What is Financial Planning?

Those not working in the same industry will have a different perspective from those already in the industry, which is acceptable. It happens to many professions and is especially true for engineering, law, medical, and finance. Today I will be sharing my view on what the term “financial planning” means comparing to how the rest think it is.

When I first joined the personal finance industry, I started as a financial product agent selling insurance and unit trust products. My duty as an agent is to promote products to prospective clients. At times, some agents had to make the prospect think that a purchase is necessary when it is not; so they can fulfill the target set by the principals or for self-achievement.

After operating as a full-time agent for almost half a year, I realize this is not the right thing to do, and it will not last me if I practice the same thing as the rest. I began to see a need for change so, I enrolled in the CFP certification to learn how the industry had been operating and to up my skill set.

During my time as an agent, we are trained and told that we should be on the field to help more people with our products. For example, insurance can help a family when the breadwinner passed on or invest today for their retirement. Almost every agent will sing the same tune – financial planning is about buying insurance or investing in a unit trust or private retirement schemes. Is it?

There is nothing wrong with buying financial products from an agent. However, when an agent proposes a financial solution without accessing the prospect’s overall financial condition and calls it financial planning, that is wrong.

What is Financial Planning?

Short Answer:

Financial planning is like a mapping system that tells us how to get from point A to point B.

Long Answer:

Financial planning is like a mapping system that tells us how to get from point A to point B using the most effective methods available based on our current condition. Pretty much like how Google Maps and Waze operates.

Identifying the Gaps

To help illustrate better, let’s use the state of Sabah as an example. If we are to ask Google Map how to get from Sandakan to Kota Kinabalu District, below is how the results would look like:

Identifying the Tools

Based on the available travel methods, these would be the options available for us:

RefThe MapThe Plan
AIdentify Your Current LocationIdentify Current Situation
BIdentify Your DestinationIdentify Your Your Goal
1 & 2Identify the RoutesIdentify the Gaps
Identify the Mode of TransportsIdentify the Tools to Use
Financial Planning is a map that will show us how to achieve our life goals by using the most effective financial tools available in the market. Therefore, there is no one-size-fits-all plan in the market because each individual is unique, and our life condition changes from time to time.

If agents are not qualified to chart such a plan for us, then the next question is, who can? To answer that, I will introduce to you who is a Financial Planner in my next post.
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  1. Very good article Shane Ho of what financial planning is. Yes unfortunatly many Malaysians are very confused on what financial planning is in the financial arena. My short comment is, is the financial planners interest 100% for the cient’s interest or for his own interest to survive as a sales agent to his principal. Hope this makes it clearer for Malaysians. 😉

    1. Thank you, Robert, for your comment and encouragement. I will address your concern about the client’s interest in my future post. Have a Good Day Ahead.

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