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BByy GGEENNEEVVIIEEVVEE CCUUAAPPEERRSSOONNAALL FFIINNAANNCCEE EEDDIITTOORRTHE prospect of an advisory landscape sans commissions has generated an intense buzz in theﬁnancial advisory (FA) market, following the announcement by Ravi Menon, managing directorof the Monetary Authority of Singapore (MAS) that a Financial Advisory Industry Review (Fair)is about to take place.Not surprisingly, many advisers have reacted with consternation as the new rules threatentheir rice bowl. On the other hand, consumers (based on letters to The Straits Times Forumpage) appear to have generally welcomed the changes. They are appalled, for instance, tolearn of the quantum of commissions earned from the sale of insurance policies.More than 10 years ago, the Committee on Efﬁcient Distribution of Life Insurance (Cedli)generated just as intense a reaction. Cedli sparked a number of major changes such as morerigorous training requirements for insurance advisers, and greater transparency in beneﬁtillustrations.In those days, agents bristled and responded vociferously to the charge that they arecommission-driven. Today, based on what was publicly said by the Association of FinancialAdvisers (Singapore) this week, the association head actually admitted to being commission-driven. But many of the arguments in favour of commissions and against a fee regime actuallydo a disservice to the ﬁnancial advisory industry at large, even though the state of advisorytoday leaves much to be desired.Today, only one ﬁrm (Providend) operates on a fee-only business model - which chief executiveChristopher Tan says was 10 years ahead of its time. 'Many industry players say thatSingaporeans will not pay a fee for advice. Our experience tells us this is not true; Singaporeanswill pay a fee for advice as long as they see value in our work. And we must prove that ourwork is of value to the clients. Our existence after 10 years is a testament to that.'He adds: 'We persisted because of our deep conviction that if you truly want to giveprofessional advice, you must not take commissions. We have a strong desire to see ourprofession accorded the same respect as lawyers, accountants and doctors.'Life Planning Associates (PA) CEO Benny Ong says the ﬁrm derives 80 per cent of its revenuefrom fees and 20 per cent from commissions. He does not take on new advisers who arereluctant to transition to a fee model. His clients, he says, are happy to pay a fee. Not all ofthem are high net worth individuals. 'You must sit down and ﬁnd out what they really need, notwhat you want to sell,' he says.Here are some recently published arguments against a fee-only regime.
Fee-based advisory service the way to gohttp://www.businesstimes.com.sg/sub/storyprintfriendly/0,45...1 of 31/4/12 10:35 PM