With the enactment of the Insurance (Amendment) Act 2005 (IA) and the Insurance (Amendment) Regulations 2005 recently, Bank Negara Malaysia wishes to announce that the regulatory framework is in place for the licensing of Financial Advisers. The salient features of the licensing requirements for Financial Advisers are as follows:-
Financial Advisers will be licensed under the Insurance Act as a new category of intermediaries. In addition to insurance products, Financial Advisers may provide advice and market other financial products subject to prior approval from the relevant authorities;
the activities of Financial Advisers are defined to include analysing the financial planning needs of an individual relating to insurance products, recommending the appropriate insurance products, sourcing insurance products from insurers or arranging of contracts in respect of insurance products;
the Financial Adviser must be a body corporate with a minimum paid-up capital unimpaired by losses of RM100,000 and majority Malaysian-controlled;
the Financial Adviser must have a minimum professional indemnity insurance coverage of RM200,000 in order to protect consumers in cases of professional negligence;
the Financial Adviser licence will be renewed annually subject to compliance with specified licensing requirements;
the Financial Adviser will also be subject to other generic requirements imposed on licensees under the Insurance Act, such as changes in shareholding of the entity, approval for appointment of chief executive officers and directors, opening of branches and submission of annual returns;
the representatives of the Financial Adviser who will be involved in providing advice must be approved by Bank Negara Malaysia and must possess minimum professional qualifications specified by Bank Negara Malaysia, to ensure that they have the appropriate level of competency required to provide advice to the consumers; and
the use of the term "financial adviser" will be restricted to the holders of a Financial Adviser licence and exempted entities under the Insurance Act. The restriction on the usage of the term "financial adviser" will instill consumer confidence that the financial advice is from an entity that is licensed by Bank Negara Malaysia.
The regulation of Financial Advisers would help to promote the orderly development
of the financial planning industry. In addition to being a new distribution
channel for the insurance industry, Financial Advisers offer consumers a wider
range of financial products and act as one stop centre for financial planning.
The introduction of Financial Advisers will enhance the market penetration of
the life insurance industry, especially amongst upmarket consumers. Financial
Advisers will also provide greater professionalism in the sale of life insurance
products. The consumers can expect the licensed Financial Advisers to provide
effective financial planning based on needs-based approach rather than merely
product driven sales. Unlike the insurance agents, the Financial Advisers will
not be tied to a particular product provider.
Those who are interested to obtain further information on the licensing requirements of Financial Advisers may contact Jabatan Pengawalan Insurans, Bank Negara Malaysia, at the telephone number 03-2698 8044 ext. 7845/8542 or visit the Bank's website at http://www.bnm.gov.my.
- Licensing Guidelines on Application for Financial Advisers' Licence under Insurance Act 1996
- Application Form for Financial Adviser's Licence under Section 17 of the Insurance Act 1996
- Application Form for Appointment of Financial Adviser's Representative under Section 70(1A) of the Insurance Act 1996