Monthly Archives: June 2014

Former Singaporean Presidential Candidate Blasts ILAS, Whole Life, and Other Ripoff Insurance Products

A Profile of Tan Kin Lian

Tan Kin Lian

Before running for President in 2011, Tan Kin Lian spent 30 years as the CEO of NTUC Income, which he helped transform into one of the largest insurance companies in Singapore. The success of the company was driven in part by TKL’s determination to give consumers fair prices, which was accomplished by keeping operating expenses low.

In an interview with Yahoo News, he explained that “NTUC Income paid insurance agents lower commission rates than the market industry and that his own salary was half that of his counterparts”.

TKL left NTUC Income in 2007. Shortly afterwards, the Lehman Minibond scandal struck Singapore. Approximately 10,000 exploited investors lost most, if not all, of their savings. Utilizing his experience and influence in the financial community, TKL helped victims fight for justice by organizing public rallies and petitions.

TKL Rally

TKL later set up FiSCA (the Financial Service Consumer Association), a non-profit organization whose mission is to “promote financial education and protect consumers from unscrupulous practices in the financial services industry.”

TKL is an active blogger who writes on a wide range of topics, but he gives special attention to problems in the insurance industry. His insights and opinions are backed up by his 30 years of experience as an insurance CEO.

Powerful Statements by Tan Kin Lian

TKL knows exactly what he is talking about when he states unequivocally and repeatedly that all, I repeat, all ILAS products are bad. Below is a screenshot from his Facebook page(Note that, in Singapore, ILAS is usually called ILP, which stands for Investment Linked Policy.)

the flow and name of the game

TKL’s comments upset a lot of insurance agents, but he does not back down when they come onto his page and accuse him of being wrong.

All ILPs look bad

If you wish to rip off your client, to earn a high commission, you can do it your way

ripped off and conned by insurance agents who masquerade as financial advisers

Below, TKL explains how unethical agents deceive consumers, and then he calls out regulators for failing to understand and effectively address this problem.

selective disclosure and telling half truths

He exposes insurance companies for deliberately complexifying products to confuse and mislead consumers—and even agents.

consumer will be taken to the cleaners

When people ask for TKL’s help, he gives clear and easy-to-understand advice.

takes away two years of your hard-earned savings

In a blog post, TKL talks about the story of Ms. Koh, whose “shocking experience reflects what has been happening to tens of thousands of unsuspecting [Singaporean] purchasers of many ILP policies.”

His comment suggests that Singapore has been suffering from the same plague as Hong Kong, on a perhaps equally large scale.

In a Facebook post, TKL asks, “I do not know why the financial adviser, who was supposed to look after the interest of the client, can advise the client to invest in such a bad financial product, i.e. ILP?”

Of course TKL knows the answer, but mind-bogglingly, regulators don’t seem to get it.

In an excellent article written for The Online Citizen, TKL explains that:

“Many families are being grossly overcharged for the modest financial protection offered by the life insurance policy. After deducting the high expenses, their net savings do not earn a sufficient yield for them to live on during their retirement.”

He goes on to criticize several different insurance products, saving the worst for last:

“The investment-linked policy is equally bad for the policyholder. I have seen benefit illustrations for these policies where the reduction in yield is 4% or more…This is taking too much from the unsuspecting consumer. It amounts to daylight robbery.”

He then offers several points of advice, the first one being this:

“Do not buy any high-cost life insurance policy. High-cost life insurance plans are those where the policy combines life insurance protection with savings. Low-cost life insurance policies – term insurance policies – cover protection only.

Examples of high-cost life insurance policies include whole life, endowment, critical illness, education and investment-linked policies, where many months of your premium are used to pay the insurance agent’s commission.”

In a piece for the Straits Times, TKL rhetorically asks:

“If an insurer or its agent can earn so much by selling a whole-life or investment-linked policy, why should they want to sell term insurance?”

Obviously, an agent won’t want to, unless commissions are equal or else banned altogether.

Further Reading

For those who wish to learn more about TKL, here are links to different pieces he has written:

Life Insurance before and Now (Blog Post – June 12, 2014)

How to stop mis-selling of life insurance policies (Blog Post – June 4, 2014)

Consult a Fee-Based Financial Adviser (Blog Post – May 2, 2014)

Shocking experience with Investment Linked Policy (Blog Post- Dec. 28, 2012)

Ms Koh’s Story (Facebook Post – Dec. 28, 2012)

Rebuttal to Adviser (Facebook Post – Nov. 17, 2012)

Zurich Vista Plan (Blog Post – July 14, 2012)

Buying the right life insurance policy (Blog Post – Sept. 15, 2011)

Avoid financial advisers (Blog Post – Jan. 31, 2011)

Comparing whole life and term insurance (Blog Post – Dec. 7, 2010)

Why insurers, agents may turn a deaf ear to SM Goh’s appeal (Blog Post – Oct 27, 2010)

The Truth about Life Insurance (The Online Citizen – May 7, 2008)

Interviews

Financial Planning for Singaporeans – Interview with Mr Tan Kin Lian, President of FISCA (Big Fat Purse – May 14, 2013)

I was unfairly criticized: Tan Kin Lian (Yahoo News – Aug. 10, 2011)

In Conversation with Mr Tan Kin Lian, CEO of NTUC Income (Tech in Asia – Oct. 25, 2006)

Group of Young Singaporeans Slam Insurance Industry for ‘Unethical Profiteering’

Dollars and Sense

Concerned about widespread financial illiteracy in Singapore and a rapacious financial industry dead set on ripping off everyone it comes across, a group of young Singaporean social entrepreneurs created a website devoted to addressing this problem: Dollars and Sense (D&S).

They write on a wide range of topics, but their articles on insurance are particularly interesting, as the subject matter is just as relevant to Hong Kong as it is to Singapore.

The most pertinent article at the moment is one called “The Insurance Industry – A business of unethical profiteering?

It was written in response to a Straits Time (ST) article entitled “Reigning in Unethical Insurance Practices“, which described how players in Singapore’s insurance industry completely undermined the push for reform, a phenomenon that seems to be happening in Hong Kong right now, as the Legislative Council finalizes a bill which will establish an allegedly “Independent” Insurance Authority.

According to the ST article:

“SINGAPORE’S commission-based system for insurance agents has often been cited as the main cause of unethical selling of insurance products.

The criticism goes that agents push particular products to land higher commissions for themselves, rather than recommend those suitable for the consumer.

This longstanding problem was one reason behind the Monetary Authority of Singapore’s (MAS) launch of a comprehensive review of the industry last year [FAIR].”

However:

“The panel concluded that Singapore is not ready for a fee-based advisory now.”

As one D&S writer pointed out, the conclusion was a total fabrication, pulled straight out of the industry’s ass. There was no evidence suggesting that “Singapore” wasn’t ready. Only pushers of ripoff products weren’t ready.

“Those who support the move towards a fee-based scheme for the agents attribute the backtracking on this issue to the huge resistance put up by the big boys in the industry.

Almost every major insurer – Great Eastern, Manulife, Prudential and AIA – stated their views opposing the fee-based structure.

Financial advisers were also up in arms, meeting regulators behind closed doors to state their cases, and even holding a media event to get their point across.”

D&S responded to the article thus:

“Have you ever wondered why insurance agents and companies are always in the news for misselling and hard selling their products? Its easy enough to understand that they receive different amounts of commission for each product and are naturally going to sell the products which give them the highest paycheck at the end of the month. We are not going to argue on the moral hazard of that system, we think more than enough people have given it enough publicity.

But have you ever wondered why the government doesn’t do anything about it? This is where [the ST article] comes into play. A review panel was set up, but they concluded that Singaporeans were not ready for a change, and that hard selling is fine – essentially. It wasn’t surprising that experts in the field vehemently lobbied that we maintain our status quo instead of changing to a fee-based system, where insurance agents become the professionals selling us the advice that they are able to offer, rather than the products that they have.”

“We at DollarsAndSense.sg fail to see how the fee-based system wouldn’t work in favour of consumers, other than there might not be as many insurance agents and the “reach” of the institutions diminishes. And when we say “reach”, we actually mean cold calling, hard selling and heckling on the streets and over the phone.”

In a more recent article entitled “5 Myths Financial Advisers Would Like You to Believe“, D&S reiterated its support for replacing a commission-based system with a fee-based one:

“Not all financial advisors are cheats or liars. But we will sign the contract if you throw in free luggage bags and PCs.

Financial Advisors. Even the job title is misleading. Let’s face it, these “advisors” are more in the business of being a “salesperson”.

The insurance companies consider the “advisors” as part of their sales team. Moreover, the advisors are paid on their sales performance, and not the quality of their advice.”

“…This is the reason why we propose for a fee-based system rather than one that is sales-based.”

D&S has written nearly a dozen different articles on problems in the insurance industry. Below are a few provocative excerpts.

Insurance Industry Review By MAS: Is It Enough?

“For years, many young Singaporeans have been plagued by the dreaded reality of having a close friend become an insurance agent. No one likes losing a friend.”

Case Study: Mis-selling

“In this article, we want to bring to your attention that there is a certain amount of mis-selling going on the insurance industry. And the easy prey are most likely your parents and grandparents.”

A Must-Read Article Before Buying Any Insurance in Singapore

“Insurance is good, yet somehow it sounds like a negative word in our society. Unwanted soliciting, misrepresentation of products and plain horror stories such as insurance agents going to old folks HDB estates to sell insurance plans to the elderly only serve to portray the negative image of the industry.”

The writer offers several warnings, among them:

DO NOT let your potential agent buy you a drink, or a fancy dinner for that matter. You do not want to feel obligated to buy something that will cost you $2k a year, for the next 30 years, just because you drank the coffee at Starbucks.”

Further Reading

For those who want to read more, below is a complete list of Dollars and Sense articles on insurance:

Case Study: Mis-selling (June 2, 2014)

The ABCs of Buying Insurances in Singapore (March 29, 2014)

A Must-Read Article Before Buying Any Insurance in Singapore (March 17, 2014)

The Myths and Realities of Insurance (Dec. 30, 2013)

Avoiding sticky insurance situations in Singapore (Oct. 26, 2013)

5 Myths Financial Advisors Would Like You to Believe (Oct. 15, 2013)

Insurance Industry Review By MAS: Is It Enough? (Oct. 4, 2013)

The fine prints of health insurance (Sept. 12, 2013)

The Insurance Industry – A business of unethical profiteering? (Feb. 2, 2013)

Straits Times Article

Reigning in Unethical Insurance Practices (Straits Times – Jan. 29, 2013)

Insiders Are Attempting to Subvert ‘Independent’ Insurance Authority

Yesterday, SCMP published this:

Forced disclosure clause in draft insurance bill could kill industry, insiders complain

Of course transparency would kill an industry whose existence depends upon fraud, bribery, and collusion.

However, the bill does not mandate commission disclosure.

“A spokesman for the Financial Services and Treasury Bureau, which drafted the bill, said the bureau will not require the IIA to use the rule. They are just codifying their power to force disclosure on ILAS should they wish to.”

Adrian King, former chairman of the Confederation of Insurance Brokers (CIB), one of the industry’s self-regulatory bodies, says that, “There is a lot in the bill that is questionable and controversial. This is one of many items.”

The only thing controversial and questionable about the new insurance bill is that it doesn’t mandate 100% full disclosure for all commissions—a type of corruptive transaction which has now been outlawed in more civilized countries, most notably the UK, the home country to a large number of CIB members.

If people like Mr. Adrian King have their way, then the Independent Insurance Authority is going to have zero independence and zero authority, and the industry will continue ripping off consumers with total impunity. 

The current draft of the bill is already disgracefully weak. Concerned citizens need to raise their voices.

Information about the IIA bill can be found here. The bills committee can be contacted at: bc_06_13@legco.gov.hk

If the LegCo wants to prove that it prioritizes the public interest ahead of the interests of a criminal industry, then it needs to set out a timeline for a complete ban on commissions, with a ban on indemnity commissions becoming effective immediately.

Morever, regulation of ILAS needs to be delegated to the SFC, since ILAS is in fact an investment product—not genuine insurance. Those who sell ILAS must be held to the same standards as those who sell other investment products.

‘A Worldwide Scam of Breathtaking Proportions’: Anonymous Financial Adviser Devotes Entire Book to Exposing ILAS Savings Plans

Nearly 10 years ago, ILAS savings scams had already caused so much devastation that one conscientious financial adviser decided to take the time to write an entire book on the subject. The book is titled “The Great Expat Financial Planning Rip-Off“. The adviser’s true identity is a mystery, but he calls himself “Hugh Stevenson”.

In the preface of his book, Mr. Stevenson calls ILAS savings plan “a worldwide scam of breathtaking proportions”, so large that it would make the “infamous Nigerian scammers green with jealousy.”

On his website, he says that one aim of his book is to establish “an information base that could be used in future by expatriates and their legal representatives in seeking compensation for bad advice and/or unsuitable product sales.”

Lack of Regulation

In a chapter on regulation, Mr. Stevenson claims, “experience in countries such as U.K., U.S.A., Australia, Hong Kong, has shown that this is an industry incapable of self-regulation and governmental authority in some form or other is needed.”

He suggests that the root of evil is “indemnity commissions”, i.e., “the system by which the insurance company calculates the total commission that will become due over the life of the policy whether that be 5 years, 10 years, 25 years or any other number of years…then pays that full amount to the salesperson at the outset of the policy.”

Mr. Stevenson believes that if indemnity commissions were banned, “the offshore financial services industry would change overnight.”

“It is the lure of these quick, big payments that brings the ‘cowboy’ salespeople into the industry. They would not hang around long if indemnity disappeared and they had to settle down to create a practice based on the principals of providing good service and efficient administration in return for a reasonable reward.”

“Such a measure would effectively do away with Contractual Savings Plans. Good riddance to them but no doubt the Offshore Insurance Companies would disagree with that.”

Shark in a Suit

Image from Mr. Stevenson’s website.

Contractual vs. Non-Contractual Plans

Mr. Stevenson divides ILAS savings plan into two categories: “contractual” and “non-contractual”. The contractual ones pay indemnity commissions and slam investors with extortionate penalties for terminating the policy early. Non-contractual plans pay commissions to advisers on a month-by-month basis and have no exit penalty. The two products are essentially the same, except in the way they remunerate advisers and penalize investors.

Mr. Stevenson says, “it is difficult to see how any expatriate saver, having heard the enormous differences explained, would opt for a contractual plan.”

They almost always end in disaster.

“Reliable sources within several [offshore insurance] companies say that the average time for which contributions are maintained is 7.2 years. That means that every time a client is persuaded to sign up for 10, 15, 20, 25 years or whatever, the strong probability is that the payments will be maintained for little longer than 7 years. They, the companies, know it and your financial advisor knows it but both go to great lengths to persuade you to take the long-term route.”

When Mr. Stevenson first wrote his book, most insurance companies offered both contractual and non-contractual savings plans. By the time he updated his book in 2011, every insurance company had eliminated its non-contractual plans, except for Royal Skandia.

“Why have the Non-contractual Plans been removed? It’s a pretty safe bet that is because advisors seldom or never advised clients to take advantage of them.”

“The only remaining offshore insurance company plan that should be considered for either retirement planning or medium/long term savings is; ROYAL SKANDIA MANAGED CAPITAL ACCOUNT via monthly or quarterly contributions. All other Contractual Savings Plans are not simply ‘worst buys’ they are disastrous.”

“To their everlasting credit there are large and influential insurance companies who refuse to be tempted into the ‘offshore savings/ retirement plan’ scam despite the fact that it could be very profitable for them…One such British insurance company, on being asked by its salespeople why they did not have a contractual savings plan to offer overseas clients, gave a reply that sums up this book in a nutshell. The reply was simply ‘because we do not believe in swindling people’.”

The Great Expat Ripoff Is Now the Great Chinese Rip-Off

Mr. Stevenson titled his book The Great Expat Financial Planning Rip-Off because 10 years ago, ILAS was primarily an expat problem. No more. In Hong Kong, because regulators and legislators have persistently ignored the exhortations of people such as Mr. Stevenson, ILAS has now become a Chinese problem. Consider the following:

Decades of data shows that more than 2 million ILAS saving plans have been sold in Hong Kong over the past 14 years.

According to SCMP, in 2012 an industry insider estimated that 75% of investment products sold to Hong Kong retail investors were ILAS products.

The largest so-called IFA company in Hong Kong—Convoy Financial Services—is a Chinese company. It’s so big it is listed on the Hong Kong stock exchange.

Nearly 80,000 people (about 1% of Hong Kong’s population) are currently licensed to sell insurance. A very large portion of them presumably sell ILAS.

ILAS Savings Plans Should Have Been Pulled Off the Market in 1984 — Three Decades Ago!!!

Mr. Stevenson devotes a chapter to explaining why the ILAS industry has historically been so British based:

“The primary reason is quite interesting. Until 1984 the British government, sensibly, encouraged people to insure their lives by giving tax relief (15%) on their life insurance premiums. Smart life insurance companies exploited this by cobbling together savings plans that only just managed to meet the criteria for classification as life policies.

Investing through such plans was a good deal for the investor. Where else could he get a 15% discount on investments into Unit Trusts, Savings Plans, Property Funds and the like? Even the extortionate charges built into these savings plans were masked and often outweighed by the 15% discount.

At midnight on 13 March 1984 all that ended. The privilege of tax relief on life insurance premiums was withdrawn. From that moment ‘Insurance Linked Savings Plans’ became a poor investment medium because of the huge built-in, largely hidden, charges. Probably these products should have disappeared from the scene.”

However, they did not disappear. Instead, they flourished. There was too much money to be made at the expense of uninformed, gullible investors.

“Eventually the abuses became so great that the [British] government stepped in; the Financial Services Authority was established, given teeth to catch the onshore ‘cowboys’ and has largely done so via effective legislation. That legislation does not apply to offshore activities.”

Thus, the cowboys moved to places like Hong Kong.

How to Get a Copy of the Book

Hong Kong regulators, legislators, ILAS policyholders, and anyone else who cares about justice ought to read Mr. Stevenson’s book.

It is available at: http://www.the-great-expat-financial-planning-ripoff.com/

Towards the bottom of the webpage, you’ll see a “Buy Now” button. If you click on it, you’ll be taken to PayPal. The book costs about $15 USD. After paying, you’ll see a link that allows you to download a pdf copy of the book.

The book is 66 pages long, and it only takes a few hours to read. Here is its table of contents:

The Great Expat Financial Planning Ripoff - Hugh Stevenson - Table of Contents

I bought the book last Thursday (June 19). I emailed the author after I finished reading it, but he hasn’t replied yet. I sincerely hope he will consider updating/translating his book for consumption by a Chinese audience.

[REMINDER: If you haven’t yet, please sign this petition!!!]

Savings Scams & Portfolio Bombs: A Petition to the Independent Commission Against Corruption (ICAC)

Charge insurers, fund companies, and brokers with bribery. These crooks have used ILAS savings scams and portfolio bombs to swindle hundreds of thousands of investors out of their hard-earned savings. 

Sign the petition here!!!

Every time someone signs, an email will be automatically sent to the ICAC. Signers can choose to have their name displayed publicly, or they can keep it private. They can include their reason for signing the petition if they want. The petition will remain active until the ICAC acts.

Savings Scams

Countless hundreds of thousands of Hong Kong investors have been locked into unneeded, exploitative “savings plans” that never should have been sold to them. This has happened because insurers have been secretly paying brokers up to 25 years worth of commissions in advance for selling these awful products. The total upfront payment is often hundreds of times higher than the commissions paid by issuers of competing products. Insurers transfer the high costs of these obscene commissions to investors through obfuscatory fees and excessive lock-ins, whose massive damage is concealed by deceptive account statements. With no disclosure to investors, most of their first two years of savings aren’t really saved, but are instead pocketed by insurers.

Recently, a leader in the brokerage industry emphatically called for 25-year savings plans to be banned. He claimed the products provide no value to investors and only benefit insurers and brokers. He also said the products are so toxic they should have health warnings like cigarette packets which say “this product is not good for your financial well-being.”

Brokers, who are bound by a legal duty to act in their clients’ best interests, are obviously only selling these poisonous products because it allows them to line their own pockets at their clients’ expense—via the secret commissions paid by insurers.

Consequently, it is undeniably true that insurers and brokers have been engaging in corrupt transactions which are expressly prohibited by Section 9 of the Prevention of Bribery Ordinance. These crimes are punishable by up to 7 years imprisonment and a fine of up to $500,000 HKD. 

The signers of this petition are calling upon the ICAC to swiftly bring these scoundrels to justice. All savings plans with excessive lock-ins must be annulled, and wrongdoers must be forced to give victims their money back, plus interest.

For further reading about ILAS savings scams, see here:

ILAS Commissions Explained: A Look at How Insurers Bribe Advisers to Screw Their Clients and Why They Could and Should Be Prosecuted

The Most Evil Insurance Companies in Hong Kong

The SFC Must Draw a Line in the Sand on ILAS: Front-Loading Years of Commissions Is Unacceptable; Lock-In Periods and Exit Penalties Must Be Capped, Eventually Banned

Legal Armageddon On the Horizon: Two ILAS Policies That Could Decimate the Insurance Brokerage Industry

Industry Leader ‘Shouts From the Rooftops’: Ban 25-Year ILAS Savings Plans!!!

Portfolio Bombs

Shockingly, another class of ILAS products known as “portfolio bonds” can cause even more destruction than savings scams.

A loophole in securities regulations allows brokers to market unlicensed funds to expats by packaging them inside portfolio bonds. This loophole also allows brokers to “double dip” into their clients’ pockets by accepting a large commission from both insurers (who issue the portfolio bonds) and fund companies (who issue the unlicensed funds).

Some brokers abuse the loophole by primarily selling unlicensed funds which pay commissions that are multiple times higher than licensed funds. 

According to SCMP, the fund company LM Investment Management paid brokers 3 times the average commission rate for flogging its unlicensed Managed Performance Fund, which ultimately imploded and lost investors 95% of their money. Some of the victims were cold-called by brokers and told that the fund was low-risk, and they were advised to put their entire life savings in it. Once they did, their money vanished into thin air. This was just one of the latest in a series of more than 80 different unlicensed fund collapses occurring since the 2008 financial crises. 

Clearly, the greedy brokers who sold such funds had only one motive, and it wasn’t fiduciary. They were doing the bidding of shady fund companies, in exchange for indecently large commissions. Their corrupt behavior was in blatant violation of Section 9 of the Prevention of Bribery Ordinance.

The signers of this petition are calling upon the ICAC to bring offending fund companies and brokers to justice. They must be forced to give victims all of their money back, plus interest.

For further reading about portfolio bombs, see here:

Scope seen for tighter regulation of insurance-linked investments (SCMP – April 21, 2014)

Future of Portfolio Bonds Is Unclear (International Adviser – May 8, 2014)

LM Investor Victim Group Hits 500 (International Adviser – June 4, 2014)

DeVere ‘investigating options’ over Strategic Growth Fund (International Adviser – April 29, 2014)

CEO’s Stake Risked Conflict of Interest (SCMP – Oct. 23, 2013)

Regulators & Legislators Must Not ‘Repeat History (Again) after Ignoring It (Again)’

ILAS mis-selling has continued steadily for well over a decade. Here’s a few articles about a massive scandal that occurred in 2004:

Investors may sue insurers over fund fiasco (SCMP – May 2004)

Fund Losses Spark Fury (The Standard – Nov 2004)

Repeating History after Ignoring It (Asia Sentinel – June 2009)

According to the articles, more than 7,000 Hong Kong investors, many of them “wealthy bankers, lawyers, accountants and other members of the professional elite”, suffered catastrophic losses as a consequence of poorly trained, commission-hungry “advisers” flogging complex, crappy products they did not understand, while simultaneously advising clients (aka suckers) to borrow “three times their initial investment to buy extra shares”. This fiasco eventually left some investors penniless and in debt, while the so-called advisers made out with a fortune, presumably quadrupling their commissions.

Regulators responded to the scandal by doing practically nothing.

It’s no surprise that history soon repeated itself. In 2009, approximately 30,000 investors lost their savings in the Lehman mini-bond meltdown.

According to Vanson Soo, “the impact of the Lehman mini-bonds saga could have been minimized, if not prevented, if the SFC had acted decisively [in response to the 2004 scandal]”.

“The SFC could have punished the wrongdoers to send out the right message, restructured the regulatory landscape to prevent any similar episodes and seized the opportunity to demonstrate its seriousness in dealing with misconduct of financial institutions.

No, thank you. The SFC did none of the above.”

The SFC’s response to the Lehman mini-bond scandal was hardly better. This is exactly why, today, there are well over a million Hong Kongers locked into ripoff ILAS savings plans that never should have been sold to them.

Inevitably, history will keep repeating itself and investors will continue to be exploited unless regulators and legislators take the job of regulatory reform seriously. Ultimately, this will require a complete ban on commissions (a form of legalized bribery), a ban on opaque fee structures (a form of legalized fraud), strict licensing requirements for advisers (who are capable of ruining people’s financial futures), serious enforcement of antitrust laws (since collusion is presumed to be rampant), and introduction of class action lawsuits (so that millions of ripped off investors have a speck of hope about getting their money back).

Reform will also require sensible regulation of “pay packages and performance incentives” and strict rules to ensure that products are “fair to investors”. This is exactly what Enoch Yiu called for yesterday in a new article written for the South China Morning Post, entitled:

Give new insurance regulator power to examine pay and products 

As Enoch mentioned, “The legislative process for setting up an Independent Insurance Authority kicked off last week, and lawmakers are set to spend months of debate on what the new regulator should and should not do to protect Hong Kong’s nine million policyholders.”

The core reforms that must be introduced are already crystal clear. If lawmakers are troubled by the details, they can use the UK’s Retail Distribution Review as a template.

Lawmakers & regulators must not botch up this opportunity to right the wrongs of the past. If they do, we all know what will happen (again).