81. Wealth Enhancement Strategies for the HNI Market

The High Net Worth (HNI) market is the holy grail of financial advisory, this is the key to TOT qualification

To grow as financial advisors, it is very important that we develop and maintain a HNI client base because this would give us the opportunity to acquire competitive advantage by learning to develop solutions for complex financial needs

HNIs are extremely successful individuals who are in possession of large amount of wealth whether inherited, from the practice of their profession or by dominating their business niche 

The usual advisor's pitch of helping them prepare for retirement or education funding for their children usually do not interest them as they can already afford it many times over

Approaches on investment management may get their attention only because they are looking for new outlets for further diversification of their portfolio

What would be a good approach?

A recent study shows that between the trade-off of "price" versus "value", HNI would most likely consider a proposal with clear and concise value proposition, something that would further enhance the benefits they derived from their already substantial wealth base

The same study shows that three years into the pandemic, 67% of Asian HNIs are now more concerned with the costs of medical treatments

A good approach may be a plan that would enhance the "financial protection" afforded by their health fund

One idea I would like to share is the case I am working on now

Client A decided to set up a personal health fund, he would allocate 10M as initial seeding and add a million pesos a year over the next ten years to cover increases in the cost of treatments,  he eventually would like to build it up to 20M

My proposal is a 10M Life Insurance with a 10M CI rider to cover critical illness, annual premium is about 1.25M/year for 10 years

The value proposition is this - while the client can well afford to self-insure, the plan would allow him to pass on the risk of the more expensive critical illness expenses because a CI happening at the onset of this build up plan may deplete his health fund and affect his ability to continue building it up

The value proposition is this plan would immediately "almost" double the benefits of his health fund

Including an investment component to the plan will allow the client to recover the cost of the CI rider making it seem to be cost free during the protection period

Ideas such as this is what would differentiate an ordinary financial advisor pushing for the old and tired approach of retirement/education planning to an advisor capable of coming up with wealth enhancement strategies 

This is a one-hour program that would present several more wealth enhancement ideas that may help in your last quarter run for qualifications, email alijeffty@gmail.com for arrangements for group presentations

all the best my friends!

#acgadvice

80. What is best investment advice we can give today?

 

I was talking to a fellow financial advisor the other day

She is scheduled to meet one of her long time and valued client for portfolio review and to provide possible recommendations for re-allocation with an objective for faster recovery as the portfolio is still down by 20% even though it was placed more than 5 years ago

This is one of the most challenging situation for any financial advisor - what advice can we give a client who has entrusted to us their life savings expecting that the product solution we provided in the past would really make them better off, what if after years of patiently waiting, they are still not seeing any gains and worse, is in a negative position

Situations like these challenges the confidence of the financial advisor in the capital markets where the funds are invested, we are constantly reminded by investment experts and gurus  "that over the long term, equities almost always goes up...", how long do we need to wait for this to really happen, obviously five years is not enough, 10 years? 15?

I always have a healthy respect for the "uncertainty and volatility" of the market, I have seen fund values rise and fall since the 90s, the Asian Financial Crisis, Dot com, 9/11, mortgage crisis of 2017 and the most recent covid induced crisis

I always take the advice of the so called "experts" with a grain of salt, because ultimately as a financial advisor, I am the one facing clients, I am the one responsible for providing advice that may or may not  help clients achieve their financial objectives, at the end of the day, it is on me!

So what is the best advice we can give today?

Critical Assumptions:

1. equities have a long-term upward bias
2. equities are volatile by nature, hence unpredictable over the short-term
3. volatility strategies should be in place from the onset (cost averaging for multiple pay and portfolio allocation for single pay)

Some factors to consider:

Time Horizon of the client - 5 to 10 years (fixed income portfolio), 11 to 15 years ( 60% equities, 40% fixed), 15 years or more ( 80% equities, 20% fixed), of course these are just rule of thumbs, actual allocation should include the client's risk profile

Where to invest? Local or Global - Global funds are quite popular these days as various companies have launched various versions of their own in the past few years, it promises access to developed markets, foreign diversification and global management expertise

First a disclaimer : This is just my personal opinion and should be in no way to be constituted as a financial advice, I would suggest you continue on your studies and research, because ultimately, you are responsible for your client's financial well being

I prefer local funds for the following reasons

Global funds are typically structured as "funds on funds" offered by local investment houses and it naturally translates to various levels of "management fees", first, the fee charged by the fund originator, second the fee charged by the fund aggregator, third the fee charged by the local investment house and fourth the fee charged by the company offering the product to the end user (our clients)

second is that these funds are originally denominated in USD, and as such, if the product is bought in pesos, clients can be exposed to FX risk, it is as if we are buying USD at the current level, if the peso starts appreciating, it will affect its conversion from USD to pesos

third, it may be over-diversified - while it is true that diversification minimizes risk, also remember that it also puts a cap on the upside, portfolio theory places the ideal diversification to just 18 to 22 assets, anything higher may lead to over-diversification

final word is that sophisticated is complicated (and expensive), fees will eat into returns and be aware of conversion risk

all the best my friends!

#acgadvice

79. ZOOM FATIGUE !!! (from a financial advisor's perspective)

picture credit to the owner

Oh no!!! Not another zoom meeting!!!

Agency managers have never had it so good, when I was on the other side of the fence (distribution development on the corporate side), agency meetings are always preceded by:

• the conceptualization of the theme - it can be a market update, product launches, announcement of sales campaigns or to share insights that we hope will help our advisors provide more value to their clients
• this is then followed by budget requests to cover the costs of the venue, some light snacks and maybe some giveaways
• and if the budget permits, we would be inviting a guest speaker to increase attendance especially if we can afford a "credible" and "known" resource person

Nowadays, its mostly just coming up with a theme for the meeting, maybe invite a speaker, announcing the meeting and setting it up over zoom

I am all for efficiency and reach of online meetings, but after attending so many since the lockdown two years ago, I literally have to be more discerning as the time I would spend listening to the drawl of a typical zoom meeting is competing with the time I could have spent watching YouTube Videos of MDRT sharing (https://www.youtube.com/c/MillionDollarRoundTable) or watch Boss Rex reinforce old learnings and learn new ones (https://www.youtube.com/c/RampverFinancials)

CREDIBILITY - I think this is the key, as there are already costs savings from not holding these on a physical venue (at least most of it), maybe the organizers that use this savings in getting more credible speakers as they can be more expensive compared to run of the mill speakers they normally feature

I find it a waste of time (pardon my directness) to listen to speakers who have not sold a thing in their life trying to teach me about selling, a non-MDRT speaker telling me how to qualify or someone without any meaningful field experience coaching me on how to be a better financial advisor, its much like a blind person leading the blind

as they say - "pay peanuts, you get monkeys" ha ha ha