by Joel Barretto, CFP | via Negosentro.com |
Financial planning is not a one size fits all concept. Everyone has their own unique financial goals, priorities and situation. Your first line of defense is finding an ethical, trustworthy and competent financial advisor. Unfortunately, due to the pay structures of today’s so called “financial advisors,” this might seem like trying to find a needle in a haystack.
Because majority, if not all financial advisors in the Philippines, are on commission right now, you will encounter two kinds of financial advisors in this market.
The first kind is what I call the “holistic” financial planner. These are people who have been in their trade for a while. They have seen the changing landscape of the financial services industry and have a lot of passion in what they do. These are professionals who ask a lot of questions about your personal goals and situation. They truly take the time get a good understanding of your priorities before making recommendations.
Unfortunately, establishing a relationship with a “holistic” financial planner is not within everyone’s reach. They have paid their dues and can now set certain standards and qualifications on the clients they prefer to deal with. They are knowledgeable in all facets of financial planning and products but may set a minimum investment amount to make it worth their while dealing with clients of their choice. They may also charge a fee for what they do.
In short, high net worth/income people have a better chance of bagging a “holistic” financial planner. So what’s left for the majority of the savings population?
The second kind of financial advisor is what I call the “product pushers.” These are typically the people who are starting out in the business (within the last 5 years). They were most likely trained to sell some kind of insurance product that pays the highest commission. In most cases, it doesn’t matter how you answer their questions during the consultation stage. The final recommendation is probably always going to be that same product they were trained to sell anyway.
There is nothing wrong with specializing and pushing a certain financial product as long as it is “suitable” to your needs. Unfortunately, lack of ethical training and integrity of financial advisors combined with your lack of financial literacy is a financial disaster waiting to happen.
Ultimately, you will only have yourself to blame if you did not do your homework in the first place. Due to a huge lack of consumer protection laws and regulations enforcement in this country, it is up to the consumer to protect their best interest.
The best way to do this is to arm yourself with enough knowledge to know what questions to ask. Then maybe you can weed out the ethical product pushers from those who are just after lining their own pockets with the high commission paying products they can sucker you into buying.
In my succeeding articles, I will go over suitability issues and arm you with the right questions to ask your financial advisor.
Joel Barretto, CFP sold his financial planning practice in Irvine, California U.S.A. to promote financial literacy and awareness in the Philippines. He is a respected Certified Financial Planner practitioner with over 24 years of experience in helping people optimize, manage and protect their wealth.
He is a public speaker and lecturer on a variety of financial planning issues and strategies. With a passion for entrepreneurship, Joel dabbles in venture capital projects and mentors up and coming entrepreneurs on growing their start-up companies. He is a 2nd degree black belt in the martial art of Kempo and enjoys performing and directing stage musicals for community fund raisers.
You can reach Joel at firstname.lastname@example.org.