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Eye on the regulatory regime in some far-flung places

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Concerns about regulatory and compliance requirements, as I learned during one-on-one interviews at the 2015 annual meeting of the Million Dollar Round Table last June, are shared by advisors worldwide. Among them: producers in countries where the financial services profession is less well developed than in advanced economies like the U.S.

Take Hong Kong, for example, where there are new rules regarding disclosure and transparency in advisor-client engagements, according to Terence Chan Mou Hon, a Prudential plc agent I met with. Since 2014, agents there have been required to communicate how much they earn in commissions on sales of life insurance products. They must also gather more info from during fact-findings to determine clients’ financial needs.

There’s also greater transparency in discussions about retirement plan investments. Now, Hong Kong-based agents have to better assess clients’ risk tolerance and recommend products to match.

Hon said that he and fellow agents at Prudential can deal with the additional fact-finding. But an added layer of due diligence has prompted many to drop investments from their portfolios: the post-sales call.

Hong Kong regulators now require insurers to contact clients after the sale to confirm their interest in the investment product, its alignment with their financial objectives, and to remind them that they can cancel the transaction during a “cooling off” period.

Many buyers have done just that, resulting in lost commissions for agents. Also often down the drain: a continuing a relationship the client, who may no longer have faith in the agent’s expertise and professionalism.

Since the regulatory change, many agents have dropped or reduced sales of investments (notably mutual funds), limiting their portfolios to life insurance and other protection products. Mou Hon said that only two years ago, investments accounted for about 30 percent of his business. Now they’re down to 5 percent.

To compensate for the loss of business, he and other Hong Kong agents have set their sights on a growing market for life insurance sales: the neighboring mainland Chinese cities of Shenzhen, Dongguan and Guangzhou.

Mou Hon said that almost half of his life insurance business today comes from mainland China. Partly accounting for the increased policy sales: Mainland Chinese buy larger policies than do their counterparts in Hong Kong.

He added that he expects his business to expand further, thanks in part to productivity-enhancing technologies he’s implementing. Prudential plc, he said, will be rolling out in the fourth quarter of 2015 e-apps and e-signature technology to replace the paper-based apps agents still use. Now being tested among a group of Prudential producers, the software will be available via apps on tablets like Apple’s iPad.


The handiwork of regulators on the Asian subcontinent has spelled good and bad news for agents in India.

On the plus side, the Insurance Regulatory and Development Authority of India (IRDAI) is allowing agents to affiliate with multiple product providers. After passing IRDIA exams, agents can be appointed as a “tied” agent with three carriers (life, non-life and health insurers).

Rajesh Chheda, a certified financial planner at Finance Factory, says the ability to market a broader range of products has enhanced agent competitiveness. Ditto in respect to financial professionals seeking to distinguish themselves by becoming registered investment advisors (RIAs), a professional designation the Securities and Exchange Board of India (SEBI) has recognized since 2013.

Chheda says these changes, plus a ratcheting up of compliance requirements, will work to the advantage of “serious” advisors who have a long-term horizon and are prepared to invest in their careers. That calls not only for continuing education to keep professional designations current, but also investing in tech tools that can aid in planning and practice management.

To be sure, Chheda is not completely sanguine about the future of the profession. He warns that India’s regulators, prone to “knee-jerk” reactions after a financial scandal, could overreach in regulating advisors, stifling the profession.

And so it goes worldwide. Whether it’s the U.K., Hong Kong, Australia or India, there’s a constant push and pull among industry stakeholders to strike the right balance — to protect consumers from bad advice and give advisors the freedom they need to run and grow their practices.

How this high-stakes game plays out in the coming years will bear close-watching.

See also:

5 new compliance headaches for advisors, BDs

Joe Jordan: Why you need to celebrate the positive impact you’ve had on your clients