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How to Run a Successful Financial Planning Firm and Why So Many Others Fail

 By Taylor Liao, CFP

CFP certification has been in Taiwan for around 10 years, but the financial planning profession is still developing. There is one statistic that really sticks out here in Taiwan: a very low percentage of individuals who receive their CFP certification actually become financial planners. What happened to those people who spent lots of time and money studying for and passing the exam? Why didn’t they use their certification? Part of the reason might be the huge gap between theory and practice. These people found it was hard to take the first step to be a financial planner. We may be able to solve this problem with the fundamental of education.

Theory vs. Practice – The Gap in the CFP Certification Program

By the time CFP professionals have passed the examination, we have received 240 hours of education. I attended the training course in 2003, the first year that CFP certification was offered in Taiwan. You can imagine the situation: there were quite a few people who had already experienced financial planning including the teachers of the CFP certification course. When I look back and remember the training, I must say that there was a really huge gap between theory and practice.

Even by the time you had passed the course, you didn’t know how to get started as a financial planner. I spoke with a CFP certificant who had passed his examination a year ago, and I asked him, “Why don’t you start planning for clients?” His answer surprised me. He told me that he didn’t know how to produce a financial planning report. In our firm, we have built a platform for other financial planning firms or independent financial advisers to learn from. They can rent planning software, website-building tools, SOP Systems (Standard Operation Procedure), training courses, and other helpful tools from us. We have found that there are a lot of barriers for CFP certificants starting their careers as planners, and we have tried to build a system for them to help them start their businesses easily.

This is not the fault of the CFP mark organization. It’s due to the lack of sufficient, experienced planners in the profession. Lots of people carry the label of CERTIFIED FINANCIAL PLANNER professionals, but actually, a CFP credential doesn’t guarantee that you have the ability to do financial planning. The solution to make up for this gap between theory and practice is to add more elements into the CFP certification program. My suggestion would be to add a comprehensive case study to the Sixth Module, and it would be best conducted by a group discussion, a team of students simulating a planning case study with the output being a planning report. This case study would help future CFP practitioners to understand the entirety of financial planning and also show them that CFP certification is just the first step toward the road to becoming a financial planner. The CFP certification needs to be verified by the market to prove that it’s a symbol for a qualified financial planner, not just a representation of a professional certification with expensive tuition and high barriers to entry.

Charitable Trusts

During last month’s CPD education, we listened to a lecture on the topic of charitable trust. The speaker was a CFP professional. He helped the clients settle a charitable trust that helped children in an orphanage in central Taiwan. The orphanage encourages the children to eventually move on and be independent. Once they move out, the trust will give the child US$270 a month until he/she is 21 years old. They even work with an insurance company to cover the Medicaid for the children. The trustee was a local bank and this planner was the trust supervisor. The trust was started with around US$70,000.The advantage of the trust is that the settler can arrange the contract with his/her wishes, such as how to use the money to help the children.This is a good start for the children and a very creative way to do financial planning.

First, Solve a Problem, Then, Make Money

When we tried to start our firm two years ago, one of our partners had contacted angel investors to invest in us. After he presented our business model of building planning systems for financial adviser firms and advisers, the angel investor responded to him “It’s not our concern that you will make money, we care about whether you can solve a problem for others. The bigger problem you can solve, the more business opportunity you will have, and this will guarantee that your firm will make money.” During our entrepreneurial beginning, these words really inspired us.

When we were discussing our business model, we always asked ourselves, “Can we create more profit for our client when they use our systems?” We believe that before we make profit, we should create profit for our client first. The same idea applies to CFP professionals developing their financial planning careers in Taiwan. They are facing the problem of being compensated for financial planning. In my opinion, we should be more humble and listen to the voice of market needs. CFP professionals should be more open-minded to cooperate and share with each other to find the best business model. A charitable trust is a good example of something that solves a problem first and then, pays back profit later. We may only receive small adviser fees from settling a charitable trust, but more importantly, it will help the client to fulfill his/her wish to do charity.

Finding a Niche in the Financial Planning Market

Becoming certified will not automatically get you clients which is why it’s our responsibility to think about what we can do for the public. Since we are CFP professionals, we can be creative to find out which financial services are favorable to our clients. Financial planning will always be around, but, we have to examine the market and find the right angle to approach it, and sometimes we have to create a market. I have observed many CFP certificants after they have passed the qualification test; they were full of passion about financial planning, so they started a firm together with other CFP practitioners, but, often they struggled to succeed. They found that it was hard to make money from financial planning. So, they would switch to becoming a training consultant who taught financial planning. I have seen this pattern repeated many times; a new firm is established and it disappears in a few years. It’s a pity that they spend so much money and effort on starting a firm and then they get nothing in return.

My interpretation of their failure is that they lack a profitable business model. The way to overcome this is to find a unique way to reach potential clients. The trick to surviving and being successful is finding the niche in our market, for CFP professionals. There is an opportunity market that integrates the services of lawyers, banks, government resources, and the like. This niche would be useful for clients attaining a charitable trust, a real estate asset trust, an employee benefit trust etc. If you want to setup a firm for financial planning, you can study these kinds of services: procedures to set up, requirements from the government, how to work with a lawyer to set up the contract etc. The point being, if you want to setup a financial planning firm, you have got to find a special strength and offer it to the market properly.

As CFP professionals, we can use the CPD training as the platform of re-education and communication. When we share a successful business model or a good idea with other planners, we often will get positive feedback from them.

Aligning our Education Program with Market Demand

I have heard that the number of people attaining the CFP mark has decreased for several years, in Taiwan. This is something that our financial planning organization, FPAT, needs to pay attention to. If we can modify the education program to meet market demand better, the situation might be improved. For CFP professionals, we have to help each other by selflessly sharing insider tips such as workable business models or progressive ideas to developing the market.

4 comments to How to Run a Successful Financial Planning Firm and Why So Many Others Fail

  • “We believe that before we make profit, we should create profit for our client first” Wonderful saying and well written 🙂

  • Patience is the name of the game , Taylor has put this very nicely , expecting quick results often leads to disappointment , I see a lot of impatience to earn after a CFP Certification , It only makes one educated in the area and not market ready where the application is done from the education sought , there is a big difference , as Taylor rightly put CFP certifications provides the right foundation to understand and apply , application is often taken for granted and that’s where most of the impatience is seen , one needs to practice and seek the right skills before being called market ready .

  • Krishna Gopal Gupta

    Really, a very inspiring & motivational idea to look for the profit of the client FIRST. If one follows this, undoubtedly, one will prosper automatically. It is also a good idea to make available planning software etc. on rental basis. Those who are equipped with these may offer their services to new entrepreneur at nominal charges.

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