The guidelines, which were announced on 14 March, were co-created by the LIA and the Monetary Authority of Singapore (Mas).
They are intended to address concerns about potential mis-selling or the churning of policies by agents and advisers who are under pressure to meet sales targets at their new firms.
Mas is also going through a public consultation on measures that also look to address mass-migration in the financial advisory sector.
Mass exodus
The guidelines and Mas consultation comes after about 300 advisers mass-migrated from Great Eastern to new advisory business AIA Financial Advisers, in September 2017.
The exodus saw GE lose about a tenth of its advisory staff.
Further, in 2016, 250 advisers at Prudential Singapore’s financial advice unit, called the Peter Tan Organisation, quit to join rival insurer Aviva.
Sweeping measures
Four measures are outlined in the guidelines to curb adviser mass-migration and sign-on incentives.
Measures one and two apply to new recruits who are offered sign-on incentives tied to sales targets or a transition package.
While measures three and four apply when an insurer or its related financial advisory firm conducts “mass recruitment”.
Sign-on incentives
Under measure one, sales targets are to be set at a “reasonable level”.
“Sales targets for the first year should not be higher than the representative’s average of his annual achieved sales in the preceding three years,” the guidelines says.
Any increase in subsequent years’ sales targets should also be set at a reasonable level, considering several factors, including their sales performance and compliance track record.
Measure two says the payment of sign-on incentives must be spread over a minimum period of six years
The first-year payment is capped at 50% of the agent’s average annual remuneration in the last three years, and the remaining payments are based on a level percentage.
Mass recruitment
“Mass recruitment” is defined as the movement of 30 or more representatives from the same financial advisory firm within a 60-day rolling period.
Measure three relates to pegging sign-on incentives to the duration, or “persistency”, of policies serviced by the representative at the previous firm. This relates to a client continuing with a policy after it is sold or advised.
After the agent or adviser has been with their new firm for two year, their previous employer should share the persistency of the representative’s “ring-fenced policies” with the new firm. The persistency will be calculated on a case-count basis.
Depending on the persistency of the ring-fenced policies, the hiring firm is required to adjust the representative’s entitlement to sign-on incentives.
The final measure is enhanced monitoring for at least two years.
Under this measure, the insurer or related financial advisory firm is to engage an independent external party to conduct a pre-transaction survey of 100% of the transactions involving those receiving sign-on incentives pegged to sales targets.
