UK-based insurer Aviva has launched Aviva Financial Advisers in Singapore, with a view to grabbing a slice of the crowded but growing advisory market in the city-state.
Like most of its local rivals, Aviva FA will follow the commission-based approach – whereby customers pay a fee per product transaction – rather than paying a regular flat fee for both advice and transactions. The head of the new business is set to be announced at a later date.
Aviva FA has 280 advisers, which puts it in the mid-to-large-sized player category, along with companies such as Great Eastern Financial Advisers and Manulife. There are 61 firms with FA licences in the city, according to the Monetary Authority of Singapore, many of which are relatively small players with fewer than 50 employees, though industry consolidation is widely expected.
The FA channel's market share of insurance product sales at the end of 2015 stood at 20%, up from 4% as of 2006, while tied agents’ market share had declined steadily from 68% in 2006 to 39% in 2015, according to Aviva. The market is measured in 'average premium equivalent' for individual life and health products, which includes investment-linked and traditional policies.
The insurer already offers Navigator in Singapore, an online funds platform. Aviva FA will offer a full range of life, health and general insurance solutions, as well as over 600 unit trust funds available through Navigator. Funds from Aviva Investors make up about 3% of the total on offer.
Aviva’s FAs are licensed to advise on a full range of life, health, general insurance and investment products. Asked which products the firm expected would be popular, a spokeswoman said that would depend on customers’ individual needs. She added that the firm did not have a projection of how much of its new business would come from investment-linked product sales.
Asked which firms Aviva FA viewed as its main competitors, the spokeswoman made a rather unusual comment: “The key purpose of setting up Aviva Financial Advisers is not to compete with other FA businesses, but to provide the catalyst to the growth of the FA channel as a whole.”
She went on to say that the firm had invested in building digital infrastructure that simplifies processes and improves the efficiency for all FA partners, to support the growth of the channel as a whole.
That said, one suspects that Aviva would not be averse to taking business from financial adviser rivals.
Fee-based still a way off
Like the bulk of its local rivals, Aviva FA will be working on a transaction-based rather than fee-based approach, though Singapore is ultimately expected to shift towards the latter model, like markets such as Australia and the UK. The Monetary Authority of Singapore showed signs of this when it consulted on its Financial Advisory Industry Review (Fair) rules, but did not go as far as some had hoped when it introduced the proposals.
The Aviva spokeswoman said: “We believe Singapore is not ready for a fee-based model yet. Experience in other markets has also shown that such a model leads to certain segments being under-served.”
This comment echoed one made by Lee Chuan-Teck, assistant director for capital markets at the MAS, when the Fair proposals were unveiled in January 2013.
However, the transaction-based approach is also more likely to result in product pushing and fund churning, as distributors look to makes sales that result in bigger commissions for their firm.
Nishit Majmudar, chief executive of Aviva Singapore, said: “We hope this move [the launch of Aviva FA] will provide the catalyst for the shift of Singapore’s insurance industry towards more mature markets such as the UK and Australia, where most financial advisers offer solutions from multiple product providers.”
Yet such market maturity not only requires open product architecture, but also moves by the regulator, and market players, to educate customers on the benefits of fee-based advice and shift the industry in that direction