MPF management fees have room to fall, but don’t judge on fees alone

This article is a rewrite of a report from July 2012.

With the MPF amendment bill passed and semi-portability due on 1 November 2012, the Employee Choice Arrangement and the statutory intermediary regime would take effect together. An MPF business development director at a financial advisory firm said he supported legislating intermediary oversight as a professionalism boost, but urged regulators to weigh the operational impact on the industry and the public.

Would call recordings push costs up?

Rules requiring intermediaries to record verification calls with individual clients during sales could add costs, he said — recordings then had to be re-verified for follow-up queries, creating extra work, though his firm could cope. The goal, he stressed, was protecting clients’ interests, and he asked the authorities to hear the industry’s views on implementation details.

The firm had already aligned training with MPFA guidelines: in 2011, over 95 per cent of its licensed advisers completed the mandatory “MPF Intermediary Employee Choice Arrangement” course on time, and about 76 per cent of advisers could advise on both insurance and securities.

Is there room for further fee cuts?

He believed MPF management fees had room to fall as the market’s asset pool grew, and semi-portability could trigger another price war. He expected workers to watch providers’ offers before deciding whether to switch from 1 November, with some motivated by the feeling that “the old plan was the boss’s pick, not mine”.

But he also warned: never judge on fees while ignoring fund performance — it is the fund manager’s calibre that grows wealth. Semi-portability, he said, would help services improve through competition.