Financial Advisory Business- How to Transform it to the ... Advisory Business... · Contents I. Current Scenario & Challenges II. What does a personal finance customer want from an

Presentation By: Team FPSB India

Financial Advisory Business- How to Transform it to the Next Level

Financial Planning Standards Board India

702, 7th Floor, Leela Business Park

Andheri-Kurla Road, Andheri (E) Mumbai – 400059

Phone: +91 22 61712424, Fax: +91 22 61712444

Email: [email protected], Website: www.fpsbindia.org

Contents

I. Current Scenario & Challenges

II. What does a personal finance customer want from an Independent Financial Advisor (IFA) today?

III. Where are you? Assess yourself

IV. The Way Forward

V. Questions & Answers

* Source: RBI Data, 2008

Total Gross Savings

(Rs In Crores)

2005-06 (P) 2006-07 (P) 2007-08 #

597,694 768,730 734,372

P : Provisional. # : Preliminary Estimates

With whom would Indians trust their money?

* Source: IIMS Dataworks Survey 2007

Present Regulatory Infrastructure

Prevailing Financial Advisory Industry

Minimal or no entry barriers for Financial Intermediaries

100 Hrs of Training after passing Exam for Insurance Advisory

A single certification for Mutual Fund Distribution (AMFI)

Conflicts of Interests and absence of any consistent approach to managing them

No distinction between Advice and Selling

Absence of Industry wide minimum certification standards

Consumers‘ inability to distinguish between variable quality standards of different intermediaries

Growth of Financial Intermediaries – MF & Insurance

Numbers in ‘000

The rapid increase in the number of intermediaries over a short span has the following

concerns:

Moderate level of regulation or no regulation

Risks associated with unregulated selling sans any advisory

Tremendous scope for skill generation* Source: AMFI, IRDA Annual Reports 2004-05, 2007-08

Numbers in ‘000

Understanding the current Financial Advisory Industry

Selling Preferences of Financial IntermediariesBusiness Profile

Age Profile

* Source: IIMS Dataworks 2008

LI : Life Insurance Financial Intermediaries’ profile is not restricted to a single product or service

Scope for skilled employment generation at varying age profiles

The FPA and Ameriprise Value of Financial Planning Study

• A Financial Planning Association survey sponsored by Ameriprise Financialand conducted by Harris Interactive shows how critical the pairing of aprofessional financial planner and the creation of a comprehensivefinancial plan can be to an individual‘s long term financial success.

• Consumer confidence is near historic lows, yet one group is feelingoptimistic and on track to meet their financial goals including retirement—people in a comprehensive financial planning relationship.

• In fact, they are nearly twice as likely to report feeling confident abouttheir financial future as those without paid, professional support.

Study is conducted in US in the month of June/July 2008

Contents




IV. The Way Forward


But…….

Who is an IFA?

Questions Clients Ask - 1

―I‘ve just received an offer for a new job. Can you tell me if this salarystructure is in my best interests?‖

Ponder…

Is this asked of by every distributor? And if not, why?

The Answer Is Trust

―Integrity is what you are when no one is looking.‖

Questions Clients Ask - 2

―Which is the best Mutual Fund to invest in?‖

―Do I need insurance?‖

―Shall I sell this property now?‖

Competency Is Essential…

Knowledge is the only instrument of production that is not subject to diminishing returns.‖ --- J M Clark

…Without Complacency

―It‘s what you learn after you know it all that counts.‖ --- John Wooden, college basketball coach

IFA is the personal Financial Architect & CFO for his client, who

Understands needs, arrives at a budget

Makes the drawings, gets okay, converts to blueprint

Builds the house

Role of CFPCM Professionals

Contents




IV. The Way Forward


Top concerns of Advisors Today

Opportunities in No Entry Load Era

• Relationship becomes more advice and customer centric than transaction based

• Will open doors for Financial Planning

• Good advice will be appreciated and hence rewarded

• Customer service will be the key

• Knowledge is a must, hence certification becomes important

• Those who work in client's interest will be rewarded

Immediate Issues

Difficulty in putting a value to your service & advice

Building the right business model

Maintaining brokerage structure may be difficult and cumbersome and bulky

Technology – Online platforms with direct investments

Immediate cash-flow concerns

Hence…… establish a fee-based model !

What you should do next?

• Improve knowledge levels

• See if you can position yourself as a one stop shop for investment advice

• Establish client relationship & earn trust

• Have a sense of ownership of your clients

• Ensure continuous knowledge up gradation

• Charge a fee for your services

• Build your network

• Partner with people with expertise in a different area/function

Financial Planning = (Trust + Education)

Competence

Capability

(Education)Results

Character

Integrity

(Approach)Intent

Reasons for Client Retention as viewed by Clients and Advisors

Reasons Clients Advisors Gap

Service quality 88% 87% 1%

Online access and

Capabilities

66% 32% 34%

Statement and

reporting quality

63% 39% 24%

Risk Management &

Due diligence

73% 54% 19%

Fee structure 48% 30% 18%

Relationship 73% 92% -19%

Firm’s reputation 59% 76% -17%

( Group Agreeing in percentage)

(Capgemini & Merill Lynch ,World wealth Report 2009)

Reasons for Client Attrition as viewed by Clients and Advisors

Reasons Clients Advisors Gap

Statement and reporting quality 49% 26% 23%

Availability of

product/Investment options

55% 27% 28%

Transaction/management Fee 48% 21% 27%

( Group Agreeing in percentage)

(Capgemini & Merill Lynch ,World wealth Report 2009)

The cost Distribution of an average Wealth Manager

STRENGTHS• Established Relationships with

existing Clientele• Fundamental Knowledge about

the present Market & Products• Established practice as an Advisor

WEAKNESS• Lack of Opportunity to offer

multiple array of products• Unstructured Advisory Process• Limited Power to command fee

from the customers

OPPORTUNITIES • Implicit Recognition of the

Advisory by the Regulators• Growing demand for comprehensive

need based solutions under a singleroof

• Public Recognition

THREATS• Growing Complexity of

Financial Products• Competition• Managing Customer Loyalty

SWOT Analysis of an Independent Financial

Advisor (IFA)

Which orbit do you think today your Financial Advisory service belongs to?

In an average month, what proportion of time do you, as CRM, spend on the following activities ?

Which of the following best describes your business

model, now and in two years' time ?

How Important do you, as business head, rate the following

product/Service offerings in terms of serving your clients

over the next two years ?

Wealth Management

Reach your Next Level of Success: Questions to ask yourself

• Do you have so many clients that you provide it difficult to provide personal services to each one?

• Do you have a higher priority on attracting new clients or on providing the best possible service to your current clients?

A lesson from top CFP Certificants

To have a more successful practice you need to have a fewer, often higher quality clients, and serve them exceptionally well. Many advisors have done this by creating a transition plan that deliberately targets affluent clients and prepares their practice to offer a higher level of service through comprehensive Financial Planning.


• Do you have processes & structures in place in your business that enable you to efficiently meet your client‘s needs?

• Is enhancing your relationships and providing better service to your existing clients a top priority in your practice?


The more successful Financial Planners understand that one of the few aspects of the advisory business that can be never commoditized is the advisor-client relationship itself. They place a high priority in continually fostering and improvising client relationships.


• Do you think of yourself as a problem solver for your clients?

• Are you conducting your overall business in a way geared to providing real-life solutions to your client‘s real-life problems?


The more successful Financial Planners see their first job as solving problems for their clients. Selling them products is simply a means to this end.

Contents




IV. The Way Forward


Services of Future

Certification & Standards

Individual Level

Qualification/ Certifications

1.CFPCM

2. PGDFA

3. PGDFP

4. CRM ( FP)

Certification ( Product Centric)

1. AMFI

2. IRDA

3. NCFM

4. BSE

Organization Level

ISO Certifications

1. ISO 9001

2. ISO 27001

Rating Standards

Standards as Prescribed by FPSB

India

Benchmark in Financial Planning

Financial Planning Rating Model for Planners/Firms

Financial Planning Standards -Benchmarks for Organizations

Financial Planning Firm’s Positioning

Certification: Individual Level

CERTIFIED FINANCIAL PLANNERCM or CFPCM

CFP Certification- Most prestigious international certification program for Financial Advisors. Currently being offered in 23 countries.

Initial Certification - must meet the following four

initial certification requirements

(known as the four "Es"):

•Experience

•Education

•Examination

•Ethics

It is estimated that the earnings of a financial planner who is certified exceed those of a financial planner who is not by almost 33 percent.

Course Contents in CFPCM Certification Program

There are 6 modules:

Introduction to Financial Planning

Risk Analysis and Insurance Planning

Retirement Planning and Employee Benefits

Investment Planning

Tax Planning and Estate Planning

Advanced Financial Planning

1. Regular Pathway – to accomplish the ‗education‘ Criterion

• Enroll with any of FPSB India‘s authorized Education Provider

• Self Study Mode

2. Challenge Status Pathway for working Professionals :

• A candidate must fulfill the criterion of additional higher qualification or professional qualification as specified by FPSB India apart from Graduation degree

• At the time of enrollment a candidate must have minimum three years of full time work experience in Financial Services Industry or five year experience as self employed in financial services or in Finance related departments of other Industries

Pathway to CFPCM Certification

Why CFPCM Certification?

The Candidates undergo a thorough education program which empowers him/her with knowledge and skillsin multi-discipline financial services such as Investment, Insurance, Retirement solutions and Tax Advisory

A robust examination system evaluates their skills and knowledge

Adherence to the Code of Ethics and Professional Conduct by the Candidates

CFPCM Certification is awarded after conducting due verification of the profile credentials of the Candidatesand suitable due diligence

Continuing Education requirement is embedded in the CFPCM Certification, which ensures regular knowledgeand skills enhancement

CFPCM Certificants help bring the pieces together

Investments

Insurance

Lending

Integrated

Financial

Solution

Debt

Management

Estate

PlanningAdministrationAdministration

Reporting

Out Sourcing Buy Sell Agreements

Powers of Attorney

Wills

Cash, Tax, Debt

Management

STRENGTHS• Strong command on the subject.•National & International recognition.• Regulator and industry acceptance.

WEAKNESS• Limited access to Capital currently•Low awareness of CFPCM

Certification in investors currently.

OPPORTUNITIES • Unstructured market .• Growing demand from FinancialServices Sector.• Allied fields like training, contentdevelopment, etc.

THREATS• Substantial Increase in the numbers in future • First mover advantage absolutely critical. • Financial Institutions scaling up their capabilities

SWOT Analysis of a CFPCM Certificant

• Adding value to the advisory and scope of being able to command fees from the customers

• Managing Competition and Increase in Client Acquisition/Retention

• Alignment with Global Standards while employee becomes part of a league of professionals recognizedworldwide

• Transformation from Financial Chemist To Financial Doctors

• Proves that the employee/advisor has tested herself/himself against the best and has met the Challenge

• Expertise and Credibility of the employee/advisor as a Financial Planner is instantly communicated

Benefits of upgrading Professionals as CFPCM Practitioners

Business Opportunities

PrivateBanking

Retail Banking

WealthManagement

AssetManagement

N/ABrokerage

Transaction-based advisory

Low

High

High

ProfitMargins

Revenue Growth Rates

FPSB India

Financial Planning Standards Board India (FPSBI) is a public – private enterprise and a professional standards setting body that proactively guides the development and promotion of standards for financial planning professionals for the benefit of all stakeholders, viz. the Government, the Regulators, the Industry Associations, the Corporate, the media and the general Public.

INDUSTRY GIANTS HAVE COME TOGETHER TO ANNOUNCE THE BIRTH OF A REVOLUTION IN FINANCIAL PLANNING INDUSTRY

Recognition of CFPCM Certification & FPSB India

Regulatory

• FPSB India is an established Body of Knowledge for Financial Planning as an AcademicInstitution and Change Agent to evolve Regulatory Framework

• Various Papers prepared and presented by FPSB India to Regulators and the Government viz.IRDA, PFRDA, RBI, SEBI and Ministry of Finance and honorable mention of FPSB India at theOECD International Conference

Industry

• FPSB India is promoted up by 50 leading Financial Services Organizations

• The Charter Members of FPSB India have resolved to give first preference to CFPCM Certificantsin their respective recruitments

Media

• CFP Certification rated as the ―Gold Standard‖ in Financial Planning by the Wall Street Journal(Jan, 2003)

• CFP Certification acknowledged as one of the ―Upcoming Certifications‖ in Financial Services inIndia by The Week

Contents




IV. The Way Forward


Thank You!

For further detail contact us:

Financial Planning Standards Board India

702, 7th Floor, Leela Business Park

Andheri-Kurla Road, Andheri (E) Mumbai – 400059

Phone: +91 22 61712424, Fax: +91 22 61712444

Email: [email protected], Website: www.fpsbindia.org

Documents

Financial Advisory Business- How to Transform it to the ... Advisory Business... · Contents I. Current Scenario & Challenges II. What does a personal finance customer want from an