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The Financial Planning World is Flat

By Daehong Kwon, CFP

Previously, when I met with clients for a consultation, we would talk about their individual issues and, broadly, domestic economic situations and prospects. Now, our discussions have to reach out to global issues, as we are exposed to real-time news reports on global issues and the correlations of the economic situations of the countries around the world. This is because Korea was affected by the recent global economic recession and the euro-zone crises. Some clients complain by asking, “Why should my retirement fund shrink due to some economic problems in a country I have never heard of?” But, that is the present reality and we must consider global circumstances in our financial planning.

In financial planning and asset management, overseas investment has now become a prerequisite consideration from the asset allocation perspective. As Korea has entered into a low-rate growth phase, investors are consequently turning their eyes overseas, and investments in BRICs, other emerging markets or commodities requires one to pay attention to global economic circumstances. In this context, our relative weaknesses in the accessibility to international issues and in risk management make diversified investment necessary, calling at the same time for our readiness to respond to any global crisis that may emerge.

While the global economy may be the biggest problem at the moment, the following are also major issues apparent in both the domestic and international arenas.


First, not just tax-evasion but legitimate tax-saving itself is getting increasingly difficult, both in Korea and internationally. In the Republic of Korea, tax law revisions are on the table, with raising taxes on the rich emerging a hot issue amid the upcoming presidential election. The super-rich in this country are paying keen attention to issues such as disclosing of Swiss secret accounts, the Tax Office’s investigation on tax havens and levying penalties on offshore tax evasions, the moves of international funds to Singapore, and the like. The depression of the stock and real estate markets has rid investors of good investment destinations. These have combined with tax burdens to create a trend toward both risk-off and tax-saving investment vehicles like saving insurances and bonds. Hence, keeping wealth safe has grown as important as enriching it, and many financial planners are studying measures to do so.

New Sources of Income

Second, many people are turning their eyes overseas, looking for new sources of income. Business-running clients are knocking the doors to emerging markets that offer cheaper labor and bigger potentials than China. Young job-seekers who have suffered from domestic job shortages, the self-employed who have faced the difficulties in making ends meet, and elderly people who are dreaming of a peaceful life after retirement are all showing interest in going overseas for their own reasons. Some are planning on global marketing, taking advantage of the “Korean Wave.” All these may not be easy, but they are indeed a sign of change that they are not going to limit their activity to domestic boundaries. This is why financial planners who deal with these people need to broaden their global perspectives.

Global Investments

Third, national borders are being eliminated in investments, too. Those with advanced or expert-like knowledge and interest in investment are even showing interest in investing in individual companies or particular opportunities. For instance, LVMH (the mother company of Louis Vuitton)  is going to acquire Hermes and they are checking out ways to invest in the Hermes stocks. During the renowned IPO’s of social networks such as Facebook and LinkedIn, some people made very bold investments. Such investments may be a daily activity for those who live in the particular countries where the companies were founded, but those who engage in investments from another country can be considered as possessing a considerable global outlook.

Retirements of Baby-Boomers

Fourth, opportunities and risks coexist amid the retirement of the baby-boomers and the trend of the nation’s aging. Like some advanced countries, Korea is facing the issue of baby-boomers’ retirements, while exhibiting the fastest rate of aging. The real estate-oriented asset structure is spawning fears on the possibility of asset value detraction, while the issues of domestic debts and re-employment continue to pose a threat. Against this backdrop, the country is discussing national-level support measures through the “Old Age Livelihood Support Act.” Thus, more and more financial planners are studying ways to capitalize on these issues for business opportunities by looking into examples from advanced countries.

In addition to those four areas, there are many other global issues to keep an eye on, such as arenas related to ‘politics, welfare programs, educational systems, health care, etc.’ These are issues that need to be touched upon, one way or another, in the course of financial planning for clients, and depending on how one handles or uses them, they can be a risk or a good opportunity.

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