Singing the praises of the Singapore market

Professional Investment Services(PIS) led the charge into Singapore.Norwich Unionquickly followed andAssociated Plannersis on the brink of signing a deal.

While other Australian companies may baulk at the thought of launching a financial services arm in Singapore, PIS, Norwich Union and Associated Planners all believe they have stumbled upon a rare opportunity.

The belief is that Singapore will not only offer future company growth in the Asian market place, but may also open up avenues to other lucrative markets, such as the US and UK.

In October 2001, PIS was the first Australian financial services group to seriously scout around Asia. One year later, Professional Investment Advisory Services (PIAS) Singapore emerged.

Norwich Union signed a lucrative deal late last year (through its master trust product Navigator) with the $61 billion Central Provident Fund Investment Scheme (CPFIS). And as recently reported byMoney Management, Associated Planners is set to sign a joint venture with an as yet unnamed Asian company.

However, international interest in Singapore comes as no surprise to the local Singaporean financial planning community, or its regulatory body — the Monetary Authority of Singapore (MAS). Nor is the fact that many groups are using Singapore as a springboard to other areas in Asia or further abroad.

Since the introduction in October last year of the Financial Advisers Act (FAA), which streamlined the laws governing the provision of financial advisory services, Singapore has experienced an increase in applicants from international operations wanting to apply for a financial adviser’s licence.

Organisations offering advice are licensed by the FAA, while individuals must have representative licences. To date, 48 financial licences have been issued to financial services organisations.

“The financial advisory market is still at a relatively early stage of its development,” MAS assistant managing director Shane Tregellis says.

“The new legislative framework in Singapore is designed to encourage new business structures and services in the local financial advisory market,” he says.

Tregellis says the FAA also offers more freedom to tied distribution advisers who can now provide advice as independent financial advisers.

“We assess and approve all applications based on their merits, regardless of whether the applicant is a local entity or otherwise,” Tregellis says.

A regulatory regime that more or less mirrors Australia’s is not, however, Singapore’s only attraction.

PIAS chief executive Greg Whimp says PIS opened an office in Singapore not only because the group saw an opportunity to introduce financial planning to a country with an embryonic financial planning industry, but because the country itself was well aware that it needed an injection of experience.

“Singapore is predominantly a tied distribution model and independent financial advisers (IFAs) represent only approximately three per cent of the total market here in Singapore. Many of the products are sold and there has not been an overall comprehensive approach to financial advice,” he says.

“We saw an opportunity to join a market that was going through transition — having experience from Australia of such a transition — and being able to take advantages of changes as they presented themselves,” Tregellis says.

As for Norwich Union, the move into Asia took a different direction. Instead of having a financial planning tie with Singapore, the Singapore arm of Norwich Union’s Navigator master trust platform last year signed a deal with the $61 billion CPFIS.

Under the terms of the deal, the Singaporean social security savings scheme will offer Navigator as an investment administrator to its three million members.

Norwich Union Australia’s chief executive Rob Garnsworthy says the group’s move into Asia was simply the “next step” in the development of Norwich’s Navigator platform.

He says in the Asia region there are only a few countries that hold a similar level of sophistication that would enable the platform to succeed. According to Garnsworthy, Singapore is one of those countries and Hong Kong is another.

He sees Singapore as having a number of benefits. These include its relative proximity to Australia, its language of commerce being English, its move towards an IFA legislation area, and its compulsory retirement savings set-up.

And it is the perfect testing ground for future Navigator developments.

“It will take time,” says Garnswothy.

“The experience in Australia took five to six years. I think you’ve got to give it at least a year and a half. But that doesn’t mean we won’t be doing things in parallel — Hong Kong would be quite logical [to take on] in this region.”

Associated Planners is the latest Australian group to publicly state an interest in aligning itself with an Asian counterpart, with the group expecting to announce its Asian joint venture partner by March.

Associated Planners managing director Ray Miles says the unnamed Asian group approached Associated Planners, saying it liked the way Associated Planners’ systems worked and wanted to mirror them.

Although Miles had been flirting with the idea of an Asian venture for some time, the approach did come as a bit of a surprise.

“They approached us after seeing what we could provide for one of our Singaporean clients,” Miles says.

“I’ve been travelling up there for a few years and we had been looking for a while, but we didn’t think we were ready.”

Now it’s all systems go and if the venture works out well, Miles says Associated Planners, like fellow Australian companies in the region, will move further into Asia, with Hong Kong the next likely stepping stone.

Top five reasons Australian groups choose Singapore

Location- Singapore is relatively close to Australia.

Language- The language of commerce is English.

Regulation- regime is similar to Australia’s.

Retirement savings- Singapore has a compulsory retirement savings scheme.

Culture- With its combination of east and west, Singapore is the ideal entry point into Asia.

The Central Provident Fund Investment Scheme

The Central Provident Fund Investment Scheme (CPFIS) is Singapore’s government-run pension scheme. Contributions in excess of 30 per cent are compulsory and are made up of a combination of employee and employer contributions.

An individual’s account comprises three parts - the ordinary, the Medisave and the special accounts.

Individuals can access the ordinary and Medisave accounts before retirement. The ordinary account can be used to invest in the property and equity markets, while the Medisave account covers the cost of hospitalisation. The special account, like superannuation in Australia, can only be withdrawn from in certain instances.

In practice, individual balances have been insufficient to properly fund retirement - and Singapore has one of the most rapidly ageing populations in the world.

The Singapore Government called for a review last year of the CPFIS to consider measures such as restricting the use of funds for anything other than retirement. Speculation is divided as to whether this will open up the market to external providers or not.

The Financial Advisers Act 2001

• The introduction of the Financial Advisers Act 2001 (FAA) by the Monetary Authority of Singapore (MAS) (the equivalent of the Australian Securities and Investments Commission (ASIC)) means all financial advisory activities are now governed by the one regulatory regime, eliminating the prior need for multiple licences.

• Under the new Act, corporations must obtain a Financial Adviser’s Licence and their representatives must have a Representative’s Licence in order to offer financial advice on a limited (but possibly expanding) range of investment products.

• The FAA came about following recent product innovation and the opening up of distribution channels. As well as having traditional agency sales forces, life insurance companies (which now offer products similar to unit trusts) are relying on external intermediaries including brokers, banks and financial advisers.