Insurers and financial advisory firms will be given more time to fall in line with a new framework to be used in assessing the performance of their sales staff and how they are paid.
The Monetary Authority of Singapore (MAS) said in a statement yesterday that it will "provide the industry with a one-year grace period to familiarise themselves with the framework before effecting the requirements in legislation in January 2016".
The initial target for the new remuneration framework to take effect was January next year, after the MAS accepted most of the recommendations by the Financial Advisory Industry Review (Fair) panel in September last year.
While firms still have to put in place the new framework from Jan 1 next year, penalties will not be imposed during the first year of implementation.
Enforcement will start in January 2016 to give the industry time to adjust to the new model and for MAS to fine-tune the requirements where necessary.
Known as the "balanced scorecard" approach, the new framework will take into account non-sales factors in determining the pay of the agents and their supervisors.
If the agent is deemed to have failed in areas such as not selling suitable products or not giving adequate information to the customer, they could lose their variable pay, while their supervisors' pay could also be cut.
This represents a marked change from the current system where advisers are mostly paid based on their sales results.
The MAS gave the update in a consultation paper on the legislative changes needed to implement the Fair initiatives.
Good progress is being made in the key initiatives, it said, including the launch of a direct sales channel for basic life insurance products early next year.
A new comparison website, where consumers can check out the premiums and features of the various insurers' life insurance products, is also slated to be ready in the first quarter of next year.
MAS assistant managing director Lee Boon Ngiap said in the statement: "MAS will look to the board and senior management of financial institutions to set the right tone and promote a culture of fair dealing in their companies.
"Through the Fair initiatives, consumers can look forward to a financial advisory industry that puts their interests first, delivers quality advice, and enables them to better meet their financial and life goals."
Industry players said the grace period for the balanced scorecard framework is necessary as firms need more time to tweak their systems.
Mr Leong Sow Hoe, the chairman of Insurance and Financial Practitioners Association of Singapore Alliance, said: "The compensation system in the companies has always been to pay out money to their advisers, never been to claw back the compensation.
"There's a lot of complexity involved in how much to claw back for what kind of infraction, and companies' respective systems are not ready, so giving them more time is good."
The president of the Association of Financial Advisers Singapore, Mr Vincent Ee, said: "This concerns the earnings of the advisers. Since it will affect their finances, it's better to get it right."
Both Mr Leong and Mr Ee also said most agents are prepared for the change ahead, pointing out that only a small minority of errant advisers will be affected by the remuneration framework.
Comments on the draft legislative provisions and amendments should be submitted by Nov 3.
This article was first published on Oct 3, 2014.
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