Independent Financial Adviser (IFA)
WHAT IS IFA?
Following the introduction of FAA and the attempt to regulate the use of this term, there has been a growth of Financial Advisers using the term “independent”. It is a good phenomenon for consumers. However, lets examine the use of the term.
In Singapore, Independent Financial Advisers are financial advisory firms that are started and owned by experienced individuals from the finance industry, and are not part of any financial institution or product providers.
Independent
The independence of the adviser is critical. Independence means that the client can expect the adviser to act completely impartially with no restrictions, entirely in the client’s best interests.
Financial
An independent financial adviser has expert professional knowledge of available financial products and services. A good adviser should have a deep understanding of economics and finance and how it affects the portfolio of clients. The adviser must be familiar with the services that different platforms can provide, such as market updates or even medical service for insurance policies.
Adviser
As an adviser, the third and vital component of the independent financial adviser’s role harks back to the first of his or her qualities, independence. The financial advice given must be “best advice”. That is to say, the advice must be the advice that is genuinely in the client’s best interest. In this way, the client can be assured that the advice is truly independent, objective and impartial advice that will satisfy the interests that the client himself or herself has identified.
FAA wordings on the Use of the Term “Independent” by Financial Adviser.
Financial Advisers should first satisfy comply with the use of the title “Financial Advisers” in the FAA.
No licensed financial adviser or exempt financial adviser is permitted to use the word “independent” or any similar term in its name, description or title, or to promote or advertise its services, or in respect of any of its advice or recommendation, unless it:
(i) it does not receive any commission or other benefit from a product provider which may create product bias and does not pay any commission to or confer other benefit upon its representatives which may create product bias;
(ii) it operates free from any direct or indirect restriction relating to any investment product which is recommended; and
(iii) it operates without any conflict of interest created by any connection to or association with any product provider.
Further issued Guidelines include
(a) only financial advisers which can clearly demonstrate that they do not have financial or commercial links with product providers that are capable of influencing their recommendations should use the term “independent”; and
(b) before using the term “independent”, financial advisers should be satisfied in light of their own particular circumstances that they are in compliance with regulation 21 of the FAR.
In terms of product range, Authority will not normally regard a financial adviser as being independent if it represents less than 4 product providers for each class of investment product.
