Singapore IFAs shifting from commission model

Commissions still account for the bulk of revenues for independent financial advisers (IFAs) in Asia, but that is changing in Singapore if not in Hong Kong, according to new research.

Initial commission from investment products accounts for 46% and fees 17% of revenue for IFAs in the Lion City. That compares to 58% and 3%, respectively, in Hong Kong, finds Singapore-based NMG Consulting.

A much greater proportion of Singapore IFAs have migrated to fee-based models than in Hong Kong, and that trend is set to continue, says Sandeep Rao, partner at NMG. The company provides strategy consulting and research-focused services in the insurance and investment sectors.

Asked this year whether they are shifting to a fee basis, 44% of Hong Kong IFAs said no, which is almost the same proportion as last year (43%). In response to the same question, 80% of Singapore IFAs replied affirmatively this year, double the proportion that did so last year (42%).

Meanwhile, both IFAs and premium banking channels are growing in importance in Singapore at the expense of agency channels, says NMG. It estimates that the agency channel will account for 41% of new investment business for 2011, compared with 46% last year and 50% in 2009, estimates the company. Banks are estimated to account for 30% this year, up from 23% last year, and IFAs for 22% this year, up from 19% last year.

In Hong Kong, the agency channel has seen a similar decline in importance; it’s estimated to account for 27% of new business this year, down from 37% in 2009. But there it is bank channels that are benefiting – they are predicted to account for 57% this year, having seen a steady increase from 41% in 2008. IFAs have accounted for a flat 15% of new business in Hong Kong since 2009.

NMG forecasts that new business annualised premium equivalent (APE) through IFAs in Singapore will rise 10-20% to $510 million this year. In Hong Kong the figure is projected to rise 15-25% to $888 million, and to $1.1 billion in 2012.

As for actual providers, Ifast is out in front as the leading IFA provider in Singapore by market share, followed by Navigator and Zurich. In Hong Kong, Zurich is the narrow frontrunner, followed by Friends Provident International.   

Asia’s ‘premium advisory’ market is forecast to hit $3.3 billion (in new business APE) by the end of 2011, up 20-30% from $2.5 billion last year, and to reach $4.1 billion by 2012.

NMG’s premium advisory research programme studies distribution of insurance and investment products to clients with $200,000 or more in investable assets via non-tied distribution channels in large markets such as Hong Kong, Singapore and other key markets in the region. It excludes retail bank flows, but includes premium and private banking services.