Across the globe, financial planning has only one end game for advisers. That end game is around transparency, and the disclosure of fees and services, products and solutions. Successful advisers need to focus on how they position their value proposition, how good they are at explaining this to their clients and future clients. If they understand what a client needs, it’s less about focusing on investment returns, and more about financial planning; assessing a client holistically and delivering returns and value – not just over 12 months, but for the long-term. The UK remains the benchmark for this change. They went as far as banning commission. Hong Kong and Singapore have not gone as far as to ban commission but have implemented better disclosure. Banning commission has not yet been discussed at a regulatory level – as such there is still a gap between the UK and Asia – but in terms of disclosure, transparency, creating a value proposition and really understanding what clients want, this is the way the financial planning market is heading.
In Asia, there is additional pressure because, for the most part, advisers are dealing with an internationally mobile population. Their clients will have been to other jurisdictions and are aware of adviser practices and qualifications. The market is demanding more and more.
Are you seeing some advisers at the vanguard of this change, who are moving to a fully fee-based option?
There is absolutely an opportunity to lead from the front with that business model. However, having dealt with firms in different regions, there is no one business model that fits all. Business models can vary greatly and should, as there is a huge opportunity for firms to demonstrate the value they add and charge appropriately for it. There isn’t only one way to do it and no one solution is right for everyone – there are clients that will prefer different types. As long as clients have an informed choice that prioritises their needs, then the model works. The more diversified the market, the more options clients have.
Are Hong Kong and Singapore paving the way for other countries across Asia?
There are plenty of well-regulated markets across Asia. That said, Singapore and Hong Kong have infrastructure and regulatory oversight. They also have a reputation for client protection – they have built a good reputation as a safe place for clients to invest. There is good regulatory oversight on behaviour and also accountability. If there are problems, clients have recourse, and options. So they are good jurisdictions from an infrastructure point of view. There is competition between Hong Kong and Singapore – both are well-positioned in the region, and allow a number of high net worth and affluent clients to invest confidently in Asia.
What are the key problems that advisers are dealing with in the region?
Within financial advisory firms, there is a broad range of specialisms. Some are very focused on expatriates. This may be UK expats or Singaporeans with assets overseas. There will be those who are very focused on UK pension planning or on the local Singaporean base. It may be retirement or investment focused, but each firm will have its own set of challenges behind it.
That said, the key challenges are around internationally mobile clients. There are a large number of expats and Singaporeans who go and work abroad. How can you create a portfolio that is as flexible as the clients need it to be? What are the tax consequences of running that portfolio? How much should be onshore or offshore?
As the world evolves into a more diverse place, and the global markets are no longer siloed, the biggest challenge is maintaining the relationship with the client as they move around the world. Advisers need to deliver solutions that are as flexible as their clients’ bank accounts. Solutions have to take into account a range of possible futures.
Which solutions does Old Mutual International have in the region?
We only distribute through independent financial advisers, so don’t have our own tied sales force. This model works well for us in other parts of the world and ultimately we believe it works better for clients. The suitability of our products is determined by an independent professionally licensed financial adviser and ensures that clients receive advice on how the products meet their needs. From a product perspective, our most popular product recommended is a type of Private Placement Life Insurance (PPLI) product which is an open-architecture version of a portfolio bond. This works well as it holds a variety of assets, it is tax neutral across much of Asia and it operates as a trading platform wrapped in an insurance policy. As policies are issued from the Isle of Man, investors get the benefits of that jurisdiction and the protection provided to policyholders there. This product has been around for a long time. We know it well and we do it well.
We also have a variable universal life product. This is a variable death benefit version of the PPLI. This might be used where the client has a key man dependency, and the business needs to be protected. As such, it is used for legacy planning as well. Investment returns are used to fund the life cover. These products are not unique in the West, but in Asia they have a unique place in the market.
What is your ‘Future Fit’ proposition for advisers?
We have a global presence – Europe, Hong Kong, Dubai, Latin America and Singapore. In a lot of these jurisdictions, we have seen the transition from the old world, supporting advisers through that process and we have learned a lot from these experiences. We believe very strongly in the importance of quality financial advice. We are in a unique position to help our partners with the transition process.
In some cases, regulatory change has prompted panic. In the UK, during RDR for example, some financial advisers were afraid that the end of commission would put them out of business. However, they coped with change and the required disclosure of fees for services provided, and the world has gone on. What came out is a better business model. We are taking the things we’ve learned in South Africa and the UK and replicating that elsewhere. Why wait until you are forced to make the change? You can partner with Old Mutual International and make the change voluntarily- not because it is forced upon you.
Future Fit is a six module resource set that can help us work with firms to transform their businesses. Working with chief executives to help build and test a better business plan, and making sure the change is robust and sustainable is key to how these modules work. This might include looking at operational efficiency – what a business does well, what to keep in-house, what to take to a third party. Collaboratively, we might also look at segmentation – to help firms understand where their proposition resonates most with clients.