Convoy’s ILAS Revenue for the Past Six Years
“For each of the three years ended December 2007, 2008 and 2009, the revenue of our Group attributable to the one-off brokerage commission income and recurring fee income derived from the sale of ILAS amounted to approximately HK$633.9 million, HK$552.9 million and HK$451.6 million, representing approximately 99.7%, 99.8% and 99.1% of our Group’s total revenue respectively.” (Source)
“The proportion of the revenue derived from ILAS remained stable and accounted for approximately 97.0% and 97.9% of our revenue for the years ended 31 December 2011 and 2010, respectively” (Source)
“The overall sales of ILAS [in 2012] remained stable as compared with last year, while the proportion of total revenue derived from it declined to 89.9%.” (Source)
“The top five ILAS Issuers of our Group in terms of commission income, together accounted for approximately 98.5%, 96.9% and 97.1% respectively of our Group’s revenue for the three years ended 31 December 2007, 2008 and 2009. Each of our top five Product Issuers issues ILAS themselves. Four of the top five ILAS Issuers of our Group are Zurich International Life Limited, Friends Provident International Limited, Standard Life (Asia) Limited and Generali International Limited. The largest ILAS Issuer of our Group, in terms of commission income, accounted for approximately 50.9%, 48.2% and 43.7% respectively of our Group’s revenue for the three years ended 31 December 2007, 2008 and 2009.” (Source)
“To the best knowledge of our Directors, it is estimated that the new ILAS business arranged by our Group on behalf of the Product Issuers accounted for approximately 7% of total new ILAS business in Hong Kong market in 2009 in terms of office premiums calculated from statistics published by OCI.” (Source)
“On the other hand, the SFC has clarified in the SFC Circular that, among others, as a general rule, the SFC considers that insurance intermediaries who are promoting, offering or selling ILAS to the public are neither obliged nor permitted to be licensed under the SFO. As a result, an insurance broker may arrange with his/her customers to purchase authorised ILAS without the need for registration as an investment adviser or an investment representative under the SFO. Therefore, CFS is not required and in fact is not licensed by the SFC. Our Company is advised by its legal advisers as to Hong Kong law that their view are in line with the view of the SFC under the SFC Circular that, as a general rule, insurance intermediaries who are dealing solely in ILAS and other insurance products are neither obliged nor permitted to be licensed under the SFO.” (Source)
“Pursuant to the SFC Circular, units in ILAS are not securities; any advice that might be given to a policyholder concerning the selection of underlying funds of ILAS is not advice on securities; and promoting, offering or selling ILAS does not constitute dealing in securities. Therefore, our Directors consider that our Group does not market any securities to our customers.” (Source)
“Moreover, pursuant to the SFC Circular, as a general rule, the SFC considers that insurance intermediaries who are promoting, offering or selling ILAS to the public (including giving advice to policyholders concerning their selection of the underlying funds) are neither obliged nor permitted to be licensed under the SFO. As a result, an insurance broker may arrange with his/her customers to purchase authorised ILAS without the need for registration as an investment adviser or an investment representative under the SFO. However, the advertisements, invitations or other documents which contain an invitation to the public to acquire an interest in or participate in, or offer to acquire an interest in or participate in ILAS require SFC’s approval.” (Source)
On Conflicts of Interest
“As such, there may be inherent conflict of interests as the Consultants may be tempted to sell products with higher commission rather than those actually required by or suitable to the policyholders and/or potential policyholders in the event those products required by the policyholders are of lower commission rate. We cannot assure you that, under our current business model, the Consultants will always promote those products that are actually required by or suitable to the policyholders and/or potential policyholders, or at all.” (Source)
“As an insurance broker, our Group is required under the ICO to act for the interest of policyholders and potential policyholders. Through provision of relevant advices, our Group is entitled to receive brokerage commission income from the Product Issuers for business referrals and introductions as a result of arrangement of insurance products and/or MPF schemes to customers. From another point of view, the customers pay such commission to our Group indirectly as all such costs would be eventually deducted from the customers’ contribution.” (Source)
“Although brokerage commission income and recurring fees are paid to us by the Product Issuers, our Directors consider that such arrangement…will not lead to conflicts despite commission income is paid by the Product Issuers because (i) our focus is to provide advices and information to our customers according to their objectives, needs and concerns; and (ii) our Group is dedicated to provide a comprehensive and quality choice of various products to the customers through maintaining business relationships with various Product Issuers and performing due diligence on their products, to enable the customers to make informed decision as to their choice of product(s). Our Directors believe that the aforementioned relationships among customers, authorised insurers, insurance brokers and consultants are common across the insurance brokerage industry in Hong Kong.” (Source)
On the Fee-Based Model
“The form of remuneration is commission, though Fong is open to considering a fee basis in the future, having conducted a study and found that “the Hong Kong people are not ready for it yet.”” (Source)
On Convoy’s Multi-Level Marketing (MLM) Business Model
“The majority of our business is being generated from referrals, recurring business from existing customers and the remaining is from direct marketing. Referrals, recurring business from existing customers and direct marketing accounted for approximately 47.4%, 34.3% and 18.3% of the business of our Group for the year ended 31 December 2009 respectively.” (Source)
“some Consultants decide to pursue their career path to build their own teams of Consultants and recruit new trainees or new Consultants. These supervisory Consultants will firstly recommend candidates and will then recommend whom they consider suitable to CFS. Interview records will then be reviewed by independent staff of CFS. If CFS is satisfied with these candidates, CFS will engage them as new trainees or new Consultants…At the expiration of the training period, CFS will only enter into the contracts for services with those who have performed to the satisfaction of CFS and who will be generally remunerated on a commission basis as contractors to CFS and subject to terms and conditions under the contract for services…Our Directors believe, to the best of their knowledge, that the majority of new Consultants and new trainees are introduced by the Consultants.” (Source)
“The supervisory Consultants are entitled to share overriding commission (being the difference between the higher commission rate of a supervisory Consultant for transactions and lower commission rate of a new Consultant for the same transactions) for transactions successfully arranged by the new Consultants. Our Directors believe that this practice is a norm across the insurance and MPF intermediary industry.” (Source)
“The turnover rate of junior members is relatively high. Our Directors consider that it is reasonable and normal due to the fact that our Group provided a series of training to the junior members and required them to satisfy various targets as a way of screening capable and stable Consultants.” (Source)
“Once they complete the training programme and achieve initial sales targets, recruits can look forward to a fast-moving career.
The usual path will take them from senior consultant to management grade, where they recruit and run a sales team, to associate director within three to four years, depending on performance, of course.
Individual income potential increases commensurately, with seniority bringing the chance for commission, recurrent earnings and “overrides” based on team achievements.” (Source)
“We offer an attractive commission scheme for staff who are great at making sales. Financial planners who are good at making sales on their own can earn handsome rewards,” he adds.
Shin says Convoy supports high-performing sales staff by helping them build their own teams and train newcomers. “We develop staff according to their talents,” he says. (Source)
Ng says she worked as a management trainee with a bank before joining Convoy in 2007. She started as a financial planner, before building her own team. “The training at Convoy is great. It is very practical. They provided huge support as I prepared to move up from consultant to team leader,” she says.
Ng also likes Convoy’s open culture. “Unlike banks where the system is rigid and experience rules over everything else, Convoy promotes strong performers. You can see many young people moving up to management level due to their outstanding performance. In banking, most management people are 40 years or older,” she says. (Source)
The Ideal Qualities and Credentials of a Convoy Employee
“Noting that candidates with finance industry experience are always welcome to apply, Shin stresses that personal qualities, rather than degree subject or prior qualifications are the main determining factor.
The company looks for applicants who are self-confident and outgoing with good communication skills. Ideally, they should also have an analytical mind, a high level of integrity, and be good team players.” (Source)
On Convoy’s Inexperienced Employees
Clients at Convoy are relatively young, with 71% of them aged between 25 and 44.
“Do you know why?” she asks rhetorically. “Because our consultants are relatively young and we even take fresh graduates as well. The average age of the consultants is 29, and that means it is not easy for them to meet older clients.”
It is seldom that very experienced individual advisers join. The structure involves a team leader who ensures the team members look after the clients, but also has other responsibilities including recruitment of new staff. (Source)
The Ambitions of a New Convoy Employee
What have you learned about your chosen career and what are your plans?
My immediate plan is to train up more of my teammates to management level, to build a team of more than 1,000 people, and to develop the business and expand the team into the mainland. I also hope to obtain a CFP [Certified Financial Planner] qualification, and to get an MBA. I also aim to be promoted to deputy director. (Source)
The Frustrations of a New Convoy Employee
What challenges have you encountered?
Sometimes I am hesitant to call my friends to ask them if they want my services because they may have misunderstandings about the job.
What have you learned about your chosen career and what are your plans?
This career has inspired me to keep trying. I will not hesitate to call anyone who may need my services. I plan to approach more people to offer them my knowledge in financial planning. I don’t really like setting a target number to declare myself successful or having reached a breakthrough. (Source)
Employees Explain the Cons of Working at Convoy
Cons – Pay is completely commission based. You get docked pay/asked to pay money if you’re late to work/other work related events…but you don’t get paid a basic salary so this was unfair in my opinion (Source)
Cons – Sometimes it shows low efficiency. You may feel very stressful and highly competitive, and are been ignored by the team (Source)
Cons – nothing, just too much people there (Source)
Rosetta Fong’s Advising Credentials
How did you originally get into financial planning?
It was quite straightforward and didn’t take long. In 1996, I met a financial planner, became a client myself and got a retirement plan. Discussing the options, I became more interested in the field and asked about the chances of joining the firm. Back then, there wasn’t much focus on financial planning in Hong Kong, but I felt quite confident about the prospects for the sector and thought there was nothing to lose. I understood the basic concepts and products, could explain them to clients, and knew that if things didn’t work out, it wasn’t such a risk because I could always go back to the building industry.
What kind of training was available?
It was nothing like now where new recruits have induction programmes, licences and exams. When I started, the only training was to sit down and make cold calls to get appointments. Once I had done that, a senior manager or supervisor would join me to see the potential client. As we were basically focusing on simple retirement planning products, there was not too much information to learn and it was quite easy to get started.
What led you to Convoy?
In 1997, I formed a company with three partners – former classmates – to do financial planning. My role was to head up the back-office operations department and we soon took on a few salespeople and began to find clients. One of us knew the owner of Convoy, which at the time was only doing general insurance, and we agreed to team up and found a financial planning division for them. We now have more than 1,200 frontline consultants and keep expanding through organic growth. (Source)
Convoy’s Twisted and Deceptive Sales Pitch
“Investment funds are fundamentally different from ILAS with the result that it is the needs of customers instead of difference in commission arrangement that will be the most relevant driving force for customers to choose investment funds or ILAS. By way of examples, investment funds with the features of exit mechanism are suitable for customers who need to have higher liquidity, whilst ILAS products are more suitable for customers who have medium to long term investment horizon given ILAS’s much longer maturity. Likewise, ILAS offers an opportunity for customers to gain exposure to a basket of funds through contributions made for a single policy, where such feature is not available for investment funds offered by [Convoy Asset Management] and therefore investment funds are not suitable for customers who look for such an opportunity.” (Source)
Convoy Exploits Uninformed Clients by Framing ILAS as a Rational Supplement to MPF
“MPF is a great ‘door opener’. It concerns everyone and as such it creates direct and indirect business opportunities for industry professionals. Every working person in Hong Kong has an MPF account so the product effectively gives agents and fund providers an excuse to approach potential clients. And whenever the government proposes changes to the scheme, they will always create a huge response from the community, which is great because more public interest creates business,” Chung explains. (Source)
Convoy’s Power of Precognition
“According to Fong, the negative publicity arising from regulatory action, reprimands, fines and other public sanctions inevitably damages a firm’s reputation, which leads to loss of investor confidence and clients.” (Source)
“there is no assurance that ILAS will be continuously accepted in the Hong Kong market and we will be able to maintain our revenue through arranging ILAS. Any significant deterioration in our Group’s ability to generate sufficient sustainable revenue from the sale of ILAS and any significant fluctuation in the market demand for ILAS may adversely affect the sale of such products and hence our Group’s profitability.” (Source)
On Lack of Executive Accountability
“In addition, although our Group may be subject to civil liabilities and/or disciplinary actions of regulatory authorities (such as PIBA) if there is any misconduct by the Consultants in selling ILAS, the Consultants will indemnify our Group from and against all actions, claims, proceedings, costs, damages and expenses which may be levied, brought, incurred or made against our Group by any customer and potential customer in respect of or arising out of the provision of the services by the Consultants pursuant to contracts for services between the Consultants and CFS.” (Source)
Convoy’s Non-Listed Businesses
“The listed company has the licence for the insurance and the MPF only, but a private company called Convoy Asset Management deals with investment in mutual funds and another, a securities broker, facilitates a platform for Hong Kong stocks and futures.” (Source)
“on 19 July 2013 (after trading hours), [Convoy Financial Group (CFG)] (as vendor) and Favour Sino (as purchaser) entered into the CAM Memorandum in relation to the possible sale and purchase of the entire issued share capital of [Convoy Asset Management (CAM)]…CFG and Convoy Inc. are substantial shareholders of the Company [Convoy Financial Services Holdings] and Favour Sino is an indirect wholly-owned subsidiary of the Company.
It is expected that the Proposed Acquisitions, if materialised, will enable the Group to expand its scope of business to the asset management business which is essential for building an all-rounded financial services platform.” (Source)
The Nationality of Convoy’s Customers
“The majority of the locations of the customers of our Group are in Hong Kong, which accounted for approximately 98.2% of total number of customers as at 31 December 2009, while the remaining insignificant portions come from all over the world including, but not limited to, expatriates working in Hong Kong and customers travelling to Hong Kong. All contracts with our customers were executed in Hong Kong.” (Source)
The Age and Sex of Convoy’s Customers