Who are Independent Financial Advisers (IFAs)?

In 3Q 2002, the Singapore Parliament passed a new legislation called the Financial Advisers Act (FAA). This act signaled the birth of the Independent Financial Advisory (IFA) industry. 

 Financial planning before the FAA was synonymous with insurance planning. The public was familiar with insurance agents that sold a myriad of insurance products that were marketed as vehicles for retirement planning, education planning, accumulating wealth and other financial goals. This also meant that consumers had to shop around and ‘do their homework’ before buying any plan. In the end, an individual could end up with a combination of plans from different financial institutions. This led to conflicting advice from financial intermediaries which caused more confusion to the individual.

The birth of the IFA industry has finally empowered the public with an objective and comprehensive platform. 

The IFA industry aims to provide consumers with true holistic financial planning where the needs of an individual from risk management to wealth accumulation and estate planning can be addressed under one roof. The consumer gets the big picture perspective - how each part fits with the other components of his/her financial planning.

“The term Financial Adviser (FA) refers to a corporation and the individual providing the advice is referred to as the Financial Adviser Representative (FAR). Exempt FAs are banks, insurance companies, finance companies, insurance brokers and holders of a capital markets services license. 

MAS regulates the usage of the word ‘independent’ by financial advisers. Amongst the key considerations for a financial adviser to use the term ‘independent’ is the provision of more than 4 product providers from each class of investment product. He should have no direct or indirect commercial arrangements with product providers that will create product bias and should operate freely from any form of product restriction. Financial consultants from exempt FAs such as banks and insurance companies are barred from using this term as they contravene at least one of thse key considerations. 

As the onus lies on financial advisers on the usage of the term ‘independent’, our usage of IFA refers to independently-owned Financial Advisers. These are financial firms that are started and owned by experienced finance individuals and are not part of any financial institution.”

“With the IFA in place to research and compare products, product providers can no longer operate under a cloak of consumers’ ignorance and have to constantly innovate to create better products to compete effectively.”

(Source: iFAST Insight - Your Guide to IFA Wealth Management magazine, Q12007 issue)