Financial Planning Lessons Learnt From United States

The financial services industry is changing.

More and more traditional product-oriented business (e.g. Brokerage, insurance, etc.) is embracing financial planning. There is an increasing number of transaction-oriented sales people converting to �Financial Advisers� who are able to provide multiple financial services like investment, insurance, tax, estate, retirement planning and sell more products.

The focus is switched to building long-term relationships with customers and �needs-based� selling. These changes has resulted in sales force transformation where brokers and agents are being replaced by financial advisors whom are now being asked to sell more financial products. There is also an increased pressure to cross-sell products.

Technology is viewed as a driver.

Financial planning firms are able to derive cost savings from the Internet in their internal operations. However it is not a significant cost-saver in client servicing as the mass affluent market segment still prefer to deal with their financial planners face-to-face. Technology will eventually make most transaction or administrative services, as well as information, a commodity. The Internet has driven marginal cost of information, close to $0 and innovation is occurring in all areas of financial planning services.

Consumers now need to process information into knowledge. However, they lack the time and expertise and gave rise to the need for independent financial advisors. Technology (IT tools), in this case, can be view as an IT enabler and not a replacement for financial planning advice, because it cannot replace the chemistry between the client and advisor.

The knowledge and insight that consumers want is not price sensitive. As a result, intermediation will be based on knowledge and insight. Advisors will be pressured to give more value (beyond transactions) and they will eventually assume the role of validator for self-service individuals.

The number of �financial advisors� far exceeds the number of �certified� planning professionals. There is a struggle for tied advisors to be an independent advisor. In addition, advisor qualifications vary greatly and there is a greater �Reputation Risk� for the financial planning industry.

The business model has changed more quickly than the infrastructure and the hiring models and support infrastructure have not changed fast enough. Training as an advisor has been optional instead of mandatory. The advice parameters have broadened, leading to more unqualified individuals providing broader-based advice. Despite all the focus on financial planning, many people were still not qualified to be a financial planner.

The need for financial planning is being recognized on a global basis. There are over 50,000 CFP worldwide with the largest growth overseas. The CFP designation is becoming the most widely recognized designation by the consumers.

We are seeing the beginning of industry standardization, balanced with country localization. Governments and corporations are recognizing and supporting the need for financial education and planning. Consumers at all levels (high, medium and low-income earners) are gasping the need to plan financially.

So, what is driving this need? Reasons include:
(1) Consumers are concerned about the shrinking state pension program
(2) Increased responsibility for their own financial security
(3) Worried about the lack of adequate savings and increased debt
(4) Unsure of how to handle large sum of money e.g. Inheritances
(5) Confused by the complicated array of financial products available

Despite all the above implications, the financial planning industry is still booming.

It represents a potential market opportunities for financial planners to advise their clients on how they can better prepare for retirement. More consumers are investing but many are still not aware of the implications of their actions.

Hence, there is a greater need for financial planners to act professionally, in order to boast the logging consumer confidence.

The Asian financial planning industry will experience much of the same prime movers and implications as do the US governments and companies will continue to encourage individuals to be more self-sufficient.

As a result, more consumers will seek help from financial advisors. People are willing to pay for advice, but only good and sound advice. Retirement and investment planning will be the initial focus because of the aging population and increased complexity of investment tools.

However, focus will eventually move to a more holistic approach to planning, including education funding, risk management, insurance and wealth planning. Services will be bundled (inclusive of planning). An advisor�s success will be measured by his ability to retain clients and grow assets under his management.

They need to embrace technology and understand their target markets. They need to adapt to their client service model accordingly (e.g. high technology or high touch). Countries must determine whether they want to be a specialist or a generalist and seek out the complement.

It is also important for them to recognize the need for certification, education and continuous training. Financial planners must emphasize the advice, not the financial plan and sell their planning services based on their advice.