The Essential Element to Be a Financial Planner

“Describe the essential element to be a successful financial planner in Hong Kong and China. Explain the challenges of practicing ethical financial planning in Hong Kong and China. ” Successful financial planning Successful financial planning Establishing trusting relationships with clients Establishing trusting relationships with clients Strong reputation Strong reputation Professional and ethical behavior Professional and ethical behavior Strong financial planning knowledge Strong financial planning knowledge Strong interpersonal skills Strong interpersonal skills
Financial planning has become much more important over the decade in Hong Kong and China. Many graduates and other people with professional financial planning knowledge engage into the field of financial planning. Being a successful financial planner, certain conditions should be fulfilled to respond the demand of clients and general public. Figure1 Conditions of successful financial planning As figure1 stated, a successful financial planner should establish trusting relationships with their clients which require strong reputation of those financial planners.
There are three main elements to construct the strong reputation to the clients, including strong financial planning knowledge, strong interpersonal skills and professional and ethical behavior. Financial planners are required to have the all-round knowledge. They are expected to evaluate all aspects of the clients’ financial needs including consumption, income and wealth analysis, insurance, retirement life, tax and estate planning. They should provide value-added services to fulfill the needs of the clients accordingly. Also, there are some microeconomic and acroeconomic factors would affect the performance of the investment portfolio. A professional financial planner should have related knowledge for clients’ best interest. In Hong Kong, the financial market is well-developed . It is easy to find a large range of financial products to invest. Plenty of choices imply that financial planners should understand the nature of each product to suit the client’s need. To increase public confidence in the financial planning, many banks and insurance companies require their staff to take the CFP examination.

As for China, Chinese government has opened the financial market over the years which lead to the changes of the Chinese circumstance frequently. So financial planners in China are required to receive related education to enhance the public confident on financial planning. Taking the example of China taxation system, there were several changes in tax incentive for foreign business and individual income tax. Financial planners in China should aware these changes and modify their tax planning quickly for their clients.
Interpersonal skills are essential to financial planners. Because they have to collect the data from their clients to make recommendations to their clients. When collecting data from their clients, financial planners should show their integrity and competence to convince the clients. It can be better to set the financial goal for their clients. Chinese people would not disclose their private information to the stranger easily. It hampers financial planners to help their clients to pursue their financial goals.
Financial planners who serve for Chinese people should use their interpersonal skills to get close with their clients and collect more information. Many successful salespeople suggest making friend with the customers and clients. Caring with client’s needs help financial planners to make a close relationship with their clients. For example, one child policy in China makes the citizens to concern more about their retirement life. A financial planner can gain client’s trust by sharing their knowledge on retirement planning and making suggestions.
Professional and ethical behavior is the third important element for financial planners to gain reputation. Nowadays, more people concern about the ethical practice in financial sector, especially after the financial tsunami. Integrity can build trust with the clients and gain reputation. CFP Board set the “Code of Ethics and Professional Responsibility” which includes several principles – integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence. Without these principles, a financial planner cannot establish a well relationship with their clients.
To fulfill these three elements, a financial planner can gain good reputation among their clients and establish trusting relationships with them which make him or her to be a successful financial planner. CFP mark is the qualification recognized by Financial Planning Standards Board (FPSB). A financial planner needs to fulfill certain conditions – education, examination, experience and ethics. Every financial planner would face ethical challenges when practicing financial planning. There are some examples for challenges of practicing ethical financial planning in Hong Kong and China.
There are complex financial products in Hong Kong and China. It is hard to compare these new and complex products with the traditional one. The aim of financing planning is to provide professional services to suit the needs of their clients. Ethical practice means doing the right thing. A structured product can generate higher cash flow than treasury bonds in the blooming economic. However, it incurs higher risk for the client’s investment at the time. For the financial planner, it is difficult to say for certain that those new and complex products are better than the tradition investment tools.
And it makes the decision-making to become harder. Another ethical challenge is the method of compensation. In US, most financial planners are compensated via a combination of fees and commissions. Comparing with the financial planners in Hong Kong and China, many of them are compensated by commission and low basic salary. Commission is a motivation which drives financial planners to maximize the asset value of their clients. Higher growth rate of the asset value implies higher commission that planners can earn. However, commission-based compensation would bias financial planners to perform a risky portfolio.
Instead of concerning clients’ interest, planners would pursue his or her own benefit for survival. Because the basic salary might not be enough for living. In Hong Kong and China, financial planners may face the pressure from their employers or supervisors. They have to meet the monthly quota of some “recommended” products. In general, they receive high commission by selling these products. Different from the salespeople, financial planners are advising their financial planning to their clients but not selling it. Those “recommended” products may not be suitable for their clients’ situation and needs.
It goes against the principle that a financial planner should put client’s interest in the first priority. In conclusion, financial planners have to deal with many ethical dilemmas in reality. When a professional financial planner is facing the difficulty at work, he or she can still put their client’s interest on first and avoid the trap from those unethical practices. In the future, it is expected that the field of financial planning will grow extensively in Hong Kong and China. And there will be more professional financial planners to engage into this field.

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