Just Released: MAS Consultation Paper on FA Sign On Incentives

Financial advisory (“FA”) firms usually pay hefty sign-on incentives when they recruit experienced FA representatives, which may be pegged to sales targets that the FA representatives need to meet at the new firm. To manage risks of pressure selling and improper switching of insurance policies, the Monetary Authority of Singapore (“MAS”) issued a consultation paper on March 7, 2018. This proposes how sign-on incentives should be paid to promote a culture of quality advice and good after-sales service, and institution of robust controls to monitor the conduct of newly recruited representatives. The four principles of the consultation include:

Proposal 1: Setting reasonable sales targets with a cap for the first year

Proposal 2: Spreading sign-on incentives pegged to sales targets over a minimum period of six years with a cap on the amount to be paid in the first year

Proposal 3: Pegging the sign-on incentives to the persistency of policies serviced by the representative at his previous FA firm

Proposal 4: Putting in place enhanced transaction monitoring for sales conducted by the migrated representatives for two years

The consultation closes on April 9, 2018. It states that the four proposals are only applicable to representatives serving retail customers, as non-retail customers are generally better informed or better able to access resources to protect their own interests. Thus, there is no effect on firms that serve only accredited and institutional clients.

Access the MAS consultation paper here.