CISL: Levelling The Playing Field
CISL: Levelling The
Playing Field
Outline
• Key Developments
• Who Can Distribute CIS?
• Growth of CIS Industry
• Changing Distribution Landscape
• Regulatory Developments
• Trends in Southeast Asia
• Summary
Key Developments
• Emergence of mutual fund supermarkets via online stockbrokers – starting with
COL Financial Fund Source in 2015
• Banks slowly shifting to open architecture model by offering funds from third-party
fund houses
• BSP’s cross-selling framework allows distribution among affiliates, non-bank
affiliated fund houses are able to sell their funds at banks through the latter’s trust
business or brokerage license
• (BSP) has allowed UITF providers to feed into target funds that invest in
exchange-traded funds (ETFs) and other collective investment schemes (CISs).
• More foreign insurance groups are looking to set up shop in the Philippines
following the entry of Ageas Insurance International and Allianz SE.
• CISL ongoing deliberation in Senate
Who Can Distribute CIS?
Fund manager
Investment house
Any bank, financial, or
trust institution under BSP
Any insurance broker
under IC
Stockbroker duly
accredited by SEC
Independent
Financial Advisors
Fin tech companies
✓
Direct sales agents
✓
✓
✓
✓
✓
✓
?
What are the requirements to distribute CIS?
Agent
• Certified Investment
Solicitor (CIS) license
• Insurance Agent License
• Mutual fund distributor
license from SEC
• Certified Investment
Solicitor (CIS) license
• Trust license issued by
BSP
• Trust program accredited
by BSP
Bank/Financial
Institution under BSP Brokerage firm
• Insurance broker
license issued by IC
Insurance broker
under IC Fund manager
• Fund manager license
issued by SEC
• With the expanding PH economy and
CIS industry, fund houses have
started targeting the growing mass
affluent.
• With areas outside Metro Manila being
underpenetrated, large players have
started establishing distribution
channels outside NCR.
• Total MF and UITF AUM in the
Philippines is seen to grow at a
compounded annual growth rate
(CAGR) of 12.6% over the next five
years, according to Cerulli
Source: Cerulli Associates
Growth of CIS Industry
Source: Cerulli Associates
• Distribution capabilities of fund
houses continue to be strengthened
through direct sales teams.
• Inflows remain to be largely sourced
from high-net worth individuals.
Thus, there is a need to expand
distribution by tapping new client
segments.
• With the success of COL Fund
Source, other brokerage firms are
seen to follow suit on exploring
mutual fund distribution through their
ICA license.
Growth of CIS Industry
Changing Distribution LandscapeWhich of the following distribution channels do you
intend to increase the use of over the next three years?
Source: Cerulli Associates
• According to a survey done by Cerulli,
fund houses still put much importance
on their direct sales team as its core
distribution channel.
• Fund houses recognize the value of
third-party online platforms as an
emerging distribution channel, which
may drive a change in the region’s
distribution landscape.
• However, market share of online
distribution platforms remains small,
which presents an opportunity for fund
houses to expand their distribution
networks.
Bangko Sentral
ng Pilipinas
Regulatory Developments
• Released Circular No.884,
setting the guidelines on the
establishment and operation
of trust and standalone trust
corporations
• Allowed UITF providers to feed
into target funds that invest in
exchange-traded funds (ETFs)
and other CIS
• Released cross-selling
framework which allows
distribution of third-party CIS
only among affiliates
• Issued rules granting
insurers limited trust
powers to allow them
to raise and manage
employee provident
funds under a tax
exemption status
• Upcoming release of new
set of Implementing Rules
and Regulations (IRR) of
the Investment Company
Act which will allow mutual
funds to do feeder funds
• Less stringent approval
process in allowing mutual
fund houses to offer fund-
of-funds
Securities and
Exchange
Commission
Insurance
Commission
Distribution in Southeast Asia:
How are the dynamics changing?
Snapshot of Online Fund Platforms in Southeast
Asia ex-Singapore, 2016Sources: Federation of Investment Managers Malaysia, Cerulli
Associates
• Distribution channels in the region
have expanded in recent years, as
regulators liberalize and expand
markets through alternative
distribution channels.
• Most common strategies for foreign
players are through product
partnerships, M&A, and setting up
onshore presence.
• Southeast Asian CIS companies
are keeping a close eye on Fin
Tech/ digitalization, with the recent
spur in the development of online
platforms to cater to new segments.
Challenges
• Standardization of licensing process for CIS distributors poses a challenge for the
regulators, as CIS companies continue to grow their core distribution channels.
• KYC and AMLA procedures persist to be an important issue as well, as CIS
companies diversify their client segments.
• As the local CIS industry is in its infancy stage, there is an increased need to
elevate financial literacy among CIS distributors and the investing public.
• Rising competition in the region has put more pressure to CIS companies in
diversifying their distribution capabilities. However, the trend of tighter regulations
in global markets and the slow pace of local regulation in catching up with other
markets has limited their ability to explore other modes of distribution.
Summary• The CISL aims to provide a comprehensive and unified distribution framework with the
aim of levelling distribution amongst CIS players and ultimately protecting the interest of
the investing public.
• However, the country’s geographical structure remains to be a challenge in CIS players’
objective of expanding to other regions outside NCR. New means of distribution are
needed to spur the reach of CIS in this market.
• With the growing CIS industry, there is much emphasis on the need to respond to new
client segments through alternative distribution channels.
• CIS companies should work hand-in-hand with the regulators in keeping the market at
par with our regional peers in terms of regulations.
• The Implementing Rules and Regulations of the CISL shall provide greater guidance and
understanding to level the distribution of CIS across different players.
• Timing of deliberation in the Senate is crucial in defining the next steps after the passage
of the CISL.