The target market for fee-based financial advice

I watched with great interest from this video http://www.international-adviser.com/video/ia-videos/international-insight/The-road-to-fee-based-advice-in-Singapore-and-the- in which that company said that the demographic of its 8 fee-based cases tend to be more mature clients and with some lump sum money to invest.

My experience is different. Having done countless cases of fee-based financial planning, I have concluded that there is no special target market that is suited for this. The only necessary criterion is that the clients must see themselves to have financial issues in which they want a financial doctor to solve. It could be as simple as wanting to ensure they can achieve retirement when they turn 62, the desire to have a few children or as complex as estate planning for persons with special needs. However, not all who knows they have an issue to solve will come to me. For nearly two years, I have included a personality test in all comprehensive financial plans. Like all personality test, it basically places the person under one of those ‘stereotypes’. In most cases, the client has a personality of “Planning”. If the case is a husband/wife, at least one is a “Planning” type but the other not necessary. Usually, the non-“Planning” type spouse is the one who comes to see me after much persuasion from the other.

Also in my experience I find it very much easier to convince the ‘sandwich’ class to do fee-based because they are not poor enough to receive large handouts but neither rich enough to say they have no issue with money matters. The sandwich class these days are the angry lot of people! They will pay just to cool their anger. Planning for the high networth is perhaps more appropriate in the area of investment and/or estate planning. But in Singapore due to very poor financial literacy, the high networth isn’t very keen in estate planning. They think estate planning is to buy a leveraged universal life packaged with a free trust. How wrong they are. Also, many SME owners have no succession plan. I pity their employees because the company will just collapse when the SME owner kicks the bucket. Moreover, I would like to advice fee-based financial planners to AVOID charging fee for doing an investment plan as a standalone basis which tends to be the case of HNW clients. The reason is due to the huge liability for investment. When you charge fee, you better make sure it works. How can anyone ensure the client can make money? That is why I am always reluctant to do fee-based investment planning in isolation with other things. Although I a CFA charter holder, I never claim to be better than Mr. Market. (You guess it right that those trading courses will not work. Yes, trading works but it is the algorithmic high speed trading – sometimes also called the ‘dark pool’ – that works. This is in the domain only done by supercomputers in the investment banks. Don’t be a fool, don’t trade with an artificial intelligent who can think a zillion time faster than you!)

I have been extremely busy for the past many months to setup the company’s financial planning division. A lot of time is spent on setting up minimum qualification, minimum experience, compliance, implementing the vetting procedure workflow, documentation, submission procedures, and negotiation to include professional indemnity insurance for comprehensive financial planning, setting the exam questions for advisers to sit for in-house financial planning test, invigilating and marking their exam scripts! These are what I collectively call “hardware”. After March, I should have completed and put in place the ‘hardware’ for all the company’s advisers to use if they wish to do fee-based planning. However, there is this ‘software’ aspect of financial planning which I can only impart for advisers that are under my direct supervision. I am not referring to computer software. “Software” refers to the soft skills which a planner should have such as objections handling, reading clients’ minds and marketing for fee-based planning. If this sounds vague, it is basically the EQ. Without proper ‘software’ (EQ), anyone who wants to do fee-based financial planning will fail. There is no need to try. Believe me. I was there and had crossed the bridge many times to know firsthand what this means.

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