Over the past few months, all the big companies have make their stand clear that they are against fee-based financial planning. The following are some examples and the reasons for their objections:
|Great Eastern Life.|
Source: Fee-based insurance system ’has risks’, Straits Times, 18 April 2012
|Great Eastern Holdings chief executive Chris Wei said:
I have trouble with the concept that the lower-income households will be willing to pay for advice before they buy a product.
It is hard to articulate without knowing the details (of the changes) but I think naturally, there would be a significant impact (on Great Eastern's agency force) and I'm not going to pretend that I'm not concerned about that.
Source: The lesson about putting a car on the moon, Straits Times, 27 April 2012.
|Manulife Singapore president and chief executive Annette King said:
IMPOSING a fee-based pay structure from abroad for the local insurance industry would be like putting a car on the moon and wondering why it did not work.
… clients in Singapore tend to prefer bundled investment and protection products, whereas Britain and Australia generally sell unbundled products. 'Their distribution structure is dominated by financial advisers, with an open architecture of products. We are not there yet, only about 15 per cent of Singapore's distribution is through (independent) financial advisers.’
Source: AIA against fee-based model for insurance agents, Business Times, 6 April 2012
|AIA Group regional chief executive Ng Keng Hooi said:
"I'm sorry to say that no one has done salary agents and proved that it is any cheaper than commission agents. If it is that easy and you can do salary agents cheaper, why aren't all companies doing it?"
Under a fee-only model where agents and advisers are paid a salary, it has been suggested that agents may merely fulfill the bare minimum.
… commission-based remuneration promotes meritocracy, which acts as an incentive for agents who are paid only after they successfully complete a sale.
Source: Fee-based model ’may leave more underinsured’, Straits Times, 3 July 2012
| Chief Executive, Insurance at Prudential Corporation Asia. Mr Wilkey said:
… Prudential Corporation Asia fears that moving the remuneration model to a fee-based one could leave even more people underinsured. … a fee-based system where the client pays up front for advice could deter many from taking out policies.
|Association of Financial Advisers (Singapore).|
Source: Financial advisers seek gradual changes
|Mr Lee, the President of AFAS, said that if the industry banned commissions completely now, only 'half the firms will survive and the other half will probably merge or go out of business'.
The incentive to promote and sell insurance products will also be lost as financial advisers will be paid a fee for their advice rather than a commission based on the products they sell.
Mr Ee, vice-president of AFAS, said: 'The financial adviser representatives... will be interested only in coming up with a nice report and charging a fee. After the fee is collected, will the fee report necessarily result in an improvement of the financial health of the client? Not necessarily.
|Wilfred Ling||See Fee-based scheme not a problem|
Like this article? Subscribe to my newsletter below for more.