Financial Advisers Held Hostage

The term Financial Adviser (FA) refers to the corporation and the individual providing the advice is called Financial Adviser Representative (FAR). There are 2 kinds of  FA – Licensed and Exempted. Licensed FAs are required to hold the Financial Advisers (FA) license under the Financial Advisers Act (FAA). Exempted FAs are insurance companies, finance companies, brokers, banks and holders of capital markets services license are are exempted from holding a FA license. FARs representing a Licensed FA must hold a  representative license and are directly licensed by MAS.  The license is renewable every 3 years. The Exempt FAR is not directly licensed by MAS (although there have been talk of having them licensed under a central database, I have not heard of any concrete developments).

In the wake of the Lehman mis-selling saga, the time and effort needed to obtain a FAR license has increased significantly. Perhaps this was a move to eradicate churners and unethical advisers. No matter what the real intentions behind the move are, ethical advisers have been affected as well.

When a licensed FAR move from 1 company to another, a new license application is required. Questions relating to legal offense, compliance and financial status and others have to be answered again. Feedbacks from the previous firm might be sought-after as well.

1 company have have taken advantage of the tightened regulations to control the FARs, threatening to terminate the FARs if they were to resign. With a termination record, it will be an uphill battle to get a new license with another firm. The only way out is to join an Exempt FA.

Choosing which FA to join is an important decision. It does not only affect the FAR but the clients as well. A troubled FAR would not be able to plan for the client whole-heartedly. Big FAs does not necessarily mean it is a good company. The opposite is true for small FAs.

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