representatives bis central bankers ’ speeches product knowledge of fa representatives we have introduced new examination modules to ensure that fa representatives have sufficient knowledge of the wide and complex range of investment and insurance products currently available in the market. most firms and fa representatives understand and support the need to raise knowledge and skill levels through a set of common examinations. some representatives have questioned why they need to pass these new exams when all they sell are simple products. mas takes the view that a good financial adviser should be able to explain the advantages and disadvantages and the risks of competing products – both simple and complex. the reality is that consumers today are faced with a wide range of choices. for example, a consumer wishing to invest and buy insurance protection has a few options. he may consider a participating policy or a regular premium investment - linked policy or simply purchase an insurance term policy and invest separately. he could build a portfolio of just plain vanilla stocks and bonds or include etfs and futures or simply buy unit trusts. each option has its own set of risk - return and cost considerations. the increasingly educated consumer will expect his representative to help him make sense of the complexity of the products and their suitability, even if he eventually settles on simple life insurance and investment products. some other fa representatives feel that their academic qualifications are sufficient and should allow them an exemption from the exams. but consumers should have some assurance that the qualifications of the fa representatives meet a common standard. the examinations are industry - certified, and set a common standard and benchmark for fa representatives. it is important that all representatives, even those who have been in the industry for many years, stay abreast of latest market developments and products. only then can they provide holistic advice and comprehensive recommendations on what to buy, and – more importantly – what not to buy. but we understand the concerns that some representatives have raised. mas is prepared to adjust its requirements subject to the companies putting in place proper controls to ensure that only simple products are sold by the selected fa representatives who do not take the new examinations. entry requirements for fa representatives next, as part of fair, mas will review the minimum level of qualifications that we expect of our fa representatives, to ensure they stay relevant to the needs and expectations of consumers. the current entry requirement for fa representatives is four gce “ o ” level passes. it is clearly not in keeping with singapore ’ s rising educational levels, the increasing complexity of products, and higher expectations from a more literate and sophisticated public.

. stage 1 is where firms reflect higher import prices in their selling prices. stage 2 is where they reflect the increase in general price levels in wages they pay. stage 3 is where they reflect higher labor costs in their selling prices. stage 4 is where firms'pricing policies become more diverse, facilitating firms'exploration of strategies of selling more attractive products and services at commensurate prices in addition to those of selling good products and services at low prices. this stage may provide firms with broader options for attaining higher productivity. some might argue that firms have always endeavored to develop products and services that are attractive to customers and to set prices at levels commensurate with the value, and that this has been the case regardless of whether firms have entered stages 1 to 3. while i believe this to be true, let me examine if there could be a development which could facilitate and encourage a broader range of firms to make further efforts. in recent months, the import price index has declined more than 10 percent compared to a year ago, and thus if the firms just stop at stage 1 - - a pass - through of higher import prices - - the japanese economy may revert to the former deflationary state. on the other hand, if a virtuous cycle begins in which both stage 2 - - wage hikes - - and stage 3 - - a pass - through of higher labor costs to selling prices - - progress, moderate inflation may be sustainable. however, if wages increase just as much as prices rise, this will not make people better off in real terms. living standards would rise if the wage - price cycle ushers in stage 4 - - firms diversifying pricing strategies and pursuing broader options in adding higher value to their products and services as well as in enhancing productivity - - and if the gains from the enhanced productivity are shared with stakeholders. stage 1 corresponds to imported inflation, or what we call " the first force, " and stages 2 and 3 correspond to homemade inflation, or what we call " the second force. " 1 stage 4 does not necessarily correspond to inflation if firms'pricing is commensurate with the increased value added to their products. judging from what we have heard from firms, progress seems to be mixed in each of the four stages at present. regarding stage 1, a survey of small and medium - sized firms showed that many firms could pass on only a portion of higher import prices. there was similar feedback from a large japanese firm in the basic materials