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Saturday, September 08, 2007

What is meant by “Independent Financial Adviser” and why good?

Before the Financial Advisers Act was passed, there's only tied agents. These tied agents work for the insurers and their duty is to put their principals first, client second. This means, they push their products as their priority instead of doing a proper financial planning for their clients.

To be independent, they must be
  1. objective
  2. impartial
  3. not influenced by commissions
  4. no contractual obligations with any product manufacturers
  5. able to sell a wide range of products (such as mutual funds, life insurances and health insurances)
  6. more importantly good advice that put their clients’ interests first
… the Bill [Financial Advisers Act] will create of a new class of licensed financial advisers. These professionals will be able to provide investment advice on a wide array of financial products, and also sell unit trusts and their close substitutes, such as ILPs. In some cases, these financial advisers will not be connected to any product providers, such as fund managers or insurance companies, and will act independently of them. Such independent financial advisers will represent the interests of their clients, rather than the interests of specific product providers.

- Speech by Deputy Prime Minister and Chairman, Monetary Authority of Singapore, Lee Hsien Loong for the Second Reading of the Financial Advisers Bill 2001 in Parliament on 5th October 2001

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