Financial Planning / Wealth Management

The talk of the town

James Wong, executive committee member, the Institute of Financial Planners of Hong Kong

Looking for an investment opportunity or fancy setting up an insurance plan? Chances are that, from the multitude of advisors bearing umpteen titles, it is unclear who is really qualified to dispel advice, but there are ways to check on your advisor's qualifications

Although Hong Kong already has 870 Certified financial plannerCM (CFPCM) practitioners, subject to the highest global standards and stringent assessment, as a service financial planning is in its infancy here. Many consumers remain unclear about where to seek advice and who to trust. For example, are they safer dealing with an insurance agent (IA) or a financial planner (FP), or should they look further afield?

Find the best FP you can get, [who] you can trust to help you fulfil your needs

Hand-in-hand with clients

Admittedly, the differences between IAs and FPs seem rather woolly, even to professionals. However, James Wong, executive committee member, the Institute of Financial Planners of Hong Kong (IFPHK), explains that, theoretically, FPs have a broader financial knowledge base than IAs.

An FP's work involves continued, integrated financial planning, with the client's participation, based on a standard six-step approach recommended by the IFPHK and CFPCM Board of Standards." This includes risk management, usually involving but not limited to insurance planning to protect one's future earning power," Mr Wong explains.

"Other elements include wealth accumulation - discovering one's investment risk tolerance, investment style and investment objectives - and wealth preservation, which may include estate planning, lowering tax liability and distributing assets."

Essentially, FPs should provide appropriate advice to meet their clients's needs. Indeed, in principle, selling particular products is not their primary role; however, this can occur. FPs' compensation is either fee- or commission-based - or both, although fee-based work remains uncommon in Hong Kong.

Licensed to sell

IAs, meanwhile, specialise in insurance planning and products for clients and their individual general financial knowledge bases vary to a greater extent. However, many also offer a total financial planning approach, tackling risk management, wealth accumulation and wealth preservation issues.

"Owing to the licensed nature of an IA and the restriction to selling mainly insurance-based products, IAs tend to focus on problem areas where insurance-based financial products can be recommended," adds Mr Wong. "An IA's compensation is mainly on commission, so they're more focused on selling insurance products, while providing free financial planning advice."


Nonetheless, differentiating between FPs and IAs remains tough. "Total financial planning is becoming the talk of the town! [But] the public has a misconception that an FP is more professional than an IA and can access wider services," he says.

"As a result, many IAs, irrespective of their ability or capacity, prefer their titles to be FP. Or some FPs [who are] mainly selling insurance-based products still claim [to be] FPs for better presentation. You can only tell the difference through the jobs they perform."

In Hong Kong, FPs' and IAs' career paths also barely differ; instead, practitioners have two options. "One is to become a senior FP or IA, running his own business, serving clients and providing front-line services," continues Mr Wong. "The other is to become a manager, starting to build and manage a team of FPs or IAs. Since the job title specification is not well defined by the authority concerned, their job requirements have no significant difference in a practical sense."

Taken from Career Times 20 June 2003
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