Superheroes wanted

Question: I sell financial products and services. Lately, I had been exposed to the business of providing objective financial planning advice.  Is there money to be made in financial planning consultancies? —asked at “Ask a friend, ask Efren” free service available at www.personalfinance.ph and Facebook.

Answer:  I cannot speak for other consultancy arrangements. But when it comes to a financial planning consultancy, earnings would pale in comparison to what you can earn as a financial products seller.

In the Philippines, people generally regard the provision of financial planning advice as a freebie that comes with selling a product, much like a gas station giving free air. Like the air of a gas station, advice is supposed to be given for free with or without the purchase of a financial product.

But there is one significant difference. The air of a gas station is meant for one purpose only and that is to inflate tires. The service ends there.

Financial planning advice aims to inflate the overall wealth of households by providing practical training, coaching and solutions for execution, the engagement for which can last a lifetime.

Financial planners need to study their craft very well.  It is not as simple as pushing an air hose into the intake valve of a tire. They need to immerse themselves in the study of spreadsheets, time value of money, debt management, laws on financial rehabilitation, economics, behavioral economics, finance, risk management through life and non-life insurance, estate planning, investment analysis, portfolio allocation, risk-adjusted performance measurement, and real estate investing. They also need to monitor financial planning solutions in the market, to be ready for the clients’ questions.

To be distinguished from the rest, some financial planners even endeavor to acquire expensive global financial planning certifications.

And how much can be charged by a fee-only financial planner versus one who is fee-based (i.e. earning from both advice and product commissions)?  The fee can range from a low of P1,000 to P10,000 for a standard comprehensive financial plan or CFP.  The CFP may cost more depending on the complexity of the plan, especially if a detailed estate plan is included. But in the country, estate planning is still in its infancy stage. As mentioned, financial products sellers earn much more.

Yet the work does not end after the CFP is given as the true financial planner will want to monitor his clients to check on their progress.  This after-advice provision service, despite the time and effort that will be spent, often comes for free.

So why do some still strive to become fee-only financial planners?  It is probably the superhero in them. While Merriam-Webster defines superhero as “a fictional hero having extraordinary or superhuman powers,” it is also defined as “an exceptionally skillful or successful person.”

In this business, a financial planner is only as successful as his client.  And the only way he can facilitate such success, despite the not so attractive compensation, is to have a genuine interest in the growth of his client.  If he believes it is always about his clients, then he truly is a superhero.

So, ask yourself, “Am I the kind of superhero that the financial planning consultancy business requires?”