Financial Planning / Wealth Management

Model of success for franchisees

By Charles Mak

Elex Chan, general manager, regional marketing and distribution, Commonwealth Bank Group

Business models for financial planning have changed and industry professionals predict further developments are on the way

Whatever the type of business model favoured by banks or other financial institutions, one thing is certain-it will not work without a sophisticated IT platform and a variety of channels for communication. These are modern-day prerequisites for any form of business which depends on meeting the needs and service expectations of retail customers and investors.

As Elex Chan, general manager, regional marketing and distribution, Commonwealth Bank Group, International Financial Services, North Asia says, "A comprehensive IT platform is essential because it stores information about clients' personal investment preferences and spending habits. If we want to develop business by cross-selling and 'up-selling', this is particularly important."

He also emphasises that multiple retail distribution channels are needed to reach people in all sections of the community. These include face-to-face meetings, commercial promotions, online links and telesales, the combination of which helps to maximise opportunities. "We also need channels to maintain communication and cooperation with other financial institutions in Hong Kong," he adds.

The Commonwealth Bank Group has a well-established business model and is divided into investment, insurance and banking sections, each with its own workforce. As one of the two largest Australian banks by market capitalisation, the group has long realised that the right model allows both flexibility and expansion. An example of this was the establishment in 2003 of Financial Solutions Limited to develop financial planning services in Hong Kong. "We realised that some potential clients preferred to do business with third-party advisers," Mr Chan says. Therefore, a new channel has been set up for third-party financial planning, allowing selected recruits in Hong Kong to become franchisees and build a business of their own with the bank's support.

Customer analysis

A key element is that Financial Solutions can leverage the group's Web-based PlanIT system. It includes a comprehensive range of tools to analyse customer needs, prepare financial plans and assess product information and recommendations. It can also provide consolidated client reports, market information and data for customer relationship management.

"We offer a host of marketing tools to help franchisees retain existing clients and develop new business relationships," explains Mr Chan. "They can also use our brand and include it in their corporate identities. The wealth management platform has been modified to suit the local market and is unique in Hong Kong." Within the business model, there is also a "buyer of last resort" guarantee for franchisees, who can therefore be confident of building a business for the long term and know that it has a resale value.

According to recent findings, up to 500,000 people in Hong Kong could still benefit from financial planning services. The majority are aged between 35 and 50 and are part of the working population. On average, they have more personal debts than assets and are not covered by adequate investment plans or insurance policies. "If they passed away, they would leave their families in debt," Mr Chan cautions. "That is why they need assistance to plan ahead and make provisions."

It is estimated that by 2025 around 44.5 per cent of Hong Kong's population will be aged 50 or more. That compares with 23.9 per cent in 2000 and will put extra strain on medical services and the social security system. Nevertheless, if people plan properly for their own needs, this demographic shift will represent a great opportunity for the financial planning industry. Changes in the regulatory environment will also ensure that there are better services, fee transparency and more choices.

New image

Professional examinations are already improving the quality of advisers, and those who do not reach the required standards will find it difficult to get ahead. As one sign that the industry is maturing, more graduates are now being attracted and helping to change the image of the sector.

Banks, insurance companies and independent financial advisers (IFAs) are all looking for new recruits. "Around 25 to 30 per cent of some 48,000 registered insurance agents and technical representatives in Hong Kong are employed by banks," says Mr Chan," and the rest are more or less evenly divided between the other two types of employer."

In terms of products, he predicts that self-managed funds will see threefold growth in the next few years, while sales of unit trusts, corporate trusts, industry funds and allocated pensions will at least double. Since IFAs generally offer a wide diversity of products, he believes this will give them an advantage.

"Products will become more comprehensive, but a sophisticated IT platform makes it much easier to handle everything. Financial Solutions can support a franchisee's full retail financial planning business and does not simply cover certain financial instruments," he adds.

Substantial growth plus healthy competition between industry players are expected in the coming years. Forecasts indicate a 10 to 15 per cent annual increase in the number of qualified financial planning professionals, and industry growth each year of at least five per cent up until 2010. "At the end of the day, though, we still need to work harder to improve quality and safeguard the integrity and credibility of our professionals," Mr Chan concludes.

Bright forecast

  • Adaptable business model supported by a sophisticated IT platform and various means of communication
  • Demographic changes represent great opportunities for the industry
  • Regulatory environment will enhance service quality, fee transparency and choice
  • The financial planning market will grow considerably in the next few years
  • Emphasis should be on improving the quality of financial products and overall professionalism

Taken from Career Times 25 February 2005
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