Question: Why does MAS regulate certain aspects of financial planning and not the full range of financial planning activities? What is the distinction between a Financial Adviser and a Financial Planner?
Official answer from the Monetary Authority of Singapore (Source: Q3 of MAS' FAQ HERE ):
The types of services provided by financial planners vary widely. Some planners assess every aspect of their clients' financial profile, including savings, investments, insurance, tax, retirement and estate planning, and help them develop detailed strategies to meet their financial objectives. Others may call themselves financial planners, but only provide advice on a limited range of products and services.
MAS regulates all financial planning activities related to securities, futures and insurance. Tax and estate planning activities do not come under the regulatory ambit. Hence, only financial planners who conduct activities regulated under the Financial Advisers Act (or known as ‘FA activities’) are required to be licensed as a financial adviser. A financial planner may conduct other activities such as tax planning, but these are not subject to supervision by MAS.
Unofficial answer provided by Wilfred Ling based on reality:
‘Financial adviser’ means sell insurance and investment products. Selling insurance & investment is called ‘FA activities’. As a client, you must buy insurance and/or investment products from the financial adviser. The core focus of a financial adviser is to make appointment, do a presentation and closing.
‘Financial planner’ is one who advice holistically on all matters of financial planning. The core focus is fact finding, analysis, provide a recommendation and execute the solutions. The solutions may or may not include products.
The question is this, what is ‘financial planning’? According to the website http://www.moneysense.gov.sg/financial-planning.aspx, it defines financial planning as (brackets are mine):
- Managing your cashflow for your needs today and also to meet future goals like your retirement or your children’s education; (non-FA activity)
- Managing you and your family’s exposure to unforeseen events like pre-mature death, illness or disability; (FA activity - insurance)
- Investment planning to meet your financial goals; (FA activity - investments)
- Planning for your retirement; (non-FA activity)
- Planning your taxes efficiently; (non-FA activity) and
- Planning the transfer of your estate to the people and causes you care about (non-FA activity)
Missing from the above list is Singaporean’s #1 concern which is affordability to purchase a property. Under the financial planning jargon, it is called ‘Credit Management’ which is also a non-FA activity. Therefore, out of 7 financial planning activities, only 2 are considered FA activities.
As far as the ordinary consumer is concerned, they are better off engaging a financial planner who can provide the FULL range of advice instead of just narrowly focus on insurance and investments. To illustrate why this is so, I have seen cases in which the client has invested so much money in insurance that he cannot retire. In another scenario, I have seen many young people who invested so much money in stocks (because they were inspired by irresponsible books and news articles on the fallacy of investing when young) that they have to cash out their stocks at a loss in order to buy their first matrimony home.
Unfortunately, there are so few financial planners in Singapore. One such company even close down. Yours truly – Wilfred Ling – is probably one person left standing in entire Singapore.
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