SINGAPORE - BANKS and insurers could soon have to adhere to new market conduct guidelines, such as ensuring proper advice, when selling financial products and services at malls and public places. Financial institutions may also be required to notify Monetary Authority of Singapore (MAS) of their marketing activities at such places.
This is all part of a proposal by MAS to prevent the sale of unsuitable products and harassment of consumers who could also be confused over the roles of the financial institutions and retailers.
MAS has issued a consultation paper detailing the above proposals. Feedback would need to reach MAS by Aug 24.
It is increasingly common to see financial institutions marketing credit cards and insurance products to the public at MRT stations, bus interchanges, retailers and shopping centres. Some also tie-up with retailers selling consumer goods and groceries.
MAS stated that the proliferation of these activities could lead to consumers who are not seeking to buy financial products and services, make 'impulse purchases' when they are approached at these public places.
They might not be adequately prepared to provide the necessary information for a proper sales and advisory session and risk buying an unsuitable product. Consumers could also be enticed by gifts or by bundled promotions. Furthermore, the sales booths are usually small and open which are not conducive for the representatives to conduct proper sales and provide advice.
MAS assistant managing director (capital markets) Mr Lee Boon Ngiap said that the authorities recognises the importance of marketing and distribution activities at retailers and public places to the institutions' business models. Notwithstanding this, MAS is mindful of the potential market conduct risks posed to the public as some may not be fully aware of the risks and financial commitments required of financial products and may also suffer from impulse and unsuitable purchases.
The proposed guidelines include a requirement for financial institutions to call back all customers prospected at public places before or within the free-look period to ensure that they understood the transactions.
When contacted, the Consumers Association of Singapore (Case) gave the initiative the thumbs-up.
Said Mr Seah Seng Choon, executive director of Case: "We are concerned with mis-selling of financial products when the financial institutions' representatives prospect clients at such locations. There is also a tendency for representatives to push their boundaries that borders on pressure selling just to get sales in such public places, particularly so when consumers are not interested. Moreover consumers are usually not in the right frame of mind or have the time to ponder over buying financial products at such public places and may end up with unsuitable financial products."
Mr Seah recommended that the guidelines should include a provision to disallow the closing of sales at such places.
"The representatives should arrange for a proper consultation location and time to walk through the product highlights sheet with the consumers," he added.
Other safeguards proposed by MAS include regular mystery shopping and site visits by financial institutions to monitor and check on the sales and advisory practices of representatives. Banks and insurers should also monitor complaints arising from such activities separately.
Welcoming the initiative, a market observer said that the sale of financial products at public places are getting 'rampant' and that the proposed guidelines are long overdue.
The Life Insurance Association (LIA) said that its members are aligned with MAS in their commitment to safeguard consumers' interest and will share their insights and recommendations accordingly.
"The implementation of numerous initiatives such as compareFIRST (a portal that compares insurance products), balanced scorecard and Direct Purchase Insurance (DPI) products are some examples of the industry's efforts to focus on this, ensuring that consumers are well-informed and given flexibility in managing their portfolios to meet their individual protection, savings and investment needs," said LIA.
DBS Bank said it has 'stringent processes' in place for the marketing and distribution of financial products to our customers and continually review them to ensure that their service standards are well within internal and regulatory sales guidelines.
Whilst the rules are designed to safeguard consumers from product mis-selling, Mr Antony Eldridge, financial services leader at PwC Singapore highlighted that the proposals should also help to protect financial institutions here from getting caught in the kind of hugely costly scandals that have hit a number of overseas institutions.