Financial planners are responsible for giving expert advice to clients to help them reach their financial goals. This includes setting goals for saving and implementing strategies for accumulating wealth.
Financial planners are also expected to recommend products and services to their clients that can best serve the needs of their clients.
And yet, financial decision-making can still be a difficult task for your clients. In this day and age, financial consumers are constantly bombarded with ‘choices’ which could hamper their ability to make the right decisions for themselves. At the same time, not everyone has a good grasp of their finances and their ability to make long-term commitments.
More recently with the after-effects of the pandemic, many financial consumers are grappling with managing their personal finances, to have adequate funds to continue their day-to-day lives let alone having funds to invest or even to procure insurance policies or takaful to protect themselves from unexpected perils.
Adding value with financial literacy
There are studies that suggest that those who use financial planners are more likely to feel confident about their financial future when faced with economic uncertainty, compared to those who do not rely on professional advice when making financial decisions.
However, not everyone is as keen to use the services of a financial planner as they may have certain pre-existing misconceptions such as financial planning services being only for the wealthy or that financial planners are only interested in making a commission. So how can we overcome this barrier?
How about incorporating financial literacy education when communicating with your customers? Not only does this provide value in addition to the education they are receiving about a product or service, but it also lets them know that you are equally as invested in building their financial resilience.
Financial literacy is an important life skill that is also transferable so the education you impart to your clients will make them more financially literate in the long run.
Generally, financial consumers with better financial knowledge tend to be in a better position than their less knowledgeable peers when it comes to earning, managing, and investing their money this also means that they are also more open to accepting ideas and making decisions on financial products and services that can serve their goals.
For example, an individual who knows and understands the importance of saving up for their retirement years would be more likely to invest earlier in a private retirement scheme than another individual who has the mindset that retirement is still ‘a long time away’. Similarly, it is cheaper to take up life insurance or family takaful protection at an early age during the healthy stage of life rather then when health issues start to surface as one age.
Start by knowing what matters at different life stages
Understanding that financial consumers have different levels of financial literacy helps and knowing what are the basic must-haves and must-dos for individuals at different life stages can also help tailor your advice to them better.
For example, a person in their 30s may need to start thinking about retirement planning, whereas a person in their 50s would find the topic of estate planning to be more relevant. And for the younger clientele who are fresh out of college, they would need to know about the importance of building emergency savings and start investing in health and other relevant insurance.
At every stage of life, topics concerning consumer rights and protection systems are relevant as part of building financial resilience.
As most consumers would have a deposit account, you could also help them to understand how their deposits are protected to help them prepare for future emergencies. In Malaysia, Perbadanan Insurans Deposit Malaysia (PIDM) is the government authority that administers protection systems for depositors, as well as takaful certificate and insurance policy owners.
Make conversations about finance meaningful and sustainable
Become a financial literacy ally! You can do this by aligning your customer education in line with the Financial Education Network (FEN)'s National Strategy for Financial Literacy as espoused in Malaysia’s Financial Sector Blueprint 2022-2026 and be part of the greater community who are working towards inculcating and nurturing healthy attitudes toward financial management.
Financial planners can have more meaningful conversations with their clients about financial literacy when clients know that they can be transparent about their motivations, expected goals, and what they know and don’t know about financial management. Inculcating ongoing financial knowledge conversations will also help financial consumers to build their personal financial resilience, thus also building confidence and trust in the work of financial planners.
Conversations about money and how to manage money can be daunting but there are resources online that can help you to convey important financial literacy messages in bite-sized and easy-to-understand formats. You can access articles and videos on financial literacy topics at PIDM’s #SediaPayungKewangan microsite (www.pidm.gov.my/SPK) and FEN’s website (www.fenetwork.my).