The full details of the long-awaited Isle of Man Financial Services Authority Conduct of Business (Long Term Business) Code that, among other factors, affects commission disclosure for financial advisers, has been released today.
The publication of the IoMFSA Conduct of Business Code comes following a three year process during which the Isle of Man’s regulatory authorities have extensively consulted with the industry. It will, among other changes, see life companies based on the island disclosing more detail on how it pays – and importantly how much – commission it gives to advisers when transacting client business.
The Code forms part of the IoMFSA’s regulatory development work outlined in what the it called the “roadmap for updating the Isle of Man’s regulatory framework for insurance business” through which the Authority proposes to introduce more detailed conduct of business requirements to complement the Island’s existing regulatory framework, in order that it “remains up to date, appropriate to the characteristics of the Island’s insurance sector, and consistent with international market developments and standards”.
One of the key areas within the document relates to companies in some instances being given the choice to disclose commission either as a percentage of the investment or a monetary amount.
Under the section entitled “What are the costs?”, the document states: “For single premium policies where remuneration is paid to an intermediary at the commencement of a policy, disclosure in the following form in bold text should state: “Although the intermediary firm that has advised you may not charge directly for the advice received, if you take up this policy it will receive a payment from [regulated entity name] of [value of commission, in policy currency OR commission expressed as a percentage of premium] on the commencement of your policy, the cost of which will be met by the charges you pay for the policy”.
Implementation of most of the requirements of the Code will be effective from 1 January 2019, with the exception of requirements in relation to the Key Information Document and the Summary Information Document which will be implemented with effect from 1 July 2019, the regulator said in a statement this morning.
Karen Badgerow, chief executive of the Isle of Man Financial Services Authority called the launch “a major milestone” in the development of the Island’s regulatory framework for long term business, which “will enhance the protection afforded to policyholders of the Island’s life insurers in line with the Authority’s regulatory objectives, in a manner that is consistent with international standards.
The move, which is similar to those being implemented across most of the other key international financial services centres – including Dubai – is part of a changing global backdrop to international cross-border (or offshore) financial services.
Peter Kenny, pictured above left, CEO of Old Mutual International, part of Quilter, said:
“This change has been a long time coming. It is the culmination of a three year process during which the Isle of Man’s regulatory authorities have been very understanding to ensure everyone can implement in a timely manner, and the further transitional period reflects this. Many of the advisers I speak to have adapted their businesses and are ready.
“We have always maintained that the new rules are good thing. They allow for greater transparency, customer confidence and they serve to keep the Isle of Man at the leading edge of improving professionalism in our industry. Those that embrace it will do well in the long run.
“Commission disclosure has to be the right move for the industry in terms of driving better customer outcomes. It is coming in most developed markets in one form or another. While it will take time for this to feed through into all jurisdictions, there is only one direction of travel and the sooner businesses adapt, the better positioned they will be.”
David Kneeshaw, pictured left, chief executive of RL360, also welcomed the move.
“The IOMFSA announcement today is welcome news,” he said. “The new guidelines will benefit the stronger and better advisers, encourage investment in better quality retail funds, and provide more transparency and protection to consumers. The Isle of Man has set the benchmark for other ‘offshore’ jurisdictions to follow.”
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Sean Christian, MD & Executive Director for Canada Life’s International Businesses, pictured below left, commented: “We are delighted to see the IOM Conduct of Business Code being published after a number of years of the industry and regulator working collaboratively together in developing a set of new regulation that truly ensures the customer’s interests are at the heart of IOM licence holders’ businesses.
“For those companies used to distributing their products in the UK market there is little in the Code that is actually new. The Code very much replicates the UK Treating Customers Fairly regime and in parts mirrors some of the outcomes brought about under the UK Retail Distribution Review in 2013.
“The Code sets down a clear marker of intent that the Isle of Man is playing a significant and vital role in driving international standards around customer protection and product transparency.”
The Manx Insurance Association (MIA) also told International Investment that it “welcomes” the publication of the (Conduct of Business) (Long Term Business) Code 2018.
Gill Marples, chair of the MIA said: “The MIA has engaged with the IoMFSA during the consultation period particularly with regards to the phased implementation of Code requirements which will allow industry to finalise development work in some areas.
“The Association supports the development of a customer focused regulatory framework which meets relevant international standards.”
IoMFSA Strategic Plan
Today’s launch follows a busy week for the IoMFSA as it launched its Strategic Plan 2018-2021 outlining its vision for financial services change within the jurisdiction in the coming years.
The Plan stated that “As a regulator, when setting our long term goals, we must be aware of the local and international environment in which we and our regulated sectors operate. In addition, we should be forward thinking, adaptable and agile so that we can achieve effective and proportionate regulation which meets the interests of consumers and industry whilst appropriately complying with the standards set out by international bodies.
- Continue to develop our identity and culture and to operate as a forward looking integrated regulator;
- Continue to develop our framework to provide appropriate protection for the financial interests of consumers;
• the reduction of financial crime; and
• the maintenance of confidence in the Island’s financial services, insurance and pensions industries through effective regulation, thereby supporting the Island’s economy and its development as an international financial centre.
More reaction and additional reporting, including exclusive videos with a number of the key individuals involved in this important development for the international financial services industry, will follow on InternationalInvestment.net.