Not mandatory for most investors to seek advice for complex products like investment-linked policies
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The Monetary Authority of Singapore announced on May 15 that it will proceed with proposals to remove the mandatory financial advice requirement for complex products.
PHOTO: LIANHE ZAOBAO
SINGAPORE – Most retail investors, except those who need extra protection, will have the flexibility to opt in to or out of financial advice before buying complex financial products. Legislative amendments to implement these changes will be consulted on at a later date.
Investment-linked policies (ILPs) will also require a product highlights sheet (PHS) and be classified as complex products.
The Monetary Authority of Singapore (MAS) announced on May 15 that it will proceed with proposals to remove the mandatory financial advice requirement for complex products.
The PHS will be enhanced to give investors the information needed to make investment decisions, while pre-transaction alerts will remind investors to assess the suitability of complex products.
The changes follow a consultation by MAS in July 2025 to seek public feedback on enhancements to the PHS requirements and the complex products framework.
Digitalisation has increased retail investors’ access to information and reshaped how they are choosing to access investments, MAS said in its release.
Mr Lim Tuang Lee, the regulator’s assistant managing director for capital markets, said investors are also now more sophisticated, conducting their own research and managing their investments independently. “These measures foster an accessible and dynamic market,” Mr Lim added.
Complex products will be identified by a red heading band in their PHS as opposed to non-complex products, which will have the default yellow band.
The PHS will highlight the key features and risks to help investors better understand the complex product.
Financial institutions will have to provide a pre-transaction complexity disclaimer, which investors must acknowledge before they buy a complex product.
The disclaimer must remind investors to review the product documents carefully to assess if the investment suits their financial circumstances. Investors will also be reminded to learn more about the complex product or seek financial advice if they do not understand its features.
If a customer has already transacted in a complex product during the month, MAS allows financial institutions the flexibility to waive the disclaimer for additional trades within the same month.
Besides ILPs, other examples of complex products include structured notes and derivatives, MAS noted in its press release.
MAS said there is merit in classifying ILPs as complex products with their own PHS. This applies even if the underlying sub-funds – which carry their own PHS – are complex or non-complex.
The regulator noted that ILPs are hybrid products that combine insurance and investment features. Returns from an ILP depend on the sub-funds’ performance and the ongoing fees and charges, which may increase over time. For example, the cost of insurance rises with age.
Even as Singapore moves towards a disclosure-based regime, Mr Lim said there remains a group of investors who will require additional support and protection.
Stronger safeguards will continue to be enforced for “selected clients”. These individuals must seek financial advice if they lack adequate investment experience in and knowledge of complex products.
A trusted individual must also accompany them during the sales and advisory process. Furthermore, financial institutions must contact these clients verbally to make sure they understand the risks before investing in a complex product.
Selected clients refer to customers who meet any two of the following criteria – namely they are 62 or older; are not proficient in English; or have academic qualifications below O or N levels, or their equivalent.
Mr David Gerald, president and chief executive of the Securities Investors Association (Singapore), said the enhanced requirements for the PHS are a positive step towards improving transparency.
Clearer disclosures of features and risks, along with more intuitive product classifications, will enable retail investors to make informed decisions, he added.
Pre-transaction alerts for complex products also serve as timely reminders for investors to carefully assess the suitability of such investments for their financial situation, Mr Gerald noted.
Investor education remains key. Investors will have to ensure they fully understand the risks and benefits of the investment product and continually educate themselves, he added.
