Cultivating the Client-First Mindset
Successful financial planners have one thing in common, Nicholas Chu, the managing director of Max Growth Wealth Education Sdn Bhd, pointed out – all of them put their clients’ interest before their own. This “client first” mindset is also really what separates the wheat from the chaff, Chu who is also a member of the Financial Planning Association of Malaysia(FPAM), said matter-of-factly.
“People do not really care about how much you know until they know how much you care,” Chu said. “And when they know how much you care, trust will be gradually built and the client planner relationship will be on a good foundation.” This is especially critical in the business of financial planning, Chu added. “A reputation takes years to build, but only seconds to come crumbling down. As such, financial planners must jealously guard their reputation.”
Having been a financial planning practitioner for close to a decade, Chu knows what he is talking about; having gone through the ups and downs of the practice. In order to have a sustainable practice, Chu said prospects must become clients and clients must eventually become friends. “It would be ideal if clients become friends because there will be trust and confidence in the client-planner relationship and the actual work of planning becomes much easier,” he said. “Yes, in the financial planning business, it is about trust, trust and trust.”
That said, Chu believes for the financial planning profession to grow, all stakeholders must participate in educating the marketplace. There must also be investments put into financial education for the frontlines of financial service providers. “These frontlines must be trained not just in product knowledge, but also in advisory skills,” Chu said. “They must be trained to have an adviser’s mindset. They must be trained in various soft skills, in particular, those on how to effectively deal with people.
“Industry players must also not be just profit-focused, but also have the ability to look into developing a thriving profession for the long-term,” he added. “And to ensure there is a bright future for the profession in the horizon, efforts and investments must be put to promote the profession. Everyone needs financial planning. It is an industry whose time has come and there should be more effort from all stakeholders including the government to ensure it flourishes.”
Malaysia also needs an organization that focuses on research and development for the industry. “A survey to find out what people think of and see financial planning is long overdue and thus FPAM recently participated in the Financial Planning Standard Board’s Global Consumer Survey – Consumer Awareness About Financial Planning and CFP Certification,” Chu said when the managing editor of the 4E Journal, Steven K C Poh met up with him in an interview recently. “Such a survey would go a long way to assist industry stakeholders on how to tailor their services to meet marketplace demands.”
The following are excerpts…
Do you equate financial planning to retirement planning?
If we are following Habit 2 – begin with the end in mind – of the late Dr Stephen R. Covey’s international bestseller, The 7 Habits of Highly Effective People, then we can most certainly equate financial planning to retirement planning because we plan our personal finances for the ultimate aim of ensuring we have enough money to go into our retirement without having to worry about when our next pay cheque will come because upon leaving gainful employment, there will be no more pay cheque to look forward to.
In essence, you are saying we do financial planning with a focus on our eventual retirement.
Retirement planning has often been regarded as a sub-set of financial planning and this happens to also be my own financial planning philosophy. It is understandably a key element of lifetime financial planning. As financial planners, we must be committed to encourage Malaysians to properly plan for their retirement and above all, ensure that all of them enjoy security and dignity in retirement.
But is retirement planning all about saving enough money?
Retirement planning is not just about planning your finances (savings, cashflow management, debt reduction and investments). The scope is much wider and goes beyond money. As a significant milestone in life, retirement like birth, graduation and marriage, warrants our attention when it comes to details. Apart from being organized financially, other areas like estate planning, lifestyle, healthcare and a host of other social and psychological needs must also be looked into. It will not be unusual for a retiree to consider or explore a second career opportunity, for instance, being a consultant to businesses or teach in a college or university to fulfill his/her intellectual needs. Ensuring one is always connected to family and friends for support, taking up a new hobby, volunteering for a good cause and travelling are also important, if not critical for the mental and emotional health of the retiree.
Meticulous financial and retirement planning will ensure that one achieves financial independence when the time (retirement) comes. And it goes without saying that a good retirement plan would include aspects of financial planning such as risk and insurance planning, tax planning, estate planning and investment planning.
As a CFP-qualified financial planning practitioner, how do you approach your potential customer with the subject of planning their persona finances and retirement? Which is harder? Talking about persona finances or talking about retirement?
It very much depends on the prospect. From my experience, young adults(those between early 20s and mid-30s) are more interested in investment planning as well as risk and insurance planning. For those that get into trouble with credit card balances, they would want to talk about debt reduction and cashflow management. So it really depends on which station they are a tin life. Those approaching their 40sand 50s would be more inclined to start talking about retirement planning. And when they broach the subject, I will then talk to them about financial planning as well and show them that it is imperative for them to consider amore comprehensive plan to ensure a comfortable retirement. For the younger group, I would also tell them about the importance of doing good financial planning to ensure a comfortable retirement. For me, it is never too early to do retirement planning. I tell my younger group of clients that if they plan for their retirement early, they will be assured of a good retirement. Time is a great ally when it comes to retirement planning. So my advice is never to procrastinate when it comes to retirement planning.
Chu: Meticulous financial and retirement planning will ensure that one achieves financial independence when the time (retirement) comes, and it goes without saying that a good retirement plan would include aspects of financial planning such as risk and insurance planning, tax planning, estate planning and investment planning.
How long have you been a financial planner and what are your thoughts on how this slowly emerging profession would be changing the financial services landscape IN Malaysia?
I have been a financial planner for almost nine years now having joined the industry in 2007. Despite being on Malaysia shores for more than 15 years, the profession is still in its very nascent stage of development even though the laws governing it were put in place in2004. And there are reasons for this sluggish pace – legacy and cultural issues among other things.
Transiting from an insurance or unit trust agent to a financial planner is challenging especially so when the marketplace is already so used to product-based services that are remunerated with commissions. In addition to the reluctance on the part of the clients to pay fees, other challenges include clients not being forth coming with their personal and financial information, which in turn, makes it tough to put together an effective, comprehensive plan. But things are changing, albeit slowly.
Malaysia is on its way towards becoming a developed nation, at least by 2020, according to the government’s forecast. That means the average household income and the level of education will increase. A more educated and knowledgeable population would only mean one thing – higher demand for financial planning services.
In addition, the ubiquity of the Internet has also transform the way we acquire information and this can only augur well for the profession. Information can be disseminated quickly as people are connected electronically almost 24/7. I am hopeful there will come a day where the financial planning practitioner would replace the unit trust consultant, the insurance agent and perhaps even the wealth advisers at the banks. I also believe financial planners would one day share the same professional status the doctors, lawyers, engineers and accountants currently enjoy.
What are some of your thoughts to fast track the development of financial planning as a profession in Malaysia?
Firstly, I believe the right policies must be in place – industry- and profession friendly policies. At the moment, there are too many professional marks in the marketplace and this is confusing the people. And there are also many people holding themselves out as financial planners when they are not properly licensed even though is it against the law.
Meanwhile, the quality of education and continuing professional education must be improved to further enhance the professionalism of the practitioners. And in addition to technical knowledge, prospective financial planners must also be taught people or soft skills which many in the industry are lacking.
Also, I am of the belief that in order to spur the industry on, there must be incentives, like tax rebates, to promote the demand for financial planning services. When demand increases, naturally more people will be attracted to be financial planners and the profession will enjoy good organic growth. As a relatively young industry, demand must be created and a good tax rebate is one quick way of doing this. We have talked about this for years, but it has yet to be implemented.
Secondly, I believe in order for the industry to flourish, all the stakeholders, in particular, the industry players – unit trust companies, insurance companies, investment banks and offshore financial products and services companies –must put in more effort and investment into the industry. By doing so, the marketplace would be more open to accept financial planning as a way of life and a norm of the industry. If these stakeholders believe in the long-term prospect of the industry, they should provide more support for it in terms of promoting it more aggressively as well as investing in educating the marketplace.
Thirdly, financial planning firms should focus on recruiting and training financial planning practitioners rather than multi-product/services representatives; in other words, moving away from product-based selling.
Chu: Convincing prospective clients on product features and benefits has always been the easier and faster way out. In doing so, many sacrificed the ideals of the profession for income.
At this point in the emerging financial planning industry, do you agree that Malaysian financial planners are still in their product pushing mode as opposed to playing the advisory role? How do you propose that this mindset be changed, at the practice and industry levels?
From my vantage point, I honestly believe that most, if not all, who hold themselves out as financial planners in the marketplace would want to practice the profession from the planning’s advisory perspective – to help clients better organize their personal finances. But more often than not, in particular for new entrants into the profession, it is a battle between income and true blue financial planning practice(providing advisory for a fee). In short, it is a matter of economics; of survival. As trust and client-financial planner relationships take time to develop, relying solely on providing financial advisory for a fee would be extremely challenging. Convincing prospective clients on product features and benefits has always been the easier and faster way out. In doing so, many sacrificed the ideals of the profession for income.
To circumvent this, many financial planners now start financial planning with their clients on a modular approach(for instance, children’s education planning, insurance or investment planning and retirement planning)and slowly move their clients to holistic planning once rapport is better established.
For this mindset to change, financial planners must first believe that they offer value to their clients. You must believe that the services you offer will greatly benefit your clients. If you do not believe you offer value, then naturally you will have a hard time charging your clients professional fees. It’s that simple.
Secondly, you would need to quickly pick up some very important soft skills – the skills that they do not teach you in school like how to handle a client professionally, how to deliver a convincing presentation, how to talk confidently, how to do personal and professional branding and how to create business opportunities by helping prospective clients solve their persona financial problems.
These are some of the things that the industry can do to help the practitioners to better themselves professionally.
In your personal and professional opinion, on a scale of one to 10, how would you rate the professionalism of the existing batch of Malaysian financial planners?
I will rate it at eight. But I suspect many people will say that it is too high. But let me explain … there are currently not too many financial planners around. Those who are currently in practice and are able to sustain their practice are the ones who have survived the scrutiny of the clients/market and thrived. They must have done something right and acceptable by their clients/market and have reached a certain level of professionalism. Hence the rating of eight. To each, his own. These financial planners must have found their magic formula – the most effective way to practice and sustain a profitable business – to come this far.
Chu: In addition to adherence to complicated requirements, potential planners lack role models and guidance from experienced and successful practitioners.
We currently have approximately500 licensed financial planners in the industry. This number is too small if you take into account the size of the potential market. Why is there seemingly a reluctance for qualified financial planners to go into practice at the moment?
If we look at the condition of the current market, a few reasons come to mind. Many qualified planners do not go into practice because they seemingly do not have the confidence that the business is sustainable and that they would be rewarded well in terms of professional fees. You really cannot blame them because they are not convinced that clients would pay advisory fees having been in an environment where fees for financial advice is not normally practiced.
Then there is the concern about professional fees not in line with the amount of effort put in. Potential financial planning practitioners know they have to spend a fair amount of time with their clients and many feel they can make money quicker doing other things. Here, we need to take into consideration that many of these potential planners have backgrounds in sales from the insurance and unit trust industries.
Also, in addition to adherence to complicated requirements, potential planners lack role models and guidance from experienced and successful practitioners.
You have been involved at the chapter level work in Malacca for many years and despite being recently elected to be a Board member, you are still active at the chapter level. What are some of the challenges you face in Malacca when it comes to the locals there being aware of financial planning?
The Malacca chapter has organized quite a few significant and successful activities over the years. For instance, to initiate the availability of CFP Certification programmes in the state three years ago. We are also working together with state government and AKPK (Counselling and Debt Management Agency) to organize state level financial planning awareness activities, in addition to the many networking nights where members meet with related industry players socially for collaborative and engagement purposes. And we constantly engage the media to assist us in promoting the profession as well as to educate the public on the importance of financial planning.
In our experience, the chapters can only do so much when it comes to generating financial planning awareness among the locals. We are constantly limited by resources – both financial and manpower. We are all volunteers at the chapters and organizing these promotional activities needs a lot of effort and is extremely time consuming. And we are often also constrained by limited finances. As such, the frequency and consistency of these activities and events will always be a challenge at the chapters.
What more do you think can be done(but have not be done to date) at the chapter level to promote financial planning awareness? What do you think would be the best message to send out to the marketplace in Malacca to get people interested in financial planning?
I believe a yearly event such as Financial Education Month would be helpful and would go a long way in inculcating financial planning awareness. It would be great if programmes of this nature are supported by the state government together with related agency like, EPF, PPA, SOCSO (Social Security Organisation), AKPK and FMB(Financial Mediation Bureau). Industry players like the banks, investment houses, unit trust companies, universities, colleges and related associations should also participate. The apt message will always be: it is never too early to plan, whether it is in Malacca or Malaysia. And failing to plan is planning to fail. We can never over-emphasize this message.
In the early days of the industry, many financial planners focus their attention on high net worth individuals for their business/practice so much so that people who genuinely need financial planning services are often neglected – young adults in their early 20s to people in their mid-30s. As the industry matures, albeit slowly, do you think financial planners need to refocus their attention to this group of people as they make up a huge segment of the potential market. Appreciate your thoughts on this.
Financial planners were focused on acquiring high net worth clients in the early days of the profession simply because they were supposedly the “low hanging fruits” – people with spare cash to invest; people who supposedly were worth their time talking to. But many failed to realise that it takes special skills to approach these high net worth people. And when they are unable to get these people to talk to and turn them into clients, they get disappointed and some gave up the practice. Whilst it is great to have high net worth clients, we need to realize that this group of people do not really need financial planners as they already have private bankers and investment advisers attending to them. The opportunities are always out there. And if you were to analyze the profession and the industry a little deeper, you will realize that the people who really need financial planning are the everyday, common people – the regular man-on the-street. These are the folks who need a financial planner to help them better organize their personal finances.
But as always, different people have different needs. In financial planning too, different age groups have different needs and a good financial planner would know and have the requisite people skills to assess what his/her clients need and how to effectively approach them.
So, it is really not an issue to refocus, but an issue of understanding how to approach potential clients for their business. And to do that, the financial planner must know his/her own strengths and decide on which target market he/she wants to work with.
Chu: Whilst it is great to have high net worth clients, we need to realize that this group of people do not really need financial planners as they already have private bankers and investment advisers attending to them.
In your view, what are some of the key messages that you think can be used to promote to the young adults(those in their early 20s to mid-30s) to get them to be serious about financial and retirement planning?
As I have mentioned before, retirement planning is not just a plan to retire from work. It is a plan to be financially independent so that we can achieve more in this life. I am often reminded of this quote by Quaker missionary Etienne de Grellet, who once said, “I shall pass this way but once; any good that I can do or any kindness I can show to any human being; let me do it now. Let me not defer nor neglect it, for I shall not pass this way again.” Being financially independent provides us the freedom to do more with our life and to live up to our potential. This way, we achieve more for ourselves and more for others through charitable endeavors. This is one key message we can share with Generation-Y and Generation-Z people.
But before we can really drum the idea of retirement planning into the minds of the Gen-Y and Gen-Z people, we(the stakeholders of the industry) need to let them know more about financial planning. We need to educate and excite them on what financial planning can do for them in terms of assisting them to achieve their life goals. Retirement planning will come naturally once financial planning becomes a lifestyle for everybody.
And if we want to focus on the Gen-Y and Gen-Z segments, we must also make an effort to really understand them from a behavioral perspective. People in these two groups are generally Internet-savvy and are constantly present on social media. They do many things online – share, socialize, shop and learn. To effectively reach out to them, we should create opinion leaders among them (by converting some of them into financial planners) and have them promote the idea of financial and retirement planning to their peers.
The Gen-Y and Gen-Z people are also often independent and cherish the idea of being self-sufficient. So the idea of being financially independent would appeal greatly to them. It would be good if the industry’s stakeholders learn more about the Internet and how to effectively leverage the social media to reach them. I see creating the right buzz online as key to this endeavor.
Chu: The opportunities are always out there. And if you were analyze the profession and the industry a little deeper, you will realize that the people who really need financial planning are the everyday, common people – the regular man-on-the-street.
As a financial planner, financial planning knowledge and skills are a given. In addition to these crucial skills, what other skills do you think people in your profession need to better serve their clients?
There are basically two types of financial planners in the current marketplace. On the one hand, we have the product and services specialist and on the other hand, a financial coach or adviser.
While people are already talking about the future role of robo-advisers in the U.S. and Europe, I do not see that happening in Malaysia as yet. Despite being more than 15 years old as a profession, we are still, at the moment, pretty much in the product-peddling phase even though I can see that planning/advising based practice is on the rise. We have come a long way, but have a long way still to go. As financial planning is a “people business” (some might even sayin the purest form), the need to have good people skills is important, if not crucial, for sustainability and success, profit-wise, that is. As such, just being a product and services specialist would not be sufficient.
Many of us would need to migrate from product and services specialists to financial coaches or planners. Only then can we become successful financial planners. A good financial coach or adviser has to know the client’s status and has in-depth knowledge of the client and his life goals. He/she needs to be able to lead, inspire, guide and walk with the client throughout his/her life to achieve financial freedom. These skills are extremely important in the business of financial planning and they are often based on trust. Hence establishing client-planner trust is vital!
What do you think can be done to aggressively promote retirementplanning to the Malaysian population?Is the government, via EPF and PRS(Private Retirement Scheme), doingenough in this regard?
There are two approaches to persuading people to take retirement planning seriously – by scaring the daylights out of them or by gentle persuasion. Many may disagree with me, but I am of the opinion that invoking fear would be the most effective approach under the current circumstances and for the Gen-Y and Gen-Z people, gentle persuasion can be used as a constant reminder when financial and retirement planning has become a lifestyle for Malaysians in general.
Messages along the lines of “if you don’t prepare for your retirement, the worst scenario may just happen when you are no longer in gainful employment – you don’t have enough money to fund your golden years.” And the old adage of making hay while the sun shines applies here.
The current economic climate – with the value of the Ringgit being significantly shaved, job retrenchments, inflation, stagnated incomes, shrinking disposable incomes as a result of the implementation of the goods and services tax and bankruptcies – is a good example to use as a premise for this argument.
The government, as always, can certainly do more. Among other things, it can provide incentives for the people to plan and save for their retirement. For instance, more generous tax rebates for investing in PRS or engaging a financial planner. It should also encourage the banks to aggressively promote financial and retirement planning to their customers as the banks come in contact with them on a daily basis. There should also be an intensive and concerted effort by all stakeholders to promote financial and retirement planning at the national level. At the moment, efforts to this end are sporadic and isolated at best.
Chu: Many may disagree with me, but I am of the opinion that invoking fear would be the most effective approach under the current circumstances and for the Gen-Y and Gen-Z people. Gentle persuasion can be used as a constant reminder when financial and retirement planning has become a lifestyle for Malaysians in general.