A mystery shopping
survey conducted by the Monetary Authority of Singapore (MAS) has
found almost a third of the product recommendations made by
insurers and banks were assessed by an industry panel as
“unsuitable”.
MAS said the top three
categories of products recommended by insurers and banks were
endowment insurance policies, unit trusts and investment-linked
life policies.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
However, it said almost
a third of the product recommendations were unsuitable because the
products recommended did not match the shoppers’ financial
objectives or their stated investment horizons.
In terms of product
disclosure, MAS said most representatives disclosed basic
information about the products recommended. This includes an
explanation on whether the product is meant for protection, savings
or investment.
However, MAS said
disclosures on risk factors, amount and frequency of fees and
charges, warnings, exclusions and caveats, as well as the free-look
period were omitted in a significant number of advisory
sessions.
Inadequate
disclosures
MAS said: “Inadequate
disclosures may result in consumers making poor investment
decisions due to lack of understanding of the product’s features
and risks.”
Finally, when it came to
fact-finding, MAS said fact-finding was carried out in the bulk of
the visits but the extent of information collected from the
shoppers was inadequate.
It said most
representatives obtained information on the shoppers’ personal
particulars and employment, but other pertinent information, such
as the shoppers’ investment experience, financial objectives, risk
preferences and financial situation were less frequently
gathered.
“Failure to conduct a
comprehensive fact-find impedes the ability of representatives to
make suitable recommendations,” explained MAS.
The survey was conducted
from October 2011 to December 2011.
A total of 126 mystery
shoppers made 500 visits to 11 licensed banks and four registered
insurance companies seeking financial advice from their
representatives.
The products recommended
by the representatives were reviewed for their suitability by a
panel of industry practitioners based on the shoppers’ personal
profiles, their experience during the advisory and sales process,
and sales materials obtained from the financial
institutions.
