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2012 Predictions: An Opportunity for the Financial Planning Profession?

By Taylor Liao, CFP

2011, for financial planners, was just like riding a roller coaster. Through the long-lasting 2008 collapse of the Lehman Brothers financial crisis, it seemed as though the economy would get better towards the second half of 2011. Unfortunately, then came the euro-zone debt crisis and all things were back to square one. Most of the clients were worried about the revenue of their investments. Looking forward to 2012, it’s full of uncertainty. It casts a shadow on the financial planning profession. Maybe 2011 was a tough year for financial planners, but there are still good signs for the profession in 2012. The situation may actually be favorable in several areas.

Less Talk, More Action

For more than 20 years, the sales force of insurance companies used to be the main source of revenue for insurance companies, but the situation changed after the banks developed their broker system. They took over 50% of the market share in just a few years, and they currently hold 70% of the market share right now. Meanwhile, the insured rate of Taiwan is over 200% (meaning everyone has two policies in hand). That is happening on a small island with a population of 21 million and more than 30 life insurance companies. You can imagine how competitive the insurance companies are. For those companies, they are all facing a problem now: How do we expand our market share? In a nearly saturated market, they have to find a way to deep-plow the customer. It’s good to hear that some insurance companies are pushing their agents to attain the CFP professional training courses. They know that the certifying of financial planning will help their sales and develop their client base.

Nowadays, the insurance sales are at a turning point, too. They are having the problems of lower productivity, higher premiums, lower commission rates, and the intense competition from the bank. The premiums are getting higher because of the ultra-low interest rates. Right now, the popular products that are being sold are the foreign-currency products. This is because the premiums are lower than the products of local currency. Also, most of them are short-term periods—6 years or 10 years. The commission rates are additionally quite low—only 2% or 3%.

Some local insurance companies are operating like banks. They are pushing short-term, foreign-currency products to absorb their deposits, just like a bank. This strategy makes it hard to survive for the salespeople because of the low commission rates. Some of the salespeople are thinking to change their career to financial planner or to implement financial planning into their sales activity. Financial planning will be their solution to carry on their career and help their clients. They can free themselves from selling just products and spend some of their time learning the knowledge of financial planning. They will find out that through the approach of financial planning, they will have a higher acceptance from their clients. Also, their clients will treat them as close friends as opposed to just a buyer-seller relationship, as it was before. Clients appreciate how planners sit down with them and listen to their dreams, caring about how to help them to achieve their goals, and not just selling products to them. It’s the perfect timing for an insurance agent to seek for a breakthrough action to join the financial planning profession.

Less Product Sales, More Financial Planning

For a long time, Endowment Insurance has been sold as a savings tool in Taiwan. This kept the average face amount of life insurance for all insured people at a very low level, less than US $30,000. For a middle-class family, earning a yearly salary of US $50,000, they may pay the premium US $10,000 a year and receive the equivalent protection of less than a US $30,000 face-amount life insurance policy. It’s not wrong to sell products to a client, but if this client can have a financial plan before he/she makes any decisions, they will know the priorities of their life and what the sequence of their goals are.

The insurance is the tool to achieve the client’s need for risk management; it’s not the ultimate weapon that can solve all the needs of the client. For years of economic depression, most of the clients treasured their money and hoped that it could be used in the most effective way. They needed their financial planner to take a look at their financial status for them, to adjust or reallocate their resources, and to keep them on track so they could achieve their goals. The financial planning profession is new to Taiwan. We have a hard time promoting the idea of financial planning but now, the external environment is conducive to this profession. Financial planners should take advantage of this.

Less Theory, More Practicality

We have more than 900 people whom have passed the CFP certification exam, but there are one third of them whom didn’t renew their qualification in 2011. They spent a lot of time and money to pass the CFP certification exam and they expected to perform the career of being an independent financial planner and receive the advisor fee from the client by providing them professional consultation. Unfortunately, most of these planners were disappointed at the real situation—clients need to be educated to accept the idea of financial planning and there is no successful financial advisory company or financial advisor that can act as a role model.

Aside from the market element, there is something that CFP Professionals need to improve. Students get certified but they still don’t know how to start a financial planning business. The education for for CFP professionals, includes 240 hours’ of courses that are theoretical training only. There is not a single practical course that teaches how to be a financial planner. To become a financial planner, students need the training of counseling skills for approaching a client, the practical experience to give suggestions based on a client’s financial analysis…etc. If they want to organize an advisory firm, they will need more knowledge: a profitable business model, a workable sales system…etc. Due to the lack of profitable business models, the existing advisory companies are small scale—no more than ten consultants, and they are still struggling to survive.

The good news is the market is maturing and there are many people in insurance, bank or stock securities companies that are interested in a financial planning career. These people are eager to have a business platform where they can perform as an independent financial planning professional. Our company is dedicated to two things: developing a business platform for financial advisor/planner software, EIP(Enterprise Information Portal) System, and training of counseling skills, setting up a sales system and the profitable business model. Our target is to help the financial planner develop their business and/or to setup a financial advisory firm in a low-risk way.

For the gloomy year of 2012, the future seems full of uncertainty, but we have seen that many people remain committed to the financial planning profession, even though the circumstances aren’t favorable for this profession. But, throughout the long term of product sales, the client expects change—a change that somebody will really care what they want and sell the product which will help to achieve their goals, not the product of higher commission rate and the hottest item that insurance companies or banks are pushing at that time.

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