How Does your Advice Process Reflect the Findings of Behavioral Finance?

By Taylor Liao, CFP, Chinese Taipei

原文刊登於Financial Planet
http://www.financialplanet.org/2013/advice-process-behavioral-finance/

客戶的投資理財常常會受到媒體資訊所影響, 財務顧問應該對行為財務學增加了解, 知道客戶為何會受影響, 並針對此在進行財務顧問案時改進進行步驟與方式

1.改進在資料收集面談時問題的形式與內容

不要只有問客戶的財務資料, 要多問價值觀的問題, 才能知道客戶在某些情況下的反應是什麼, 運用各種不同型式內容, 探討客戶的價值觀, 仔細聆聽客戶的回答並加予深入追蹤

2.在財務規劃的六個步驟中不要忽視追蹤檢視這步驟

客戶在聽完你對他的財務建議後, 多數人可能都不知道如何落實到生活中, 去改變他們的消費習慣. 儲蓄等等, 運用現代科技工具協助客戶用手機記帳軟體記帳, 並每一季與客戶做追蹤檢討, 更深入的財務規劃步驟將有助於實際的去協助客戶, 不是把規劃當成一時興起的決定而已, 而是實際取協助他們完成他們的財務目標

As a financial planner, it was hard for me to understand what it was like for my clients. Consumers get their information from and are influenced by several mediums such as the media and product sellers. Banks or fund houses, for the sake of selling more products, will release market information that a market has potential to grow in the future and usually this information causes consumers to invest, no matter how high the price of the fund is. On the flipside, consumers will sell their funds as soon as they receive any negative sign from the media.

The weekly BlackRock report shows that when the price of equity drops, the size of funds decrease simultaneously. Most investors keep making the same mistake: buy high, sell low. In the six step advice process of financial planning, even if the client completely agrees with you on how to improve their financial status, most of them won’t take action without monitoring afterwards.

Financial Planning Clients are only Human

Financial planners have to understand that it is natural as human beings to be influenced by a certain type of financial behavior. Some people will make mistakes such as the mental accounting bias; where people save money for a trip they are taking in 2 years by putting money in a savings account with an interest rate of 1%, while they have a credit card debt that charges them 18% interest. It is my opinion that clients need to be educated and that takes time to work with them. After years of practicing financial planning, I have modified my advice process to be more client-friendly.

After presenting the financial planning recommendations to a client, I ask them to use the App program on their smart phones to keep a record of their daily spending and email it to me at the end of the month. The software is easy to download, easy to use, and it forces them to think about their spending every day. At the end of every quarter, we review their progress of implementing my recommendations.

I have found that financial planning services aren’t successful if they are limited to two short meetings a year. After clients walk out of your office, they might return to their old philosophies of what it means to manage their spending, but by tracking their spending, I can interact with the client on a continual basis.

Asking the Right Questions

Aside from using apps to track spending, I have also changed the format of my questionnaire that gathers the client’s information/goals in the initial meeting. This questionnaire helps me to better understand how the client makes financial decisions. For example, 3 weeks ago, a client filled out the questionnaire and given the question, “Compared to others, do you prefer high risk investment?”, he answered “No.” On the next question, “In an investment, which one is more important: potential profit or potential risk?”, he answered “potential profit.”

I asked a few follow-up questions and discovered this individual was doing high-risk investment that included him loaning money to a client of his in which he received a 30% interest rate. Because of this experience, his expectations for other investments were equally high. Most questionnaires don’t dive very deep and do not get enough information about the client. Based on the information he told me, my recommendation for him was influenced.

Most clients have a blind spot when it comes to financial management. By asking effective questions, I am able to gauge clients’ financial behavior and decision making patterns, and adapt my communication with them to better meet their needs.

Practice Challenges Facing Financial Planners

By Taylor Liao, CFP

The financial planning profession faces a lot of challenges including a general lack of awareness from the public, competing designations that confuse the public, lack of regulation, and people claiming to be “financial planners” when they are not qualified.

The biggest challenge in my opinion for CFP professionals is the uncertainty about the future of financial planning. Some people in the industry don’t want to face the challenge of becoming a financial planner. It is rare to find a CFP professional who is willing to take the risk, roll up their sleeves, and setup a financial planning firm.

I don’t think being a financial planner will ever be easy, because the career deals with human emotions, desires, and money. Even developed financial planning markets such as the US or the UK struggle to gain market share. To gain market share, we must be creative and willing to try many different ideas. I think CFP professionals should be open-minded and work with a variety of people on their teams and in their firms. It is more advantageous to have people who compliment your work style by adding new perspectives, than to work with people who are all just like you.

Educating the Public about Financial Planning

Educating the public is the foundation of developing the financial planning market. We have to make the public aware that there is a better alternative to purchasing financial products from salespeople. The public receives financial information from blogs, newspapers, magazines and television every day. Unfortunately, most of the information is regarding investments in the stock market. People in the media will call themselves financial planners but they aren’t CFP professionals and don’t have the credibility to speak to the profession. In fact, most of these people are product providers trying to sell something. The biggest problem with this is that the public is mislead to believe that financial planning is about selling products; which just isn’t true. It is our job to education the public about what financial planning really is.

Giving Presentations about Financial Planning

A good speech will turn a high percentage of the audience into prospective financial planning clients. Grabbing the audience’s attention is very important. The best way to do this is to relate to peoples’ daily lives and speak about things they are interested in. Lastly, conclude with the concept of financial planning.

Last year, we had news that caught the attention of the public; the Labor Pension System of Labor Insurance was in financial trouble. They announced that they would not be able to pay out the annuity to retired laborers. At that moment, everyone was concerned that Labor Insurance would go bankrupt.

When invited to talk about retirement planning at Hewlett-Packard last December, I opened by discussing the Labor Pension System because they were all interested to hear about it. I still closed with the philosophy of financial planning. As a result of this presentation, I was able to teach more than 80 people about the benefits of financial planning. This is the first step of warming people up to the idea of a paid advisory service.

It is really important to highlight an event that is affecting their every day – this will catch their attention. This approach is much more exciting to listen to than an educational course. It also helps if you can add humor or metaphors to tell the story of financial planning.

Using Technology to Get Clients

People may not be willing to attend a 1-2 hour class but odds are better that they will watch a 10-20 minute video on their smart phone. Technology allows us to have access to more people. How about putting a few free beginning courses on your website to attract interested people and charge for the more advanced courses? The technology to accomplish this is mature at this point and you can keep your costs low. The beginning videos could focus on topics like “How to keep a spending record on your smart phone” or “How to create a monthly/yearly analysis report of your spending.”

These days, people value quick and efficient solutions to their problems. Make your courses short, easy to understand, and simple to purchase and watch. In Asia, teachers are paid high respect, and concurrently, the smart phone is gaining more and more popularity. Financial planners trying to keep up with the evolving generations would be smart to create short 20-30 minute speeches that are available on smart phones, than 2-3 hours lessons in a classroom.

Easing New Clients into Financial Planning

Do you have difficulty getting clients? It can be hard to convince prospective clients to pay high advisory fees. If you put yourself in their shoes, this is the first time they are learning about financial planning and after 1-2 hours of meeting with them, they are expected to trust you right away with their most intimate life details. One way to slowly build trust would be with experiential marketing on your website. Experiential marketing integrates elements of emotions, logic, and general thought processes to connect with consumers. Financial planning is a new concept and intimidates consumers who have never heard of it, so why not ease them into it?

Due to the slow moving economy, the public has become more conscious of their spending. How much should a financial planner charge for a case? I don’t think planners should lower their prices to attract new clients. Instead, what about offering a smaller price planning package that helps clients understand financial planning better? The package could include a 2 hour consultation by phone and a planning report via email. If they like this small package, they might be willing to pay for a comprehensive financial plan later on. I recommend charging about US$155 for something like this.

Using EAP to Develop a Wider Client Base

Another way to meet more clients is an Employee Assistant Program (EAP). An EAP is a benefit that companies, usually with 500 employees or more, offer to their employees. Employees are able to speak on the phone or face to face with consultants in varying areas such as mental health, law, financial planning, etc. I recently started working as a financial planning consultant for an EAP and I now have an opportunity to meet new financial planning clients. The employer pays for the first consultation, but if the employee decides to continue the financial planning process, then they will pay the fees.

我登在Financial Planet的文章
(中文部份係FPSB China翻譯, 中文翻譯可能跟英文原文有差異, 請與英文為準, The copyright owned by Financial Planet http://www.financialplanet.org)

英文原文: http://www.financialplanet.org/2012/2012-financial-predictions/
FPSB China中國理財標準委員會中文轉載http://www.fpsbchina.cn/webPage/Information.jsp?menuid=10004国际新闻简讯第二十五期

2012展望：今年對於金融理財行業來說是一次千載難逢的機遇嗎？
Taylor Liao, CFP

2011年對於理財師來說可能是困難重重的一年，但2012年新年新氣象，對於此行業來說，有以下一些有所好轉的情況：

少說多做

20多年來，保險公司的銷售能力常常是判斷保險公司收入能力的主要指標，但當銀行改變了其經紀系統之後，此情況有所變化。銀行在幾年內便接管了50%的市場份額，特別是近些年接管了將近70%的份額。與此同時，台灣的投保率超過200%（意味着平均每個台灣人有兩份保單在手），而這種情況發生在一個人口僅2100萬卻有超過30家人壽保險公司的小島上。您可以想像保險公司的競爭有多激烈，對於這些公司來說，都面臨着一個共同的問題：如何擴展市場份額？在一個幾乎飽和的市場中，必須找到深層次挖掘客戶的方法，而我們也欣喜地看到一些保險公司正在督促其保險代理人參加CFP專業人士培訓課程，通過金融理財認證體系來提升銷售業績和深化客戶基礎。

少一些產品銷售，多一些理財規劃

長期以來，養老保險在台灣被當作一種儲蓄工具，因此人壽保險將整個保險保單的平均面值降到了較低的水平，即低於3萬美金。對於一個年收入達到5萬美金的中產階級家庭來說，可以購買年保費在1萬美金並且獲得面值少於3萬美金的人壽保險保單的保護。理財師應不僅僅向客戶推銷產品，而應在客戶做出決定前為其量身定製一份金融理財方案，以便客戶理清其人生規劃以及達成目標的優先順序。保險是滿足客戶進行風險管理的工具，並不是滿足客戶所有需求的終極武器。數年來的經濟蕭條使得大部分客戶很在意其資產，並且期望能夠進行最有效的投資。他們需要金融理財師來評估其財務狀況，調整或重新分配其資源，分享最新的理財信息來達到他們的理財目標。

少一些理論，多一些實踐

我們有超過900位通過CFP資格認證考試的從業者，但是接近1/3在2011年沒有參加再認證。他們花費了大量的時間和金錢來通過CFP資格認證考試並且希望成為一名獨立第三方的金融理財師，通過為客戶提供專業諮詢服務來收取諮詢費。不幸的是，大部分理財師對真實情況很失望，客戶急需普及金融理財教育，並且沒有一家金融理財諮詢公司或者金融理財顧問可以作為成功範例。

除了市場因素以外，CFP專業人士在某些問題上有待改善。在校學生通過認證雖然具備理論知識，卻仍然對如何開展金融理財業務一無所知。現行的CFP專業人士教育僅包括240小時的理論培訓，沒有任何教授如何成為一名金融理財師的實踐課程。學員們需要接受培訓：比如如何接近客戶的商議技巧，以及如何根據客戶的財務分析狀況給出建議等。如果學員想自己創立諮詢公司，將需要更多的知識儲備：比如有利可圖的商業模式；可行的銷售體系等。正由於缺乏有利的商業模式，現存的理財諮詢公司均規模較小，即擁有不超過10位顧問，而且掙扎在生存邊緣。 <查看原文>

財務顧問的薪酬模式—財務顧問不應該把產品委外, 卻忽略了如何幫客戶達成財務目標 除了純粹收取顧問費的財務顧問外, 產品的配置與搭配對一般的財務顧問來說都是必要的, 因為經由如此可以協助客戶完成他的財務目標。 那麼對財務顧問來說, 我們跟一般的銷售業務又有何不同? 最大的不同應該是: 財務顧問在替客戶選擇最適合的商品時, 是根據它是否能幫客戶達成他們的財務目標來做選擇, 而銷售業務則是根據產品的價格, 可以收取的傭金多寡..等來做選擇。 在臺灣一些財務顧問選擇只做規劃, 不替客戶做產品端的服務, 但是這樣將無法達成客戶的完整財務規劃, 其一是他將失去對產品端的主導權。理財規劃的四個流程: 規劃、計畫施行、監控及調整, 他將只有負責前端的規劃, 後三個步驟必須由客戶自己另外找人來完成, 這將失去完整財務規劃的意義。 財務顧問如果選擇把產品委外, 交由其他業務負責, 例如投資交給基金公司, 保險交給保險業務員負責, 他將失去整體的主導權。第一是他不能擔保, 其他的業務員是否可以按照他所替客戶做的財務規劃的邏輯思考及規劃架構的精神, 去幫客戶做產品的安排。例如他原本考慮到客戶保費負擔過重, 超出客戶可以負擔的預算, 因此幫客戶規劃把保費較貴的儲蓄險轉為保障較高, 但是保費相對低廉的定期壽險, 但是當客戶去找保險業務員時, 他可能因為傭金過低, 結果還是建議客戶購買終身壽險或其他保費較高的商品, 於是當初的規劃變成失去意義了。 財務顧問在幫客戶做規劃時, 應該先替客戶做整體考慮, 先不要有把產品端的考慮加入。例如我上次在跟一個客戶談財務規劃時, 他一直在問我投資標的如何配置, 但是經過一番詳談後, 他才透露希望照顧其兄弟姐妹, 也希望為其小孩準備一筆基金, 以便他以後可能留學與創業之用。這就是財務顧問跟一般投資顧問的差異點所在, 投資顧問可能只為客戶考慮投資收益, 我們卻必須替客戶考慮到他的整體狀況:他的人生願望, 待完成的財務目標..等, 如果我還是從產品銷售導向的方向去思考的話, 在當下我可能就會忽略掉替客戶做整體財務規劃的目的, 而開始跟他討論起商品如何投資資產配置的方式..等等, 而忽略了更重要, 該替客戶規劃的事項了。 Remuneration Models: Why Planners Shouldn’t Outsource Product Sales With the exception of fee-based financial planners, recommending products is a necessary part of the financial planning process. So, the question we have to ask is, “What makes us different from product salespeople?” When financial planners are deciding which product is a best fit, they are looking for a product that helps clients achieve their goals. When a product salesperson is making the decision, they consider the price of the product and the commission they’ll receive, among other things. Some planners, when building their financial planning businesses, choose to be fee-only to avoid any conflict of interest. To do this, they either outsource product sales to other parties or they don’t recommend products at all. I can understand the benefits of a planner who doesn’t make product recommendations: they maintain their objective image as a planner and there is no confusion about their role. Fee-Only Planners Can’t Complete the Financial Planning Process The purpose of doing financial planning is to develop a comprehensive plan for the client. The financial planning process has 4 steps, in my opinion: planning, implementation, monitoring, and adjustment. A fee-only planner who does not recommend or sell products is only in charge of the planning stage. After the planning, the implementation stage, in which an advisor and/or products are selected, takes place. The client might choose an advisor or products on their own or with the help of the planner. Either way, the planner has given up control over the solution-provider. How can the planner make sure the product seller has the same philosophy as themselves? And, how can the planner guarantee that the seller will suggest products that are in the client’s best interest? In addition to losing control, the planner will lose the opportunity to watch the client achieve their goals. The fee-only business model can work, but only if clients are independent and fully knowledgeable about financial products. If you are outsourcing to a salesperson during the implementation stage, you might deal with the following problems: 1. You will have to manage several salespeople in different financial areas: insurance, fund house, bank etc. If they do something wrong, the client might hold you responsible. 2. You will lose the ability to control the whole project. Since the planning and the solution will be done separately, your philosophy might not be carried through all the way. For example, you find a client’s yearly premium of insurance is over their budget. Your suggest the client lower their premium by changing the endorsement policy to a term life policy. When the client approaches an insurance agent and asks for a term life policy, the agent does not want to sell the term life policy, because of the low premium and low commission rate. At the end of the day, this client was torn between product sales and financial planning. Financial Planning Considers a Client’s Entire Life If you are at the supermarket preparing for a party, you have to purchase decorations, candles, napkins, and other things. You must consider how compatible all the purchases are together – the colors, the look, etc. This is similar to what financial planners must do for clients. When we recommend/purchase products for clients, we consider how the product will fit into the bigger picture of the financial plan. A lot of times, the product with the lowest price is tempting, when not considering the big picture. But, after getting to know a client’s goals, there are many more factors that should be looked at, such as risk and maintenance. I recently met with a new client who is a well-off doctor. He has a lot of investments in stocks, funds, and annuity insurances. The dividends he’ll receive from these three product categories will easily allow him to have a satisfying retirement. He was curious about investment and asset management but instead, I asked him what he wishes to accomplish in the future. He responded that he wanted to help his elder sisters and brothers, save for his son’s study abroad, and possibly open a business. I proposed the idea of a trust that would have pay his siblings monthly and/or allow money for study abroad or opening a business. The client had never heard of this suggestion and thanked me. If my focus during the meeting was on selling products, I would have spent my time discussing asset management and investments, neglecting his future goals. Many planners handle their clients’ investments and they are very skillful at it. In my opinion, investment needs to follow the same rules of financial planning. Planners watch the market trends and modify asset allocation, but they don’t always pursue maximum return. Risk control, in my opinion, is more important than return. We have to maintain low volatility and keep the necessary return within an acceptable amount of risk. The Difference Between a Financial Planner and An Investment Adviser It would be helpful to clarify the role of a financial planner versus that of an investment adviser. Investment management is a part of the financial planning process. The goal of a financial planner is to maintain the client’s money so it is readily available when they need it in the future. The client might have their money in a single investment or a fixed monthly investment. The goal of a investment adviser, normally, is to pursue maximum return. Client’s measure their adviser by investment performance. Investment advisers don’t need to consider life goals or plans and they don’t care about when the client will need money in the future. For example, I had a near-retiree client with a fifteen-year investment. When the financial crisis hit, they lost fifty percent of their total investment. What would have happened if this client was planning to withdraw a certain fixed amount from this investment for their spending money during retirement? What if this was the only source of their retirement income? The investment had dropped fifty percent. Even if the investment returned ten percent every year, following the financial crisis, it would take ten years to return to the original amount. When managing an investment portfolio, the goal is not to pursue maximum return while ignoring risk. A few years ago, some offshore products were introduced to Taiwan that caused a serious loss to clients: Viatical and Life Settlement. Some investment advisers used these products for their clients. This is not the proper way to manage a client’s assets. When we survey a product, risk is the first issue to be considered.