According to industry observers, product pushing has been a menace in insurance and unit trusts for quite a while although efforts to stem it have, to an extent, lessen the occurrence but more need to be done in this area. This is because there is a quota which agents need to meet in order to maintain their agency contract, one industry watcher said.
Furthermore, they said the proposed framework would at the same time minimise the number of part time agents, whose number is significant at the moment and forms the bulk of the total agency force in the insurance and unit trust segments.
There are about 85,600 agents in the life insurance industry as at Dec 31, 2013 and a significant number of them are part timers. For unit trust consultants or agents, their number is close to 50,000 at present.
Association of Financial Advisers (AFA) president Alfred Sek told StarBiz that Bank Negara aims to raise the number of full time agents in the insurance sector to 50% by 2020 as stated in the recent Life Insurance & Family Takaful Framework concept paper.
He said a single licensing framework for financial advisory was in the final stages and various discussions with the Securities Commission (SC) and the central bank and relevant parties has been ongoing.
“We expect the framework to be implemented sometime this year.
“This will spare financial advisers for the need to have two separate licenses for insurance and investment consultations. One license will suffice and this will help reduce the compliance burden and address the confusion in the financial advisory industry,’’ he said during an interview.
He said AFA was also in negotiations with the regulators to make it a requirement for insurers and takaful operators to offer the entire range of products for financial advisers to sell without any form of restrictions.
The single licensing framework, once it kicks off, would be jointly regulated by Bank Negara and the SC, he noted.
Financial advisers as financial intermediaries came into the scene in 2005 and is currently regulated by the Financial Services Act (FSA) and Islamic Financial Services Act (IFSA).
The unit trust business on the other hand is regulated by the SC under the Capital Market Services Act. Sek said there were about 280 fully licensed financial adviser representatives in 19 financial advisory firms in the country.
With the proposed new framework, he said it would lead to a higher penetration rate for insurance and takaful from 54% (in 2012) to 75% in 2020. Over the last three years, the financial advisory industry saw total premiums transacted increase by an average of 21% annually.
Besides enhancing the level of professionalism of intermediaries to ensure proper advice are given to consumers, he said the framework would strengthen product disclosure standards and transparency.
On the main issues facing the financial advisory business, Sek said there has been quite a few cases where individuals “were masquerading” as financial advisers when giving clients advice. This, he said, contravened the FSA and was an offence; if convicted, offenders would be liable to imprisonment not exceeding eight years or a fine not more than RM25mil or both.
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