Changes a taste of the future for Hong Kong
A QUIET revolution began in Britain's financial services industry on January 1 - and it is likely to have long-term implications for Hong Kong.
Britain's tighter regulations and new competitive arena are in line with the changes being urged by many of Hong Kong's more established personal finance advisers.
And Richard Branson's marketing onslaught is the latest step, after the introduction of new rules on the sale of personal finance products.
Particularly affected are so-called 'Peps', an acronym for personal equity plans, which cover a broad range of life assurance and pension and savings schemes.
'Clearly, if intermediaries are going to stay in this industry they have got to add value, by which I mean a service which cannot be found elsewhere,' said David Thomas, deputy chairman of independent financial advisers Bentley Reid & Thomas.
Carl Huckstep, manager of financial services at Hill Samuel Pacific, added: 'The problem in Hong Kong at the moment is that everyone can call themselves financial advisers and many of the products here are sold solely on the basis of the commission they earn for the intermediary.' Therefore, the risk of dealing in Hong Kong with someone who knew nothing about the business was high, he explained.
Patrick Tuohy, partner at Tressider Tuohy and Partners, said: 'Most clients are not aware how much money their advisers are making and they do not know how quickly that money is made [in one lump-sum or spread over the investment period].' He said no-load funds, which have no front-end commission, were already proving popular in the United States. 'Hong Kong is pretty unregulated and things are moving pretty slowly, so we are not going to see a similar situation [to the one in Britain] overnight,' added Mr Huckstep, although he said the new developments were obviously of immediate interest to anyone planning to live in Britain.
They were also part of a worldwide trend in mature marketplaces to reduce abuses of the system and remove the monopoly 'so-called' financial advisers had on the sale of Peps.
Since January 1, vendors of personal finance products in Britain have been required by law to disclose the amount of money they make in commission on each product.
They must also hold a financial-planning certificate or diploma, regardless of how long they have been in the business.
Clients in Britain also have a 'cooling-off period' of 14 days after receipt of a letter confirming the terms and conditions of the product. During this time they are allowed to cancel the deal without loss.
Richard Branson is therefore planning to launch in a market which is already beginning to put the consumer in a more powerful position - something many Hong Kong-based financial advisers have been recommending for years.