++Hiring Financial Help++

Let's face it – making financial decisions is hard. While there is a lot you can figure out on your own, we can all use help when it comes to something as important as how to save, invest and plan for the future.

Nevertheless, very few households in Thailand have a personal financial planner. This may be due to the fact that the concept is still relatively new here and most people still feel uncomfortable to entrust their financial future to a stranger. Moreover, a changing market place has blurred the line between the likes of insurance salesmen and stockbrokers. In fact, these days everyone one from mutual fund companies to insurance and brokerage houses is competing hard to manage your money.

As a result, you will want to hire a planner who's earned credentials, such as an Investment Planner (IP) or a Financial Guide (FG). The credentials are awarded only to those advisers who have demonstrated a certain degree of knowledge and experience and who've passed exams covering major planning subjects. For example, to earn the IP credential, a planner must pass an exam that tests knowledge of investment planning, modern portfolio theory, tax planning and retirement planning.

Because qualified investment planners are trained to deal with myriad of personal financial topics, they can help you set financial goals and priorities, then recommend specific steps to meet them. This means they may give advice on how you should allocate your investments, what mutual funds to buy and explain how certain moves may affect your taxes. It's then up to you to decide if you want to follow that advice. A good planner will also recommend when you need more specialized help, such as a tax lawyer who can help with estate and tax planning matters.

Here's a round up of the different types of help that is available:-

Investment Planning:

Credential: IP (Investment Planner)

Responsibility: Advice clients on mutual funds and may buy and sell funds for clients. Some also provide general financial planning services as well.

Requirements: Candidates must pass a test comprised of 70 multiple-choice questions covering the use of mutual funds, financial planning and code of ethics. They are licensed by the SEC and in order to keep the IP status, the license holder must attend refresher courses every 2 years.

Credential: FG ( Financial Guide)

Responsibility: Provide basic information on mutual funds but may not give advice on which funds to buy or sell.

Requirements: Candidates must pass a test comprised of 70 multiple-choice questions covering the use of mutual funds, financial planning and code of ethics.

Credential: IA (Investment Adviser)

Responsibility: As the name suggests, an IA advises clients about securities.

Credential: CFA (Certified Financial Analyst)

Responsibility: CFAs are generally portfolio managers and analysts for institutional clients such as banks or mutual funds. But some CFAs advice wealthy individuals or families who have sophisticated investment needs.

Requirements: Candidates must take three, six-hours exams in three years covering financial accounting, debt, equity analysis and portfolio management. They also must have at least 3 years of professional experience in investments.

Title: Stock Broker

Responsibility: Brokers are paid to trade securities on behalf of clients. This is different from giving investment advice, though some brokers may also be registered as investment planners or advisers.

Requirements: Before they can buy or sell securities for clients, brokers must pass exams on trading procedures by the Thailand Securities Institute (TSI).

Tax Planning:

Credential: CPA (Certified Public Accountant)

Responsibility: Those CPAs who specializes in taxes can help clients with tax planning and preparation. However, some CPAs may only focus on audits and accounting alone.

Requirements: Candidates must pass the rigorous CPA examination and must licensed by the board of accountancy.

Insurance:

Credential: Insurance Agent/Broker

Responsibility: Advice clients on insurance needs and estate planning. Some also provide general financial planning services as well. Insurance agents are tied to a single insurance company whereas brokers may represent several companies.

Requirements: Candidates must pass a test comprised of 70 multiple-choice questions covering the various types of insurance, annuities and code of ethics. They are licensed by the Insurance Department.

Types of Fees

Now that you know where to look for help, here's a few tips on what you need ask your planners before getting started. First of all you need to know how much it is going to cost you and how your planners are being paid. Generally, planners use 3 main methods to bill clients:

• Fee-Only Planners are paid only for the advice they give. They do not earn commissions by selling financial products such as mutual funds or life insurance.

• Fee-Based Planners earn fees from advice and they also make commissions.

• Commission-Based Planners make money from the products they sell.

However, in Thailand , most of the planners are on a commission-based basis. Fee based basis is where you pay your planners purely for his advice. This can either be by the hour or a percentage of a client's asset. Commission-based basis, on the other hand, you do not actually pay any fees to the planners but they get a commission from the product providers such as mutual funds or insurance companies.

It is important that you should know specifically how much your planner makes from the various products that he recommends. For example equity mutual funds pay higher commission than money market funds. Ideally, fee based basis is a better way to reward your planners because you will be getting unbiased advice and you don't have to worry that your planner is making a recommendation to generate fees. Moreover, you get a better idea up front how much you will be paying for advice.

However, in the real world many people are reluctant to pay such a fee, which is unfortunate. Therefore, they have to settle for commission-based planners and determine for themselves whether they are getting the best advice. One should be particularly wary of planners who push just one product say, one family of mutual funds or one kind of insurance as they may not be giving you the unbiased or comprehensive advice you need because they are more interested in pushing the products with the highest commission.

In addition, one should be aware about the potential pitfalls when fees are paid as percentage of a client's assets. On the plus side, planners have great incentive to make you rich because their fees also increase in line with the growth of your asset. But they also have a disincentive for you to cut into your nest egg and may urge you to invest rather than pay off a mortgage or other debt.

Secondly, depending on how self-directed you are, you may want your planner to tell you exactly what insurance to get or what mutual funds to buy and where to buy them. On the other hand, you may have enough knowledge and confident to pick your own funds and determine your own asset allocation; the choice of which is up to you.

Thirdly, there is a correlation between how well an adviser understands your needs and the quality of the advice you get. Therefore, it is important that before hiring a planner one should conduct comprehensive interviews to find the one that can deliver the services you need and who is compatible with your style. Planning is more than just investing. Not all planners offer comprehensive services. Some just give investment advice or focus on one aspect of planning such as mutual funds and taxes but not asset allocation or insurance.

Background Check

Before hiring a planner, it is recommended that you check to see if a planner's record is tarnished by disciplinary problems or complaints. The Office of the SEC keeps tabs on planners and can provide help. A reference from a friend or family member is another good way to search for a financial planner. If possible, get two or more references from other clients. When following up with references, focus on specifics such as how a planner performs during a financial crisis or a big investment loss.

More importantly, the quality of a planner's advice depends on how well he or she knows you. That's why it is important to know yourself and express yourself openly such as identify the financial goals you want to meet, your assets and liabilities, your risk tolerance and investment style. The key here is to find a planner with relevant experience. A certain planner may have decades' worth of experience selling insurance products but if you have more sophisticated needs like planning for retirement or saving for a first home, then you want someone who has experience in those areas.