Singapore Regulator Warns Of Advisors' Social Media Marketing

Tom Burroughes

15 July 2019

Singapore's main financial regulator says there are cases where advisors use Facebook and other social media sites to market their wares in misleading ways. Although social media channels have their uses, these can be abused.

The comment came from Merlyn Ee, executive director, Monetary Authority of Singapore, at the Association of Financial Advisers (Singapore) 18th Annual Conference last week.

There have been cases of firms marketing endowment policies as fixed deposits, and using language such as “call me if you have spare cash for fixed deposit”, the official said. Also, there have been cases of representatives advertising anonymously, unbeknown to their firms.

"When we referred these cases to the firms concerned, these were found to be in breach of the firm’s marketing policies. Such cases also skirt the firm’s oversight and controls, and any improper practices will ultimately impact the firm’s reputation," Ee said.

The industry also has uneven oversight of business practices, Ee said. "Only a handful of firms monitor their representatives’ online marketing activities and content on an ongoing basis. Even for firms which employ monitoring tools to trawl the social media space, coverage could be broadened to include multiple platforms," she said.

"MAS expects FA firms to ensure that their representatives’ social media activities are conducted in a responsible and professional manner. In particular, the firm and representative must be clearly identifiable, and the product and service accurately represented, in marketing materials," she said.

More broadly, however, Ee said the financial advisory sector in Singapore has improved its culture and the regulator has tightened controls, designed to encourage more responsible recruitment practices in the advisory space. Such measures are due to take effect later this year, the regulator said.

"About two years ago, you would have read in the press about some financial advisory firms offering hefty sign-on incentives with high sales targets to grow their sales force. Such recruitment practices can lead to escalating costs, and even detriment to consumers if policyholders are advised to switch their insurance policies for no good reason," she said.

Aggressive incentives
Ee said the regulator has found other cases of "aggressive incentive structures driving poor conduct".

She gave the case of a financial advisory firm which terminated the employment of about 20 representatives for premium financing activities. These representatives had paid for their customers’ first year insurance premiums in order to meet sales targets, qualify for incentive trips or enjoy additional commissions. After the first year, these customers would need to service the premiums on their own. While some customers continued to hold on to the policies, those who could not afford the premiums allowed their policies to lapse, or placed their policies on premium holiday.

"If customers allow their policies to lapse, this suggests that the policies were not suitable for them in the first place. It is also possible that the information documented by the representative in the fact-find form, such as the income and occupation of the customer, was false or inaccurate," Ee said.

"FA firms can secure a niche for themselves as trusted advisors, by implementing incentive structures that help align the behaviour of their representatives with their desired values," she said. Ee noted the case of a firm (which she did not identify by name) that pays its relationship managers a fixed salary.