SINGAPORE: The Life Insurance Association Singapore (LIA Singapore) on Wednesday (Mar 14) issued industry guidelines regarding the use of sign-on incentives in the recruitment of financial advisors.
LIA Singapore said in a press release that the four measures under the new guidelines, which take immediate effect, are aimed at addressing the risks posed by the use of sign-on incentives during recruitment.
The guidelines will apply to LIA members as well as their related financial advisory firms.
“Individuals do move between companies for career advancement, but customers’ interests should not be adversely affected by such movements within the industry. This is why it is important to have guidelines to ensure that ethical, professional and responsible recruitment practices are being adopted," said LIA Singapore president Patrick Teow.
The four measures in the guidelines comprise: setting sales targets at a reasonable level; spreading the payment of sign-on incentives over a minimum of six years; pegging sign-on incentives to the persistency of policies serviced by the representative at the previous firm; and closer monitoring of representatives for at least two years.
The first two measures apply to all representatives offered sign-on incentives tied to sales targets or a transition package, while the third and fourth measures apply when the insurer or its related financial advisory firm conducts mass recruitment.
LIA added that sales targets for representatives migrating to a new firm should be set at a reasonable level in order to "mitigate the risk of representatives engaging in improper conduct such as mis-selling or improper switching in order to meet sales targets".
This includes imposing a cap to limit sales targets for the first year to the average of the representative's annual achieved sales in the preceding three years, LIA said.
As for spreading out the payment of sign-on incentives over six years, LIA said, the measure will "encourage representatives to stay on and service their customers for a longer period of time."
The new guidelines, which were developed together with the Monetary Authority of Singapore (MAS), comes after recent reports on the aggressive sales tactics and mass poaching of insurance agents from rival insurers in Singapore.
In September 2017, about 300 agents from Great Eastern's agency unit Advisors Alliance Group hopped over to the then newly formed AIA Financial Advisers.
The exodus eclipsed an earlier recruitment exercise in 2016, when 250 agents at Prudential Singapore's agency unit - Peter Tan Organisation - resigned to join rival insurer Aviva.
LIA's new guidelines are also aligned with the MAS' public consultation paper earlier this month on promoting responsible recruitment practices in the financial advisory industry, it said.