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TIONGSON: Look for someone who has solid experience in the financial services industry and who see things on a long-term perspective.

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BALMORI: Most financial advisors still cannot go out of their paradigm of selling products. But our vision is to help people do a better job of saving, spending, investing, insuring and planning. If you leave your client during hard times, you are not doing that.


Finding a reliable financial advisor

By Ma. Salve Duplito
Philippine Daily Inquirer
First Posted 20:30:00 11/02/2008

Filed Under: Personal Finance

MANILA, Philippines--It's in times of gloom and doom when tales of the stock market breaching 4,400 seem to be faint and distant that a smart and experienced financial advisor who can do some hand-holding comes in really handy.

But where have they all gone?

"My financial advisor has disappeared. What should I do now?" says an information technology professional worried about her investments.

The financial advisory industry in the Philippines is still in its infancy. Regulation is not clear-cut. Most of those who offer the service are life insurance agents, mutual fund agents or bankers. They work within the radar of the Insurance Commission, the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas, but as sellers of financial products like life insurance, mutual funds, unit investment trust funds or private bankers.

A smattering of financial-coaching companies that long to provide independent financial advisory services, while passionate in their vision to preach the gospel of financial literacy to Filipinos, feel like orphans. They don't know whom to turn to for regulation. Of course, it is not difficult to imagine some firms that are actually happy with this arrangement, hoping that no government regulator will be banging on their doors when their advice lands someone in trouble.

"It's still a loose industry," says Antonio Balmori, officer-in-charge of the International Association of Regional Financial Consultants. IARFC is an Ohio-based company that set up shop in the Philippines in 2003. It gives courses on comprehensive financial planning to finance professionals with a minimum of four years' experience. So far, the company has 300 members, but only half are providing comprehensive financial planning services.

"Most financial advisors still cannot go out of their paradigm of selling products. But our vision is to help people do a better job of saving, spending, investing, insuring and planning. If you leave your client during hard times, you are not doing that," says Balmori.

Randell Tiongson, director of Registered Financial Planners Institute, another US-based company that gives comprehensive financial planning courses, insists that financial planning is about the big picture.

These days, though, the big picture is not pretty. People's savings have shrunk; confidence in the financial system is under siege. The rich may have been hit harder than most in this crisis, but their mass of wealth will allow them to bounce back. The poor may have been relatively spared--they don't care about banks, insurance and stocks. They don't have savings. It's the middle class with their faithful savings and frugal ways that is getting squeezed.

Ironically, it's exactly the Stella and Dan of the middle class that need the hand holding that good financial advisors should be giving. They are the ones that have much to lose in this roller-coaster ride. They don't have private bankers to give them exclusive briefings in posh hotel rooms to soothe their ruffled feathers. They also can't rely on so-called financial planners or advisors who are only after commissions.

What to do?
Tiongson and Balmori say finding a reliable financial advisor requires some sleuthing, sharp interview skills, and solid referrals. The alphabet soup of financial planning--RFC, RFP, or CFA (chartered financial analyst)--should provide some assurance, but don't just rely on the designation.

"Look for someone who has solid experience in the financial services industry and who see things on a long-term perspective. Make sure he doesn't get his knowledge from textbooks. Find out if he can provide independent advice. It is better if he is recommended by someone you trust," says Tiongson.

Balmori adds that good financial advisors keep everything clear in a written contract at the start of the engagement including the fees that will be charged.

In the IARFC, the recommended fee is P20,000 to P25,000 for a comprehensive financial plan for someone with a net worth of at least P1 million to P5 million. Individuals with a net worth of P50 million and up may be charged from P50,000 to P80,000 for a financial plan that already includes analysis of their cash flow to estate planning. For meetings and consultations, RFCs are recommended to charge up to P1,500 when they go to a client's office, or P1,000 when the client comes to his.

Some financial advisors still earn via commissions from products because under the present scheme, insurance agents for example can only represent one company. Bankers and investment experts are in the same boat. Financial planning advisory thus becomes an additional service for clients, especially for agents that see their career as a lifelong one. No harm in that since he still has to work within the system, as long as he doesn't start your first meeting with, "What will happen to your family when you die?" or something like that.

Tiongson says ideally, the fee-based approach will evolve as the more superior one. "Unfortunately, the practice is not yet established, but there are already companies offering these services. Fees may range from P5,000 for a simple contract to as much as a percentage of the total portfolio depending on how complex the case is," Tionson says.

Complex cases normally involve estate planning where lawyers and accountants may have to be roped in and there's a team of advisors helping the client, instead of just one. Simple cases may involve cash flow analysis, debt management and a little bit of investment and insurance planning.

What about those who are just starting out in their careers or are in debt instead of in investment-mode? Don't they get to have their own financial planners? Both Balmori and Tiongson say they know of financial advisors who take on remedial advisory and debt consolidation--sometimes for a fee (say P5,000 to P15,000), and sometimes for free.

"In these cases, the job of the financial advisor is cash flow management. They have to turn around the client from a deficit to a surplus," says Balmori.

The psychic income in handling cases like these may not pay a planner's lunch, but Tiongson believes times like these call for investing in someone's future. "It's just like doctors doing free clinics. Planners can also do that pro bono," Tiongson says.

The role of a financial advisor is an extremely sensitive one. He may know more about a person's life than his spouse. Ideally, he has access to most financial and personal documents. The top ones who have been serving clients longest end up being family friends. Imagine what can happen when you hook up with a scam artist.

Tiongson says some telltale signs should turn your scam alert on like a financial advisor that's always pushing for something and favors one type of investments only, is not professional enough to start work with a contract and does not provide a written plan. Talks that merely skim over risks should also be major warning signs.

People go to doctors when they are sick, and are even willing to turn to plumbers and carpenters to fix their homes. When it comes to finances, a P1,500 fee can still seem steep. But if you really think about it, a reliable money coach can be the duck in your financial life that lays the golden egg--if you can find him.

(Feedback at lightdream@gmail.com. For more personal finance articles, visit Inquirer.net's MoneySmart blog at http://blog.inquirer.net/moneysmarts)

Copyright 2015 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.




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