jessica chew cheng lian : financial advisers the future – right here, right now keynote address by ms jessica chew cheng lian, assistant governor of the central bank of malaysia, at the 3rd annual conference of the association of financial advisers “ financial advisers the future – right here, right now ”, kuala lumpur, 31 october 2014. * * * at this conference last year, i spoke on four key priorities identified by bank negara malaysia ( the bank ) to further develop the financial advisory industry and to enable the financial advisers to effectively perform their role. let me first say that these priorities remain relevant today and our focus has not changed. this morning i would like to share with you how we have moved some of these priorities forward, and the steps that remain in order to further strengthen the financial advisory channel. to recap, the key priorities of the bank are : • first, to ensure that financial advisers are highly competent and professional when they provide advice ; • second, to identify and address the barriers that are preventing qualified parties from entering the industry, and the constraints that are limiting the ability of financial advisers to recommend the best solutions to their clients ; • third, to improve the alignment between the interests of consumers and financial advisers ; and • fourth, to intensify our review of the quality of advice provided by financial advisers to consumers through our supervisory work programme. in november of 2013, the bank outlined proposed regulatory reforms for the financial advisory industry which formed part of the “ life insurance and family takaful framework ” or in short the life framework, which we published for consultation. an important aim of the reforms is to support the bank ’ s desire to further diversify insurance delivery channels as one – although not the only – way to improve the quality of advice, and enhance choice and value for consumers based on their specific needs and circumstances. this in turn would contribute towards increasing the insurance and takaful penetration rate to 75 percent by 2020 as targeted under the government ’ s economic transformation programme ( etp ). we received positive feedback from the financial advisory industry on the proposed reforms and while specific elements of the life framework remain under review to take into account the comments that were received, we have moved ahead to implement several changes proposed which concern the financial advisory industry. the bank has lowered the minimum capital requirement for financial advisers to rm50, 000 which will take effect from 1 january 2015 to encourage more advisers to enter the industry. this follows an increased focus on professionalism, innovation and quality of

conduct. this is the focus of the financial services professional board ( fspb ) which was established recently with the support of the bank and the securities commission. the fspb ’ s objective is to drive the development as well as the advocacy of professional standards, ethics and continuous professional development across the financial services industry. i would strongly urge the afa to work together with the fspb to develop and implement industry codes of conduct and ethics for its member firms and representatives which should express in very clear terms the professional responsibilities that a financial adviser must demonstrate towards its clients. this should be accompanied by an effective mechanism for investigating and addressing complaints on a breach of these responsibilities, and the ability to act against errant members in order to preserve the integrity of the profession. in line with efforts to ensure a high level of professional competence among financial advisers, the bank also intends to require qualifying and continuing professional development programs for financial advisers to be formally accredited by the finance accreditation agency ( faa ). as you may already know, the faa is an independent quality assurance and accreditation body for the financial services industry that was established by the bank and the securities commission in 2012. it provides programme accreditation, individual accreditation and institutional accreditation services for learning initiatives within the financial services industry locally and internationally. since its inception, faa has registered 28 training providers and accredited 18 professional and academic learning programmes offered in malaysia, the middle east, asia, and the united kingdom, including those offered and recognised by highly reputable and established international professional bodies. faa has also developed continuous professional development guidelines for the financial services industry. the recent launch of the faa learning standards and the finance qualification structure will facilitate the harmonisation and wider recognition of accredited professional learning programmes which will also be important for this industry to promote consistent standards in the professional development and mobility of its workforce. we have started to engage faa, the industry and education providers on this initiative and are working towards the accreditation of mandatory core financial advisory training and examination modules in 2015, and continuing professional development programs progressively thereafter. to improve the alignment between the interests of consumers and financial advisers, we will be requiring all life insurers and family takaful operators to implement a balanced scorecard bis central bankers ’ speeches framework for the remuneration of agents and advisers, beginning with investment - linked products in the initial phase. we believe it is also important that such a framework is cascaded through to how financial advisory firms are rewarding their representatives. incentives for individual representatives should be structured to