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"Financial adviser", "investment consultant" and "financial planning manager" are some of the job titles that are commonly used by financial practitioners including Securities and Futures Commission (SFC)'s licensees, MPF intermediaries and insurance intermediaries. How much do you know about the differences between each job title? Are your intermediaries qualified to provide the services and products that you are looking for? Also, what do you need to watch out for when these intermediaries claim that they can provide you one-stop financial services?

Take a look at the following checklist which can help you select the appropriate intermediary to address your financial needs.

1. Check whether your intermediary has obtained the appropriate licence(s) or registration(s) to provide the relevant service

In Hong Kong, financial practitioners are regulated by different regulatory bodies depending on what type of financial service they provide.

Products Regulated activities and regulatory bodies Public registers
Securities and futures
eg stocks, futures, warrants, funds, bonds, and structured investment products
Intermediaries selling and/or advising on securities or futures are required to be licenced by or registered with the SFC.

The Hong Kong Monetary Authority (HKMA) is the frontline supervisor of banks' investment services and their staff. Only those bank staff whose names are entered in the "HKMA's Register of Relevant Individuals" can engage in selling and/or advising on securities or futures.
Insurance
eg traditional life insurance, general insurance, and investment-linked assurance schemes (ILAS)
Intermediaries, who sell or advise on insurance products, are subject to a self-regulatory regime under the Insurance Companies Ordinance. The Insurance Authority (IA) regulates insurance intermediaries through overseeing the self-regulatory bodies which represent different sectors of the insurance industry.

The HKMA, as the frontline supervisor of banks' insurance intermediary activities, monitors whether banks and their staff comply with the conduct requirements applicable to them.
MPF products Intermediaries, who sell or advise on MPF products, are regulated under the Mandatory Provident Fund Schemes Ordinance. They are required to be registered with the Mandatory Provident Fund Schemes Authority.

MPF intermediaries of the banking, insurance and securities sectors are subject to supervision of the HKMA, the Office of the Commissioner of Insurance or the SFC respectively, which are the relevant frontline regulators of MPF intermediaries.
Public Register of MPF intermediaries

No single licence or registration can enable a financial intermediary to conduct all types of financial services. For example, if your insurance intermediary would like to sell/advise you on a fund, please verify if he/she is licenced by the SFC.

2. Ask questions about your intermediary

Professional services from an experienced and qualified financial intermediary may help you manage your money better. Apart from ascertaining the type of licence/registration your intermediary has obtained, you may also ask the following questions which will help you assess the suitability of their proposals:

  • What is your approach to financial/investment planning?
  • What experience and qualifications do you have for a specific product?
  • Will you offer ongoing service?
  • What kind of fees do you charge? How much?
  • How much commission do you receive for selling the product? Whether the commission is from the product provider or from the client?

Some intermediaries may have professional qualifications. For instance, the CERTIFIED FINANCIAL PLANNERCM or CFPCM designation is an international professional certification mark for financial planners. To be authorised to use the designation, the candidate must meet initial education, examination, experience and ethics requirements, as well as continuing professional development. Whether or not your intermediary has such qualifications, he/she is required to obtain the relevant licence or registration from relevant regulatory bodies before he/she can provide the services set out in the table above.

3. Understand the benefits that the intermediary will receive from selling the product

Although you may pay nothing directly to the intermediary who sells/distributes the products to you, the intermediary will receive benefits from selling the products to you.

Intermediaries selling/advising on investment products have to disclose (as per the requirement of the SFC) the benefits they receive from the product issuer from selling the product to you.

In the case of selling ILAS products, the latest enhanced regulatory changes introduced by the IA require intermediaries to inform you (i) the amount of remuneration the agent/broker firm/bank (as applicable) will on average receive per $100 of the premium that you pay, and (ii) your right to ask for details of the intermediaries’ remuneration, for selling the ILAS product.

Understanding the benefits information can help you assess whether this would affect the intermediaries' recommendation on the products concerned.

4. Check your intermediary’s knowledge

Before recommending a product, the intermediary must have a thorough understanding of the product such as its nature, features and risks. He/she should also consider whether an investment product is suitable to you in terms of your investment circumstances, such as objective, horizon and experience, financial situation as well as your risk profile, or whether an insurance product is suitable to your circumstances such as needs and resources.

Make sure your intermediary clearly explain the features and risks of the products and provide relevant materials (eg offering document, product key facts statements and other relevant documents) to help you make informed decisions. Fees and charges are always an important factor to consider. Don’t forget to check all the fees and charges from your intermediary, including upfront fees, those fees charged on an ongoing basis, and potential fees upon exit (if any).

5. Understand the licence(s) and scope of business of the intermediary’s employer or principal

Apart from checking your intermediaries’ backgrounds, it is essential to also check the company that your intermediary is representing or working for. Conduct research, for example, in the case of securities and futures, by checking the SFC's Public Register of Licenced Persons and Registered Institutions or corporate websites of the intermediary’s employer to understand the type of licence(s) it is holding, and its scope of business.

Some people may have the misconception that a stock broker licenced with the SFC (Type 1 licence - dealing in securities) is equivalent to a participant or trading right holder of the Stock Exchange of Hong Kong (SEHK). This is not the case because the SFC licence is different from the trading right at SEHK. Also, some licences may be subject to conditions, eg acting as an introducing agent only, cannot hold clients’ assets, etc. You can look at the licensing conditions of your stock broker firm to understand its scope of licenced activities.

To check if a firm is a SEHK participant, you can visit the website of Hong Kong Exchanges and Clearing Limited. If the broker firm is not a SEHK participant, you may check with the firm which SEHK participant(s) that your orders will be traded through.