Tuesday, 17 February 2009

Who are Independent Financial Advisers (IFAs)?

Year 2009 marked my 10th year in the business and I decided to embark myself from a FA platform to the IFA platform. Some of my client asked what are the differences? So I decided to post a blog to address this.

The term Financial Adviser (FA) refers to a corporation and the individual providing the advice is referred to as the Financial Adviser Representative (FAR). Exempt FAs are banks, insurance companies, finance companies, insurance brokers and holders of a Capital Markets Services (CMS) license.

The Monetary Authority of Singapore (MAS) regulates the usage of the word "independent" by financial advisers. Amongst the key considerations for a financial adviser to use the term "independent" is the provision of more than four product providers from each class of investment product. He should have no direct or indirect commercial arrangements with product providers that will create product bias and should operate freely from any form of product restriction.

IFA firms are financial firms that are started and owned by experienced individuals from the finance industry, and are not part of any financial institution.

In summary, there are many FAs in the market but very few IFAs as using the word "Independent" would mean more regulation and not many companies are ready for that or due to the original structure of their main business e.g. the securities houses and banks. Some ask why the trouble to get myself into trouble then? My answer is simple, I believe I am ready! Being truly Independent is the way to go and will ultimately benefit my client. E.g. Now I can help my client to open securities account from more provider giving them choices rather than in the past where I can only open from one securities house because my ex-company is a securities house and there will be a conflict of interest to represent another securities house.

In a laymen term, IFA is like Carrefour which is a megamart that carries many products but none of the products belong to them. If you wanted to buy a laptop, you can choose to walk into Sony Centre that sell only Sony Laptop or you can also walk into Carrefour to choose from various brands of Laptop plus many other products that you might want all in one place which can save you time and money.

Some clients question the stability of the IFAs and the main concern is what if the IFAs firm collapse? Again my answer is simple: If you bought a Sony Laptop from Carrefour and Carrefour one day decided to withdraw from Singapore market, who will be liable if your Laptop spoil? Do you go to Carrefour or Sony? Do you worry more if Carrefour will withdraw from Singapore Market or Sony to withdraw from Singapore Market?

I think I will have more concern than the client when the IFA I decided to join eventually collapsed as that would mean that I have to find another IFA to house me, so wouldn't I be more careful than the client in choosing the IFA to work with?

After going through my stringent selecting process and talk to almost all the IFAs in the market, I decided to join Financial Alliance which is the first and only Financial Adviser Firm in Singapore to achieve both the Singapore Quality Class and the People Developer status. The coveted dual certification by SPRING Singapore was achieved only after a stringent assessment process. The company vision is "To be the guiding star in the eyes of our clients, and the inspiration for the Financial Advisory industry in the region". Over the last 6 years Financial Alliance has grown steadily from less than 10 consultants to current 150 manpower strength and is the first FA firm to win the inaugural Professional Enterprise Award - PRESTIGE in 2007. While many competitors scrambled to fight for manpower and sales, Financial Alliance focus on building infrastructure and I personally think that spells a lot on the company foresight and ability to fulfill their vision. You can also read more on their success story from the national bestseller "Asia's TOP Investments & Franchise To Make Your First Million" by Aminordin Omar & Timothy Chan (ISBN-13 9789810595210) available in POPULAR On-line Bookstore

If you are keen to explore this career, please visit www.teaengpeng.com and click on "contact" to get in touch with me.

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