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Money Moves

Innovative moves into financial planning

by Martin Williams

Fee-based service a viable alternative to the traditional commission-based sales structure

Edwin Morrow, chairman and chief executive officer
International Association of Registered Financial Consultants
Photo: Wallace Chan

The role of financial planners is far greater than simply advising clients to buy products. They are professionals, much like accountants and lawyers, and their ranks are growing.

"In the US, financial planning developed only in the 1970s, yet it is now regarded as one of the top occupations," says Edwin Morrow, chairman and chief executive officer, International Association of Registered Financial Consultants.

Jobs Rated Almanac by Les Krantz, a book that provides evaluations of 250 jobs and ranks them according to six factors including income, working environment and outlook, has in recent years ranked financial planning among the top five jobs in the US.

The industry is not yet quite at that level in Hong Kong, but Mr Morrow is positive about its future, saying that financial planning is not only a viable option for new graduates, but also for professionals looking for a career shift.

He notes that financial planning offers people wanting to use their management skills and educational background the independence to hand pick their clients and do business when and where they like.

Fee-based service

While many financial planners work for salaries or earn commission for the products they sell, Mr Morrow promotes the concept of providing financial advice for a fee.

When planners work on a commission basis, there is always the chance that their advice may be slanted towards the products that they sell. However, when they work for a fee, administration is kept separate, Mr Morrow says. "The planner is paid to give advice and develop a plan, and the client is free to buy products from the same adviser or from someone else," he adds.

In his view, the best financial planners genuinely love serving people, and communication and empathy are key to success in the profession. It is crucial that planners have sound ethical values, and to this end the International Association of Registered Financial Consultants has drawn up a code of ethics for its members.

The association even recommends that members offer their clients a complete refund if they are not happy with their plans. "I've been doing this for more than 30 years, and I've never been asked for a refund," Mr Morrow points out.

Starting out

As a pioneer in the financial planning industry, Mr Morrow founded his company, Financial Planning Consultants, back in 1969, and he has advocated the fee-based practice since the early days.

He recalls that people doubted the wisdom of charging fees when he first started out, warning that he would not get paid —b ut they were quickly proven wrong. Even so, charging fees still sometimes seem a novel idea, even within the financial services industry.

He has found some large Hong Kong companies to be sceptical at first, wondering if they would sell fewer insurance or brokerage products if they charged for their services. "However, they have found that they in fact sell more, and the higher level of advice leads to greater productivity," he stresses.

When it comes to determining fees, Mr Morrow has found it best to charge flat rates. Businesses may be used to being charged by the hour, but consumers are typically uncomfortable with hourly rates.

The International Association of Registered Financial Consultants membership test hinges on producing a sample financial plan. The association suggests a fee structure based on four or five categories for members. Planners can ask prospective clients which category they fit into and show them a sample plan, so that they know what to expect.

Association benefits

In addition to providing a code of ethics and a sample fee schedule, the association, which has 8,000-plus members worldwide and around 700 in Hong Kong and Macau, also offers members a sample script for dealing with clients, documentation and the format for design of a financial plan.

More than 80 per cent of the association's members work in the insurance industry. The rest work for banks, investment companies, accounting firms or legal practices.

Teresa So, adviser, Hong Kong and Macau, International Association of Registered
Financial Consultants; chief financial officer, General International Agency Limited
Photo: Courtesy of Ms So
One local member is Teresa So, chief financial officer of General International Agency Limited. She is also an adviser to the association and has been promoting financial planning since 2001.

Ms So remarks that she also started charging for financial planning services when it seemed that clients were keen to support a fee structure. She offers a comprehensive planning service, which involves assessing a client's entire financial situation, including legal issues and property and tax advice. Plans may run 50 pages or even more.

"The banking and insurance industries have grown very close to each other, and today there are many more financial products available. This situation on the whole constitutes a greater need for financial planning," she says.

"Financial planning is the fastest growing profession in the world," adds Mr Morrow. "Planners are making a major difference in their clients' lives, and they make a good living. It's not a get-rich-quick business, but it does offer a pretty good life."

Growing industry

  • Financial planning has a bright future
  • Fee-based service works for both planner and client
  • Ethical values important in industry
  • Association provides guidelines and samples


Taken from Career Times 22 August 2008

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