Insights to Choosing a Financial Planner

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1 Insights to Choosing a Financial Planner A joint collaboration of FPAM and SIDC

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3 How a Licensed Financial Planner can Help You 1. Offer Personalized Service Your financial objectives and goals are unique to you. A licensed financial planner would be able to work with you closely and offer personalized advice tailor-made to assist you to reach your objectives. 2. Act as a Financial Coach Your financial planner is there to listen to and understand your concerns. He would be able to answer your questions on financial issues and explain in depth, concepts and strategies. 3. Help Conceptualize Your Goals A planner can assist you to accurately define your financial goals. He can also work with you to prioritize those goals. In turn, unclear and vague goals turn into concrete ones. 4. Road Map to Achieve Financial Goals A financial goal is the final destination. The financial plan provides the route to reach the goal. A financial planner has the knowledge and expertise to design a comprehensive plan to reach your goals.

4 5. Selection of Correct Financial Tools There are various financial tools in the market to help you achieve your goals. The task of sorting through all the options can be overwhelming. A planner can narrow the choice to those that best fit your goals and objectives. You would then be in a better position to make an informed choice. 6. Proactive Management A planner with a thorough understanding of your financial goals can bring investment opportunities to your attention. He can keep you abreast of changes in financial environments that may affect your plans and recommend required adjustments.

5 Things to Consider Before Engaging a Financial Planner 1. Know What You Want and Expect from a Financial Planner Taking the time to determine what you require from a financial planner is really the first step towards deciding how closely you will be working with the financial planner. This is determined in part by the nature of your investments and other assets. It is also important to consider which area of financial planning you may need expert assistance in. 2. Knowledge of Financial Matters If your knowledge of financial matters or issues is limited, the expertise of a licensed financial planner would be important in realizing your financial goals. Remember to check the qualifications and the license of the planner. It is important to ensure that the planner s qualifications are recognized and his practising license is valid. 3. Degree of Involvement in Achieving Financial Goals It is important to decide at the beginning whether you would rather carry out your own investment plans or have the planner assist you in executing the plans.

6 4. Complexity of Financial Situation The complexity of a financial situation will have an impact on the degree of involvement of a financial planner. For example, the needs of a single young adult differ from a middle-aged family man. Therefore, it is imperative to analyze a financial situation at the onset before deciding on how to proceed with the services of a financial planner. 5. Relationship with Financial Planner The frequency of contact that you would like with a financial planner should also be considered. Whether you want to meet annually to review the plan or more frequently to monitor the progress of a plan is also a factor to be considered when hiring a financial planner. 6. Budget Constraints The amount which you are willing to pay a planner would also be an important factor in deciding how to proceed with the services of a financial planner. It is therefore advisable that you discuss the compensation structure with the planner at the onset. Having a clear understanding of how the planner would be remunerated would prevent any misunderstanding later on.

7 7. Familiarize Yourself with Terminologies and Concepts It would be in your interest to be prepared and to learn about financial planning strategies and the language most often used by financial planners. While you may not be familiar with all the technical terminologies used by a planner, it would be good to know at least the basic terms and strategies normally used. 8. Obtain Referrals and Interview More Than One Planner Just as we shop around before purchasing an item, it would be wise to speak to friends and get referrals from parties you trust. It is also better to speak to more than one planner until you are able to select one whom you trust with your financial information and financial future.

8 9. Check the Planner s Background and Obtain References Since the planner would be privy to one s financial information, it is advisable to verify the planner s background by checking with their professional associations or any regulatory bodies. If the planner works with any other professionals, request references from them. 10. Get It In Writing Remember to request any advisory contracts or engagement letters in writing to document the nature and scope of work to be provided by the planner. This is also to avoid any misunderstanding later on. 11. On-going Monitoring of Financial Plan Does the planner offer on-going services for monitoring your financial plan? If yes, are there any costs associated with such a service?

9 What to Look for in a Financial Planner A Reputable Financial Planner Should Possess the Following Qualities 1. Be Licensed by the Securities Commission All financial planners in Malaysia are required to be licensed by the Securities Commission. Ensure that your planner is licensed. Check with the professional body which he is affiliated with or check the Securities Commission s website at www. sc.com.my 2. Possess Qualifications Recognized by Regulatory Bodies It is vital to ensure that your planner is well qualified and the academic qualifications are recognized by the relevant authorities. A good example is the Certified Financial Planner (CFP CERT TM ) designation. 3. Have Adequate Experience A good planner is one who is experienced enough and has the expertise to be able to help you meet your financial objectives. However, one should also take into account whether he is close to retirement or if he is going to be available to assist you for an adequate period of time.

10 4. Be Trustworthy and Open A good planner is one whom you are comfortable with and who is honest with you. He should be someone who is forthright enough to tell you the facts as they are, yet understanding enough to ensure that you are comfortable dealing with them. 5. Disclose the Compensation Structure The planner should disclose all fees and compensation from the start. It is in your interest to agree on the compensation structure before the commencement of the engagement. 6. Be able to Provide On-going Service You need a planner who can provide on-going service and is committed to developing a long-term relationship with you. It is of no help to you if the planner constructs a financial plan for you and then never contacts you again. Constant contact is vital to ensure the success of a plan.

11 7. Assess Your Existing Financial Situation and Identify Your Personal and Financial Goals A planner should review all of your financial records and help you to identify your goals before embarking on constructing a financial plan. 8. Explain the Pros and Cons of Various Options and Products It is a planner s responsibility to explain the different options available to you before recommending the best solution to meet your objectives. 9. Refer to Other Professionals A good planner should be able to refer you to other relevant authorised licensed professionals who can assist you in carrying out the various aspects of your plan. Your planner may not be an expert in all areas and technical expertise in some specialized fields may be required in your case. 10. Periodically Evaluate Your Plans Your planner should review your plan periodically to ensure that it is on track to meeting your goals.

12 Questions to Ask a Potential Financial Planner 1. Are you or/and your firm licensed by the Securities Commission? 2. Do you have experience in providing advice on different areas of financial planning? 3. What are your areas of specialization? What qualifies you in this field? 4. How long have you been providing financial planning services? 5. How many clients do you have? What is your client base like? 6. What professional qualifications and financial planning designations do you possess? 7. What services do you provide? 8. Do you work alone or with an associate on my financial plan? 9. How are you paid for your services? Is it fee or commission based? 10. What do you typically charge for your services? 11. What type of products are you most familiar with? 12. What type of products or investments are you allowed to advise on?

13 13. Are you affiliated with any other companies whose products or services you may recommend? 14. Are you the owner or shareholder of any other company whose products or services you may recommend? 15. Do you provide written client engagement letters? 16. Are all of your recommendations or advice in writing? 17. Do you provide on-going monitoring of a client s plan? How do you track changes in a client s financial situation?

14 What Type of Advice You Should Expect from a Financial Planner The advice from a financial planner should: 1. Be in writing 2. Be without obligation 3. Focus on your financial objectives 4. Be impartial 5. Take into account your cash flow requirements and need for spare cash 6. Disclose all entry fees, exit fees and any other costs to you in the future 7. Justify the reasons for selecting the proposed investments or recommendations 8. Divulge all inherent risks associated with the recommendations 9. Spread your investments across different assets 10. Highlight any tax implications 11. Give options on how to pay for your investments Useful websites Securities Commission: Financial Planning Association of Malaysia: Bank Negara Malaysia:

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16 Financial Planning Association of Malaysia Unit 1109, Block A, Pusat Dagangan Phileo Damansara II, No 15, Jalan 16/11 Off Jalan Damansara Petaling Jaya, Selangor Tel: Fax: Securities Industry Development Centre 3, Persiaran Bukit Kiara, Jln Bukit Kiara Kuala Lumpur Tel: Fax: