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Global Financial Planning Needs Practice Knowledge

By Taylor Liao, CFP

The financial crisis of 2008 changed the economic world, as well as the market situation of the financial planning profession. Some of the outcomes from the financial crisis were positive although most were negative, such as the general decrease of wealth that was experienced by the majority of the public. 

One positive outcome I’ve observed is the popularity of financial planning among colleges. Some universities have started offering financial planning programs in several financially-related departments, which will add to the number of students who will potentially become financial planners after graduation.

Bank Employers Don’t Value CFP Certification

One negative outcome is that the CFP certification is not as highly regarded as it was several years ago. The banks have stopped providing compensation for their employees to attain CFP certification. The bank authority found that there was a conflict between traditional product sales and the comprehensive financial planning that CFP professionals are taught to use. In the employers’ perspectives, a bank employee with a CFP certification does not guarantee a better sales performance.

The Demand for Wealth Management is Hurting Financial Planning

Another area that was impacted by the financial crisis that is worth exploring is wealth management. This used to be the banks’ main business. For a while, the client had to have assets of over US$300,000 to be served. Then, due to competition, the minimum was lowered to US$100,000. This allowed more people to be eligible for wealth management, but wealth management and financial planning aren’t the same.

CFP certificants found that they were faced with a dilemma: either continue with products sales to meet the performance requirements or perform financial planning, based on the interests of the client. This dilemma resulted in most financial planners giving up on financial planning because it was too hard to meet the performance requirements.

There are many barriers in the banking industry, beyond the one I mentioned, that make it difficult for financial planning to exist. In my opinion, banks need to change their focus to long-term relationships with their clients, rather than short-term sales performance.

Financial Planners Are Needed Right Now

In the report: 2012 Household Financial Planning Survey, (created by Certified Financial Planner Board of Standards, Inc. and the Consumer Federation of America, released on July 23rd, 2012) there is data that shows an increasing number of Americans (38%) live paycheck to paycheck, as opposed to only 31% in 1997.

The situation is similar in Taiwan. After the financial crisis of 2008, the public struggled to save money, even those who aren’t in the low income bracket. They just couldn’t find enough money to save. For most people, their income was reduced. The slow-moving economy also reduced the possibility of increasing salaries in enterprise. On top of decreasing incomes, the high inflation of necessities such as oil, gas, and electricity made it nearly impossible for people to save.

Fortunately, financial planners are in a position to help the public overcome today’s messy economic environment. They can help individuals get back to a healthy financial status, and this will help to stabilize the entire society, too.

Helping Low-Income Clients

Some clients might not be able to afford us, but I think we need to have empathy. CFP professionals need to be flexible on payment terms so they can service all kinds of clients and help the poor get through the recession period. This global economic downturn is rare and something CFP professionals have never faced before.

Planners who help out lower income clients might not receive the same financial satisfaction as they would from wealthier clients, but they will receive gratification. Planners can feel good about themselves after helping these people understand basic things such as controlling their budget and managing their debt.

In the 2012 Household Financial Planning Survey, the executive director of CFA, Mr. Stephen Brobeck, says, “[financial planning] requires one to think seriously about their finances, and many Americans would prefer not to and then don’t…but having a personal financial plan helps both rich and poor achieve their financial goals.”

FPSB Needs to Face the Challenge

The development of CFP professionals has run into a bottleneck, more or less due to this recession. FPSB  needs to find a creative way to face this challenge. My suggestion is that FPSB should be more active in developing its worldwide members. FPSB may help in two areas: they can increase the exposure of the CFP designation and the exchange of financial planning practice knowledge. The CFP mark was established several decades ago in the US and they have an abundance of financial planning knowledge. This kind of knowledge could be quite valuable for CFP certificants, in Taiwan, when setting up their financial planning businesses.

FPSB could recruit a group of experienced CFP practitioners who could share the knowhow of financial planning to planners around the world. FPSB could also organize forums for financial planning knowledge to be shared, specifically for developing territories such as Taiwan, Korea, or Indonesia. In Taiwan, we don’t have a successful financial planning advisory firm. Local CFP certificants would be happy to join a forum to get knowledge and tips from experienced professionals.

Time for Practice Knowledge to Be Shared 

The 240 hour training program that a CFP certificant receives is all about theory. There is no material about getting started in the business world. A newcomer who simply passes the exam and is eager to start may oversimplify how easy it is: “All I need is software for planning.” Eventually, they will discover the truth: financial planning is much more than data.

If you would like to run an adviser firm, there are many things to consider such as:

  • How do you get a training course to be duplicable?
  • How do you setup a standard operation system of financial planning processes?
  • How do you use a cloud-based planning software system?

For a long time now, FPSB has provided knowledge about financial planning theory. Now, FPSB can act as an exchange center for knowledge pertaining to business practice; leveraging what they know from the US’s financial planning history.

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