Rainbow Pan of ipac Hong Kong reveals the features and components of comprehensive financial plans, and explains how advisers can guide their clients through the process.
Date: Mar 2010
An individual who wants to be a successful financial planner needs to have a desire to add value to people’s lives by helping them achieve their goals and objectives, said Rainbow Pan in an interview.
Without these characteristics, a financial planner cannot do well in this industry, she said.
Components of effective financial plans
To help an individual put together an effective financial plan, Pan said the most important thing a financial planner should do is to find out what the customer wants to achieve.
This will be related to the different stages of their lives, she explained. For example, a customer who is in their mid-30s might be starting a family, and could want to buy a property. So the relevant questions a planner should ask in this example relate to the customer’s timeframe for buying the property, when they want to buy it, how much they want to spend, and in which country they want to buy it.
Financial planners might also need to consider the education of their customers’ children, said Pan, for instance where they will go to school and university.
Looking further forward, financial planners also need to consider when and where their customers plan to retire, she added, as well as overall wealth protection – not just wealth creation through investment strategies.
Instead, financial planners should help their customers look at the “what if” situations and how they can protect their lifestyle through their earning potential.
Longevity is another important consideration, as people are living longer, said Pan.
Catering to different needs and goals
According to Pan, financial planners need to be aware that every client situation is different, especially in markets like Hong Kong where people tend to be internationally-minded and might have lived in multiple countries and have assets in more than one jurisdiction.
For financial planners to help these clients achieve their goals, Pan said it is important for the planners to put themselves in their clients’ shoes and assess how realistic the goals and objectives are.
For example, Pan said she has four meetings with a client to listen to what they want to achieve before coming up with a recommendation.
She added that she also discusses with her clients any trade-offs, given that in a market like Hong Kong, where a lot of people have good incomes, they tend to have high expectations for their retirement and can aim to retire before they are 50.
So clients must be guided to see any gaps in their plan, so they can decide whether to work longer and adjust their retirement goals, or to save more now to retire earlier.
Effective estate planning
When it comes to long-term wealth planning, Pan said she has seen situations where wealthy clients make plans to pass assets to children at different ages of their lives.
However, she warned, this can lead to an uneven distribution by the time the money gets to the children.
Another issue for financial planners to consider is that clients should not give money to their children when they are too young.
For some overseas clients, Pan said it is important to put in place strategies to help them minimise the taxes on their assets to ensure they can pass money to the next generation in a more effective way.