How to choose your service provider
As from February 2000, all employers and employees in Hong Kong may be succumbed by all the marketing campaign through the mass media, such as newspaper and TV advertisements from all the MPF service providers. They will also have to face all these hard-selling marketers from their bankers and insurance agents.
Choosing the appropriate service provider would be a very hard decision to make, as there are so many different products available in the market. Luckily, there is still enough time for employers and their staff members to select before they need to make a decision.
At the outset, many employers may be appealed to the siren of a simple product, i.e. one-stop shopping with one service provider who handles everything from trusteeship, scheme administration to investment management. This will remove all the headache and will be hassle-free to employers.
However, as members' balances grow, and the individuals begin to understand the importance of their accrued retirement saving and investment issues, they will start to examine the employer¡¦s choice of the service provider. Since members will pay all the fees, in time they will demand excellent investment performance, efficient administration and regular investor education. If they are not getting it, they will complain to their employer. The one guarantee under the MPF with its member choice is that there will be no such thing as a quiet life for the employer.
Apart from one-stop shopping (which will be more convenient for the employer but less flexible), the employer can also take an unbundled approach, i.e. different companies performing different tasks (whether used in a master trust or under an employer-sponsored arrangement). It would be a lot easier to get rid of underperforming parties if necessary.
The following are some of my advice to employers in selecting their MPF service provider. They should have the following attributes:
- Good administration system, both in terms of computer software and administration support in the back office.
- Client services such as telephone voice response or balance enquiry through Internet.
Overtime, I expect the standard of the service provider will improve dramatically and half a dozen companies will dominate the market within a period of a few years. This is actually what happened in The United States.
In the next chapter, I will discuss issues which employees should be aware of.
Written by John Cheung on 31 Jan., 2000