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Financial advisory
RES5Financial Advisory Services✓M5 — RES5 — Rules, Ethics & Skills for Financial Advisory Services
The Balanced Scorecard (BSC) Framework is set out in MAS Notice FAA-N20 — the Notice on Requirements for the Remuneration Framework for Representatives and Supervisors ("Balanced Scorecard Framework") and Independent Sales Audit Unit (issued under sections 38, 39 and 58 of the Financial Advisers Act). It requires every licensed and exempt financial adviser (except those covered by FAR Regulation 34A) to build quality-of-advice measures into its remuneration structure. The core idea: part of a representative's or supervisor's pay is tied to non-sales key performance indicators (non-sales KPIs) — how well they advise — not to how much they sell. Poor quality of advice reduces the variable income a representative is entitled to; it does not reward higher sales volume. Companion guidance sits in FAA-G14 (post-transaction checks, Grade-E supervision, reference checks and pre-transaction checks).
Part I · Rules & Regulations13 min read11 sections
The Balanced Scorecard (BSC) Framework is set out in MAS Notice FAA-N20 — the Notice on Requirements for the Remuneration Framework for Representatives and Supervisors ("Balanced Scorecard Framework") and Independent Sales Audit Unit (issued under sections 38, 39 and 58 of the FAA). It requires every licensed and exempt financial adviser (except those covered by FAR Regulation 34A) to build quality-of-advice measures into its remuneration structure.
The core idea: part of a representative's or supervisor's pay is tied to non-sales key performance indicators (non-sales KPIs) — how well they advise — not to how much they sell. Poor quality of advice reduces the variable income a representative is entitled to; it does not reward higher sales volume. Companion guidance is in FAA-G14 (the Guidelines on the Remuneration Framework, Reference Checks and Pre-Transaction Checks).
Performance is measured against four principles set out in Annex 1 to FAA-N20:
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FAA-N20 is the MAS Notice on Requirements for the Remuneration Framework for Representatives and Supervisors (the Balanced Scorecard Framework) and Independent Sales Audit Unit, issued under sections 38, 39 and 58 of the Financial Advisers Act. It requires licensed and exempt financial advisers to tie part of each representative's and supervisor's variable pay to non-sales KPIs (quality of advice) rather than sales volume. Confirm the current text on the MAS website.
FAA-G14 is the MAS guidance that sits alongside FAA-N20. It covers how the Balanced Scorecard is run in practice: post-transaction checks, supervision of representatives graded E, reference checks, and pre-transaction checks such as call-backs for selected clients.
Annex 1 of FAA-N20 sets four: understanding the client's needs, suitability of the recommendation, adequacy of disclosure, and professionalism and ethical conduct. A firm may add its own KPIs, but must not measure specified variable income against them.
Each quarter a representative is graded A to E on the share of sampled cases with infractions. Grade A keeps 100% of specified variable income; B keeps 75% to under 100%; C 50% to under 75%; D 25% to under 50%; E 0% to under 25%. One Category 1 case puts a representative in grade E. Specified variable income is 60% of variable income for variable-income-only representatives and 100% where there is a fixed salary plus a variable component.
A financial adviser may add its own KPIs for business reasons, but it must not measure a representative's specified variable income against those extra KPIs.