Financial Planning

[Edgar Allen]

So I have been in finance for about 17 years and find myself redundant for the second time in a year.

During the last 9 years in Asia I have found the quality of financial planning available in English to be appalling, and am thinking about starting my own business in this line.

My thinking is that there are plenty of people in Taiwan in particular who are supposedly saving a little money as well as having some fun, but wonder whether this audience would be too young/immature for a service which would help them maximise their potential savings while they are here?

I know there are also plenty of entrepreneurial Forumosans, who have done well. Do you think this audience would benefit from some solid financial advice?

I am not talking about flogging investment linked plans with high penalties (except where this is what is wanted/needed) but rather taking someone through the need for different products, and the cross section of savings and protection that should be in place for peace of mind. This might include property, mutual funds, life insurance, medical insurance, permanent health and/or critical illness type cover, as well as pension planning for the older group.

I would be very interested to hear views from Forumosans not just on whether they would use such a service, but whether they think others would do and what the draw backs would be.

I am also interested to hear horror stories. I know that I won't get rich if I do this properly and that the successful guys always rip people off. If you have had a bad experience then let us all know about it - forewarned is forearmed as they say.

[Elegua]

Hmmm....very interesting.

My 0.02 is that there are a lot of savers in Taiwan that get a lot of crap advice, (mabe not just Taiwan). These savers also have very unrealistic expectations of risk/reward, (not that we haven't seen that elsewhere either), and don't necessarily want to hear that they can't earn double-digit risk free returns year after year.

It's possible that there is a niche market for people who want sound advice....but that would be against human nature.

[Edgar Allen]

Interesting that you assume it would just be investment advice.

I see it more as risk management.

What happens if you can't go to work tomorrow?
What happens if you were seriously hospitalised tomorrow?
What happens if the stock market tanks?
What happens when you go home and the Taiwan dollar is worth nada?
What would you do if you found out you had cancer?
How do you save money? Do you dip into it for emergencies? What constitutes an emergency?
What plans do you have for retirement? How much money do you think you need?

This is all stuff that people don't really want to talk about but when you get it all in place you feel so good about it being there.....well I do but maybe I am sad?

[Elegua]

Just a knee-jerk assumption when I heard, "Financial Planning".

What you're proposing is much more interesting and valuable; but I would reckon that people:

1) Wouldn't understand what you're talking about
2) Would keep wanting to talk about unrealistic rates of returns on their investments.

"Why keep it in this boring insurance plan when I can invest it in Acme Corp. and get XX%? Then if I get sick I can sell it and get more money."

But, there just might be some people who have gotten some religion given the recent unpleasantness....

[Edgar Allen]

I did a plan for a friend of a friend this week.

He is 52 and has a 2 year old son.
He wanted life insurance for himself so that if he dies the wife and baby are looked after, and a savings plan for the little one's education at age 18.

Typical Agent in Singapore where he lives suggested a whole of life plan for the insurance, and an insurance education plan, which actually insured the child's life and had a term of 20 years (i.e. would mature after the kid was 22).

This is fairly typical advice and is based on maximum commissions. Two long term insurance plans = a very expensive way of doing it and lots of commission for the agent.

My suggestion
10 year term insurance which will take him to 62 with a sum assured equal to what he suggested in his email
20 year savings plan using mutual funds or a simple 101% type life plan
This gives him a chance to build some savings in the first 10 years safe in the knowledge that everything is taken care of
After 10 years he can either take another 10 year term at a lower sum assured (keeping the cost down) or accept that if he dies Junior will be short of some of his education funding - clearly 10 years from now his health may be quite different
Realistically he is not going to work until he is 72 - so how would he fund a 20 year plan?
I also gave options for how much he should save over 10, 15 or 20 year terms to reach his target amount
I suggested he take a criticall illness, or permanent health plan in case he cannot work at some point during this plan
I also suggested he look at his own retirement needs and check whether his medical cover was sufficient for the whole family

Clearly this is far more complex, requires more work and would pay me less than the Singapore agent was angling for.

On the other hand I think the guy in question would trust me more, and recommend me to his friends in future. Plus I know he couldn't afford the 2 plans that were recommended by the agent.

[Juba]

I could do with some financial advice, for sure. I have absolutely no idea how I'm going to survive after retirement.

[lbksig]

So I have been in finance for about 17 years and find myself redundant for the second time in a year.

During the last 9 years in Asia I have found the quality of financial planning available in English to be appalling, and am thinking about starting my own business in this line.

My thinking is that there are plenty of people in Taiwan in particular who are supposedly saving a little money as well as having some fun, but wonder whether this audience would be too young/immature for a service which would help them maximise their potential savings while they are here?

I know there are also plenty of entrepreneurial Forumosans, who have done well. Do you think this audience would benefit from some solid financial advice?

I am not talking about flogging investment linked plans with high penalties (except where this is what is wanted/needed) but rather taking someone through the need for different products, and the cross section of savings and protection that should be in place for peace of mind. This might include property, mutual funds, life insurance, medical insurance, permanent health and/or critical illness type cover, as well as pension planning for the older group.

I would be very interested to hear views from Forumosans not just on whether they would use such a service, but whether they think others would do and what the draw backs would be.

I am also interested to hear horror stories. I know that I won't get rich if I do this properly and that the successful guys always rip people off. If you have had a bad experience then let us all know about it - forewarned is forearmed as they say.

You have an interesting idea and I thought of some things you may want to think about.

First is that the internet is full of websites that give out information about savings, investing, retirement and everything else for free. That shouldn't worry you though because a lot of it is redundant and or just wrong. Your strength should be your years of experience. As your example shows, the personal approach you developed with the client, even if it meant less money to you, will pay off more in the long term. People want someone they can trust implicitly when it comes to finances and retirement. If you can fill that role, and save them money, you should have plenty of clients.

Second is what is your demographic going to be? Your OP states that English materials on financial planning are are appalling so I'll wager a guess you'll be focusing only on people from English speaking countries like the US, Canada, New Zealand, Australia, the UK, South Africa, HK and any others that I may have left out. The issue would be that financial regulations from each country will differ so you may have to be a jack of all trades. A financial plan that would work for Canada may not work in the US or Australia. I don't know the regulations but I'll venture an educated guess that they differ significantly, or not so significantly, across the previously mentioned countries.

Third is the age of your clients. I would imagine that a majority of the clients who will be looking for you or recommended to you will be older, in their 30's, 40's and 50's. That client demographic will be looking for term life insurance while a 20-something won't be. I wouldn't immediately write off the recent college grad crowd though. You could still provide them valuable advice on how to reduce debt, fund their retirement and plan for the future. I would say you can try and tailor an approach for that age cohort and see how it goes. If it's too much trouble then stop taking younger clients unless they come well recommended.

[Loretta]

What happens if you can't go to work tomorrow?
What happens if you were seriously hospitalised tomorrow?
What happens if the stock market tanks?
What happens when you go home and the Taiwan dollar is worth nada?
What would you do if you found out you had cancer?
How do you save money? Do you dip into it for emergencies? What constitutes an emergency?
What plans do you have for retirement? How much money do you think you need?

And

Realistically he is not going to work until he is 72 - so how would he fund a 20 year plan?

Let me add another question to your list.

What happens if you don't retire at 65, but instead remain in productively fair health and keep working for another 20 years after that? (The proviso being that you may need to pay for some fairly expensive medical procedures to attain that.)

More and more people are starting to talk seriously about stuff that the average person regards as fantasy, such as tissue regeneration and the possibility of mitigating (or even reversing) the effects of ageing. Even if you don't take this seriously, the idea of dying by age 70 no longer seems unavoidable. Most of us knoow people who have remained active and productive long after the time when conventional wisdom - and conventional financial planning - says they should be dead. Take a loook at this TED video for a fairly recent overview of what is happening right now in labs; new organs, cures for incurable conditions, and even limb regeneration.

This doesn't mean we can stop planning for the future. It means that the future may be a lot longer, more complex, and maybe more expensive than we realise. It probably means we can also look forward to working for a lot longer than we currently envision.

Getting more on-topic, how do you, Edgar Allen, make money out of this?

[Rascal]

Given my past experience with a so-called "financial advisor" of a firm targetting expats and advisor's working at banks I will avoid anyone that takes a commission from the products they recommend because most of them become sales people that work for their own interest as opposed to advisors that work for a fixed amount (dunno the correct term) and have nothing to gain from selling a more expensive product.
Such conditions may however make it difficult to attract potential clients, say you charge e.g. USD100 for a session but the person has only USD1500 to invest then the fee is too high, relatively at least. However such a person may not be part of your target clientele anyway.

Assuming you work for an hourly rate or similar perhaps it's a good idea to offer the first discussion for free but keeping it on a very general level, i.e. just getting to know the clients requirements / expectations and his financial situation, explaining what you can offer (but without recommending any specific products) and then see if the client is interested in future sessions, for which he will have to pay. Should it be someone that has unrealistic expecations like constant double-digit returns each year you can then also choose to reject any further meetings and not waste anyone's time and money.

[Huang Guang Chen]

Certainly a service I need, but like Rascal I've come across way to many former FILTH airport construction labourers now in suits spewing out financial advice to the unwary here in HK. I certainly wouldn't put you in the spiv bracket, Edgar Allen, but that's who have discredited a very creditable service here.

We should hook up for a beer sometime.

HG