Financial Advisors Lacking in Needs Analysis, Disclosure

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A little late in posting this little piece of very important news. Be reminded to ask the right questions to extract all the relevant minor information that your FA may have left out.
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Many financial advisors lacking in needs analysis, disclosure: MAS

By Frederick Lim, Channel NewsAsia

SINGAPORE: Many financial advisors here do not carry out a sufficiently detailed fact-find on their clients' investment needs.

This was revealed in a mystery-shopper survey conducted by the Monetary Authority of Singapore.

It also shows that many financial advisors do not give out full disclosure on the investment products they recommend.

The survey covered 100 representatives from 30 financial institutions covering the banking, insurance and capital markets sectors.

Some 40 mystery shoppers took part in the survey - including housewives and unemployed persons.

They were given two scenarios with which to approach financial institutions for advice - one, to invest a lump sum of 10,000 dollars; and the other - to purchase an insurance policy with a 300 dollar monthly budget.

The survey found many financial advisors lacking in the way they handle their advisory and sales process.

"Generally we found that most of those approached did a basic fact find but there were some areas for improvement. In the area of disclosure - some of the disclosure has been limited - particularly in the areas of disclaimers, in terms of exemptions - quite important things for consumers to know," said Shane Tregillis, Deputy Managing Director, Monetary Authority of Singapore.

The survey found that while 93 percent of financial advisors conducted a basic fact-find, only about two-thirds asked about the mystery shoppers' financial situation and current investments.

When it came to disclosure, only 65 percent highlighted risks associated with the products they recommended.

One in four told the mystery shoppers that they could cancel their purchase during a free-look period, and only 8 percent explained about exclusions and disclaimers contained in the products they recommended.

The MAS says it has shared the findings with financial institutions and their associations.

"We see this as a senior management responsibility to make sure not only they have the systems and processes in place but right down on the ground they are being implemented by all their representatives," said Mr Tregillis.

MAS says it will continue with mystery shopping surveys in the future, and they will be more targeted towards likely problem areas. - CNA /dt

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