Moonstone: "It's the right thing to do"

There are times when one gets the idea that some folk out there seem to think that the General Code of Conduct is an army manual providing guidelines on how senior officers should behave.

It is in fact the most practical FAIS document, setting out how we should conduct ourselves when providing financial advice and intermediary services. It was recently overhauled and now contains more comprehensive guidelines on, amongst others, what is required when an existing policy is replaced.

Please remember that the onus is on you, not the product provider, to comply with these rules.

8. (1) A provider other than a direct marketer, must, prior to providing a client with advice-

(d) where the financial product (“the replacement product”) is to replace an existing financial product wholly or partially (“the terminated product”) held by the client, fully disclose to the client the actual and potential financial implications, costs and consequences of such a replacement, including, where applicable, full details of-

"(i) fees and charges in respect of the replacement product compared to those in respect of the terminated product;

(ii) special terms and conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided, which may be applicable to the replacement product compared to

those applicable to the terminated product;

(iii) in the case of an insurance product, the impact of age and health changes on the premium payable;

(iv) differences between the tax implications of the replacement product and the terminated product;

(v) material differences between the investment risk of the replacement product and the terminated product;

(vi) penalties or unrecovered expenses deductible or payable due to termination of the terminated product;

(vii) to what extent the replacement product is readily realisable or the relevant funds accessible, compared to the terminated product;

(viii) vested rights, minimum guaranteed benefits or other guarantees or benefits which will be lost as a result of the replacement; and

"(ix) any incentive, remuneration, consideration, commission, fee or brokerages received, directly or indirectly, by the provider on the terminated product and any incentive, remuneration, consideration, commission, fee or brokerages payable, directly or indirectly, to the provider on the replacement product where the provider rendered financial services on both the terminated and replacement product.";

The opportunity to replace an existing policy possibly calls for more honesty and integrity than any other action we perform, not so much in respect of the client, but in terms of how truthful we are with ourselves. Despite all the above requirements, it is the “man-in-the-mirror” test that will determine whether we do the right thing or not.