The Value of Financial Planning

In my last post, I shared about 3 things.

First, it is about how murky the financial planning industry is, in Malaysia.

Second, I have separated the definition between the murky and the real definition of financial planning that has been hovering in the industry for decades and

Third, I used the Google Map Application as an analogy to explain the topic of financial planning into an easier subject for you to understand. [Here is the post, in case you missed it]

For this post, I will be addressing the questions taken from the last post on how you can benefit from engaging a Licensed Financial Planner* or a Financial Adviser Representative*.

The Questions (from the previous post)

  1. I am not rich, only rich people need a financial planner/ financial adviser representative.
  2. Why do I need one? I am single, nothing to manage.
  3. The fee is expensive because it is a professional job, I don’t think I can afford to pay.
  4. I know how to manage my own finance well, why do I still need one?
  5. I can’t even meet end needs, how can they help me?
  6. I am a business owner, I have an accountant and a financial controller. I don’t need it.

If we dissect the questions above and look for a pattern: it can be concluded that the general public is still unable to see the value of financial planning.

I am sure, you would agree that most of our financial advice received today is free of charge – either it comes from home or from our circle of influences namely our parents, our relatives, our friends, our colleagues, our servicing agents, the intermediaries or from the internet; and this advice that comes with supporting facts is usually based on personal experiences, stories that they heard at the coffee table or information shared by agents or intermediaries of financial providers, and professionals alike from a seminar or the internet in general.

“If free advice is available, then why do we still pay for it?”

I cannot deny that many of us, including myself at times, will fall into this kind of mentality. So, the next question you should ask yourself, is there a catch to it? Because…

“There is no free lunch”

Allow me to share with you an analogy of how free advice and paid advice works in a general perspective:

Free Advice, is like when you are having a cough and you went straight to the supermarket or a pharmacy and grab a random bottle of cough syrup, read the instruction, consume it and pray that it will work. If not, you will head in again to get a different bottle of cough syrup and repeat the same process until it works for you.

Paid Advice, is when you are having a cough and you go to the clinic for medical consultation by a medical doctor and take in the prescribed medication as recommended.

Both are advice, one could cost more in total (possibility are higher) and prolong our sickness while the later is reasonably charged and the percentage of getting better can be measured.

I am sure many of you could relate to the above situation, especially those of our friends or our family members. They tend to play doctor and self prescribe the medicine at the nearby pharmacy because they think it is a cheaper option. Sometimes, it may work on them because they applied what was once prescribed by a doctor from their last visit as reference. But we all know that the same medicine might not work on ALL situations as our circumstances change every time when we get sick.

Likewise, taking free financial advice is just like going to the pharmacy but in this context is the financial industry and asking advice from the agents of financial providers a piece of financial advice based on the products they sell and even worse, without looking at our financial health in totality and just suggest a product which they think the best suit the client. Whereas, engaging a licensed financial planner* or a financial adviser representative* is like going to a clinic to seek professional advice and to improve our financial health condition.

Now that you know the difference between free advice and paid advice. The next information you will need to know is, is there a difference between undertaking a licensed financial planner* or a financial adviser representative*?

To distinguish the difference between the two roles, we will need to know WHY there are two titles in the first place and how can both roles serve the client in their respective roles?

I will be addressing the questions above in my next post. If you find this article could benefit your family or friends, please share it around.

If you have comments about this article or suggestions on future topics, please do drop me an email at AskShaneHo [at] Gmail dot com.

The title financial planner and financial adviser is a regulated profession by the Securities Commission Malaysia and Central Bank of Malaysia respectively.