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10 financial advisory firms fingered for anti-competitive conduct

SINGAPORE — The competition watchdog has hauled up ten member firms from an insurance association for anti-competitive behaviour after they were found to have put pressure on a financial services company to remove its online promotional offer for life insurance products.

The Competition Commission of Singapore (CCS) today (May 28) issued a proposed infringement decision against 10 financial advisory companies.TODAY file photo

The Competition Commission of Singapore (CCS) today (May 28) issued a proposed infringement decision against 10 financial advisory companies.TODAY file photo

SINGAPORE — The competition watchdog has hauled up ten member firms from an insurance association for anti-competitive behaviour after they were found to have put pressure on a financial services company to remove its online promotional offer for life insurance products.

The Competition Commission of Singapore (CCS) today (May 28) issued a proposed infringement decision against the financial advisory companies for pressurising iFAST Financial to withdraw its offer of a 50 per cent commission rebate on life insurance products on its website Fundsupermart.com two years ago.

The ten companies, which belong to the Association of Financial Advisors Singapore (AFA), are: Cornerstone Planners, Financial Alliance, First Principal Financial, Frontier Wealth Management, IPP Financial Advisers, JPARA Solutions, Professional Investment Advisory Services, Promiseland Independent, RAY Alliance Financial Advisers and WYNNES Financial Advisers. They provide financial advisory services and distribute various financial products, including life insurance products and unit trusts.

iFAST is both a securities dealer and a financial adviser and was not a member of the AFA at the time of the Fundsupermart offer. The ten companies’ use of iFAST’s distribution platform collectively contributed significantly to iFAST’s revenues in Singapore, CCS noted. The firms have six weeks to make their representations and CCS will make its final decision after reviewing their statements and the available information and evidence. Under the Competition Act, CCS may impose remedies, directions as well as financial penalties.

On April 30, 2013, iFAST launched its Fundsupermart offer, which lets consumers enjoy cost savings via the 50 per cent commission rebate. For example, a customer could get a rebate of about S$2,000 for a term life product with a sum assured of S$1 million. However, the offer was withdrawn just three days later.

CCS looked into media reports and a complaint on the offer withdrawal and commenced investigations under the Competition Act. It found that there was an agreement in an AFA meeting on May 2 that year and further coordination from the 10 financial advisory companies to apply pressure on iFAST.

When contacted by TODAY, IPP Financial Advisers said: “We are disappointed with the provisional decision made by CCS and will be appealing within the stated timeframe. When we communicated with iFAST on their offer on Fundsupermart, we were merely acting as a corporate customer carefully seeking clarification with our long-term service provider, iFAST.”

“We never intended to be part of any cartel or to participate in any anti-competitive conduct which goes against the spirit of free competition – something we strongly believe in,” it added.

Another company, RAY Alliance Financial Advisers, said it was reviewing the matter and could not comment.

On its part, iFAST said today: “Commission rebates in the insurance industry used to be illegal many years ago, and during the course of their careers many insurance agents and agency managers have been discouraged or prevented from giving commission rebates for insurance products. So, when Fundsupermart launched the initiative, various industry players, including the financial advisory firms, voiced their concerns about it, in line with historical norms in the insurance industry.”

Still, the case took place more than a decade since the ban on rebates was lifted in 2002, following the successful implementation of the best practices recommendations of the Committee on Efficient Distribution of Life Insurance.

AFA today called the CCS move unfortunate, but held its stand that commission rebates should not be used as an inducement to purchase financial products.

“Unlike a supermarket rebate, which is direct and has no long-term implications, life insurance commission rebates have financial implications that could impact consumers later. If this rebate issue is not handled properly, the fear is that consumers’ trust in the financial advisory industry will be undermined in the long run.”

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