Benchmarked against selected countries within the region which do not regulate commission payment, the commission rate currently earned by Malaysian agents remains relatively high compared to the benchmarked rates of between 140% to 150%, as seen in other jurisdictions. This excludes other agency-related benefits which are also allowable under the OCC guideline. BIS central bankers’ speeches  1  Some have argued that the current commission levels are too low as the commission structure has not been revised since the Guidelines were first introduced in 1996. However, closer scrutiny shows that agency income from commissions had increased in absolute terms in line with the increase in average premiums size. The average size of new business grew by 9% per annum over the last decade while in-force premium size recorded a compounded annual growth rate of 5%. Hence, the commission income of productive agents has in fact been growing in excess of the consumer price index and national average wage inflation. The world is constantly changing, the transformation that is taking place in the financial sector landscape also warrants a suitable change in the regulatory framework which the industry must be prepared to embrace and adapt to, going forward. The OCC had served its objectives well to keep operating costs reasonable to ensure policyholders’ interests are preserved. To enhance greater efficiency and facilitate a more competitive market environment, the Bank will accord greater operational flexibility to the industry in determining amongst others, the commission structure for its agents and other intermediaries.
With these Guidelines in-force, the Board of Directors of respective FAs are now required to establish the necessary processes to ensure proper monitoring of the quality of the advisory process conducted by FA representatives, and we expect FAs to deal firmly and expediently in the event of non-compliance which results in mis-selling or the provision of inappropriate advice. I am greatly encouraged to see the continuing growth of the FA industry and today’s event marks a significant milestone for the industry as a whole. The theme of this Conference, “Charting New Frontiers – Financial Advisers the Future” is well-timed and reflective of the  BIS central bankers’ speeches  3  changes we are now experiencing as our nation progresses towards a high-income economy. Once again, I would like to congratulate AFA on its official launch and look forward to meaningful contributions from the Association in driving the financial advisory sector forward. On this note, I wish you all a successful and productive Conference. 4  BIS central bankers’ speeches