dealing” that it issued in 2009, which set out how financial advice should be provided to ordinary Singaporean investors, in order to ensure that the advice they receive is suitable for them.
In the statement of its findings released today, MAS did not break down its findings by company, although it said it “will share the results of individual institutions with their respective senior management”.
Those institutions found to have “fallen short of the fair dealing guidelines” would be expected to take corrective actions, it added.
The survey was conducted between October and December, and involved some 126 “mystery shoppers” who made 500 visits to 11 licensed banks and four registered insurance companies, seeking financial advice from these institutions’ representative agents.
The mystery shoppers were described as "individuals from the general investing population" who had been recruited for the task by an undisclosed external consultant commissioned by MAS.
Key findings
Among the findings turned up by the mystery shoppers was that bank and insurance company representatives in Singapore do not dig too deeply when collecting information on would-be investment clients. For example, only around half, or 49%, asked about the individual’s risk preferences, and fewer still – 27% – sought information on the would-be client’s dependents. (See table, below.)
The advisers were also found to neglect to impart information about the amount and frequency of fees and charges, warnings, exclusions and caveats and the ‘free-look period’ available on some products.
MAS said the products ultimately recommended by the bank and insurance reps to these individuals had been subsequently "reviewed for their suitability by a panel of industry practitioners, based on the shoppers’ personal profile, their experience during the advisory and sales process, and sales materials obtained from the financial institutions”.
In particular, MAS noted, the advice was studied for its conformity with the so-called Outcome 3 and Outcome 4 of its Guidelines, which have to do with the quality and suitability of advice and the adequacy of information disclosure, respectively.
MAS said the Association of Banks in Singapore and the Life Insurance Association "have agreed to work with MAS to conduct more regular mystery shopping surveys on their members". It noted that the Financial Advisory Industry Review Panel,which the authority created earlier this year as part of a major effort to boost the standards of Singapore’s financial services industry, would " also consider the survey results in formulating their recommendations".
For more information on the findings of the MAS mystery shopping survey, click here.
|
Areas
surveyed
|
Percentage of responses
|
|
Representative conducted a “fact find” of client
|
90%
|
|
Representative did not conduct full “fact find” but only asked for personal particulars
|
9%
|
|
Clients were asked about their investment experience
|
60%
|
|
Clients were asked about their financial objectives
|
53%
|
|
Clients were asked about their risk preferences
|
49%
|
|
Clients were asked to provide information about their dependents
|
27%
|
|
In discussing a product, its nature and objective were disclosed
|
93%
|
|
In discussing a product, its provider’s name was disclosed
|
83%
|
|
In discussing a product, whether capital is/is not guaranteed was disclosed
|
84%
|
|
In discussing a product, the amount of fees and charges was disclosed
|
52%
|
|
Product being discussed was deemed to be “suitable” for the client
|
28%
|
|
Product being discussed “may be suitable” for the client
|
40%
|
|
Product was deemed to be “unsuitable” for the client
|
30%
|
To view this table in full on the MAS website, click here
