The following is my answer to a Quora question: “How do commission-based financial advisors help customers without conflict of interest?”
Within the context of Singapore, there is the balanced scorecard (BSC) framework. A financial advisor must conduct a thorough fact find, and justify any recommendation. There is an annual ethics assessment, market surveys post-transaction checks and mystery shopping. The penalties for running afoul of the BSC are severe, with the very least penalty for an E grade is termination and loss of license.
The Financial Health Review document that is used as a basis for recommendation of a financial product is a comprehensive document, and includes a section on client needs, budget, financial health and existing coverage and investments. This makes it difficult to engage in pure product pushing without doctoring the findings.
Within the conduct of the fact find, the financial advisor is legally compelled to remind the client of their rights, of the risks of certain products, and the limitations of any product. They also sign off on the relevant sections of the document. Since there is a comprehensive mystery shopping exercise, particularly at roadshows, financial advisors have to very diligent about this fact find.
The regulatory framework aside, financial advisors make only one mistake before losing their license. The recruitment and training process is vigorous, and there is a serious effort to ensure that ethics and compliance is a business culture.
Terence Kenneth John Nunis
[Shared with permission from: https://terencenunisconsulting.blogspot.com/2020/04/quora-answer-how-do-commission-based.html?m=1 ]