Business

Saturday May 30, 2009

Managing your wealth

By LAALITHA HUNT


IF you were to go to any bookstore, you’d find a wide array of books about the importance of financial planning and enlisting the services of a financial planner.

So, what does a financial planner help you do? The Financial Planning Association of Malaysia defines financial planning as the process of meeting one’s life goals through the proper management of your finances, namely savings and investment.

“These goals may include buying a home, saving for one’s child’s education, starting a business or planning for comfortable retirement,” it says, in its website.

A financial planner, says the association, uses the financial planning process to draw-up a plan with an objective to meet one’s life goals.

The planner takes a “big picture” view of one’s financial situation and make financial planning recommendations that are right for you.

He is supposed to take into consideration all of your needs – budgeting, saving, taxes, investments, insurance and retirement planning.

He can also work with you on a single financial issue but within the context of your overall financial situation.

“This makes the financial planner different from say, other financial advisors who may be trained only on specific areas of your financial needs,” it adds.

Without a doubt though, for many people, given the demands of time, they tend to place financial planning at the bottom of their priority list.

For many others, they barely have enough during these tough times to make ends meet, let alone, have an investment and savings plan.

Jeremy Tan, a licensed financial adviser with Standard Financial Planner Sdn Bhd, says that financial planning services is a growing market as more people are becoming aware of the importance of their financial health.

“Basically financial planning is crucial for two groups of people – the high-net worth individuals as well as fresh graduates that has just started working,” he says.

While the high-net worth individuals would require advice on how to manage their wealth, young working adults would need to plan for their financial goals while maintaining some emergency fund.

MyFP Services Sdn Bhd financial planner and managing director Robert Foo says most of his clients are those with family and are between 35 to 50 years of age.

“We find clients at this age bracket realise that growing, preserving and managing their wealth require good information and that many times information given in newspapers and other traditional financial institutions and its agents are biased towards their products and tends to conflict with their personal financial situation,” he notes.

Foo also says that there is too much noise in the market and much of the information are product-oriented where the presumption is one size fits all.

“The personal circumstances of each individual is very different and over the long-term, wrong decisions are very costly,” he says.

Foo adds that there is no specific wealth level for one to use a financial planner because the professional engagement can take various depths from doing a comprehensive plan and reviewing it yearly to just writing a will or maybe just investing money into a fund.

“A planner who charges a fee and does not take upfront commissions like us work with clients on various levels and fees range from RM100 for a transaction to between RM5,000 and RM10,000 for comprehensive financial planning,” Foo says.

Tan shares that there is no fixed fee or payment method for financial planners.

A planner can be paid by the firm that has hired him, by fees based on an hourly rate, a flat rate, or on a percentage of one’s assets and/or income or by commissions paid by a third party from any products that he/she has recommended; or by a combination of fees and commissions.

When asked if the fees commensurate with the benefits of financial planning, Foo says it depends on one’s personal circumstances which is normally reflected by the personal and potential wealth at risk and the importance of their personal financial and life objectives.

“It also depends on what benchmark you use to evaluate the benefit of financial planning in relation to the fee paid,” Foo says. He likens financial health to physical health.

“Those who place a high value on health, they pay a large sum for a personal trainer. For others who say ‘Que sera sera, whatever will be will be’, then they may not pay for a health professional at all,” he adds.

But that’s not to say that you can’t set your own financial plans or goals if you do not hire the assistance of a financial planner.

Just take the case of Kelvin Szeto, a 33-year old marketing manager. He believes that it is not necessary to seek professional advice to plan his financial goals.

He’s got most things all figured out – insurances, property purchases, retirement and investment plans – based on advice from his parents as well as his own research.

“There is so much information nowadays which is easily accessible, which explains the steps necessary to plan one’s finances as well as the various financial instruments available,” he adds.

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