The Future of Financial Advisors – Dr. Sidney Sze


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The Future of Financial Advisors – Dr. Sidney Sze

  1. 1. The Future of Financial Advisors: R.F.P. in action September 14, 2012 RFPConference(Manila)_Sep12 1
  2. 2. Dr. Sidney Sze CFP,FHKRFP,CLU,CFE,CMA,CPA,ACMA,MSCPA, ACS,ACIS,ACIS,MMS,PhD,Certified NLP Trainer• Founder President of Society of Registered Financial Planners (HKRFP)• Chairman of CAGI Think Tank• Founding Chairman of Independent Financial Advisors Association• The Founder CEO of Midland Financial Group.• President of the Society of Management Accountants of Canada – Hong Kong Branch 2000/2002 RFPConference(Manila)_Sep12 2
  3. 3. ReductionRFPConference(Manila)_Sep12 3
  4. 4. How Cost Reduction Affect Net Profit 20% cost Equivalent Current reduction in SalesRevenue $100 $100 $140Direct operating cost $35 $35 $49Labor costs $35 $35 $49Non-core indirect $20 $16 $28costsNet Profit $10 $14 $14 20% cost reduction = 40% increase in Net Profit $4m in expense savings = $40m revenue increase RFPConference(Manila)_Sep12 4
  5. 5. Pricewaterhousecoopers Statistics from 590businesses in Europe, Americas, Africa & Australia – Why the chances are missed ? • Only less than half (48%) of all firms have a cost cutting strategy in place • 74% of companies often get their cost cutting priority wrong by cutting what is easy to measure rather than what is most needed RFPConference(Manila)_Sep12 5
  6. 6. Cost management challenges• Multiple suppliers and multiple order points• No internal benchmark data on purchases• Staff and management have limited time and resources to address non-strategic costs• Employees with limited purchasing experience are making buying decisions RFPConference(Manila)_Sep12 6
  7. 7. Insurance• Don’t over buy• Choose policies better suit the appetite of local insurance companies• Lock in when price is low• Seek group plan• Challenge brokers RFPConference(Manila)_Sep12 7
  8. 8. Family Office RFPConference(Manila)_Sep12 8
  9. 9. Family Office A family office is a private company that manages investments and trusts for a single wealthy family. The companys financial capital is the familys own wealth, often accumulated over many family generations. RFPConference(Manila)_Sep12 9
  10. 10. Traditional & Modern UsageA traditional family office is a business run byand for a single family.Its sole function is to centralize themanagement of a significant family fortune.Typically, these organizations employ staff tomanage investments, taxes, philanthropicgiving, trusts, and legal matters. RFPConference(Manila)_Sep12 10
  11. 11. Traditional & Modern UsageThe purpose of the family office is to effectivelytransfer established wealth across generations.The family office invests the familys money,manages all of the familys assets, and disbursespayments to family members as required.The office itself either is, or operates just like, aprivate company, with a COO, CFO, CIO, etc. and asupport staff reporting to you the CEO. RFPConference(Manila)_Sep12 11
  12. 12. Wealth Maximization 5 Essential Elements:  Knowledge  Experience  Discipline  Objectivity  Time RFPConference(Manila)_Sep12 12
  13. 13. Possessing enough knowledge Some people might think it is a good idea to keep their will in their safe deposit box in the bank since this should be one of the safest places to keep it. RFPConference(Manila)_Sep12 13
  14. 14. Will in safe deposit box?In the event of death, all assets will be frozenpending the grant of probate including safedeposit box in the bank.The result: heirs are trapped in a catch-22situation. RFPConference(Manila)_Sep12 14
  15. 15. True Experience ?An investment company set up an off-shoretrust by appointing the client as the trustee.In the absence of the client, there will be notrustee to oversee the trust for the benefit ofhis grand children’s education. RFPConference(Manila)_Sep12 15
  16. 16. Wealth CreatorsMost great wealth creators are so used totaking risks that they become “blind” to therisks that threaten their created wealth.As a result, they continue to spend most if notall of their time taking more risks to createmore wealth. RFPConference(Manila)_Sep12 16
  17. 17. Casual time means no timeYou can “buy time” from the professionals whosell their time to assist you in wealthmaximization.You can “buy time” from a Family Office tohelp you to manage non-critical activities whileyou focus on critical decision making. RFPConference(Manila)_Sep12 17
  18. 18. CEOYour client is successful in his business notbecause he possesses all the essentialelements to manage the business.He is successful in business because he has abusiness office to provide him with all theessential elements. RFPConference(Manila)_Sep12 18
  19. 19. Multi Family OfficePrivate company multi-family offices are nowopening to provide the same menu of personalservices that a single wealthy family obtains fromits own family office.Some of these multi-family office are housed inlaw firms and public accounting firms. Others areeither stand-alone or are outgrowths of a singlefamilys office. RFPConference(Manila)_Sep12 19
  20. 20. Family Office Exchange (FOX)FOX, a family office specialist company inChicago, estimates that there are around 3,000family offices in the US. RFPConference(Manila)_Sep12 20
  21. 21. The Financial Enterprise Has All the Complexitiesof a Family Business Family Enterprise Business Other Assets Family AssetsOwnership Wealth Ownership Family Capitalization ShareholderControl & Requirements Preservation & Structure & Philanthropic Liquidity Enhancement Tax Planning GoalsSuccession Wealth Creation Wealth Enhancement (Wealth Maximization) Source: The Family Office Exchange RFPConference(Manila)_Sep12 21
  22. 22. Wealth ManagementWith a business office to help you in wealthcreation and a Family Office to help you inwealth maximization, your wealthmanagement will be complete. RFPConference(Manila)_Sep12 22
  23. 23. Clients’ Big ProblemsIndustry motivated by greedFirms putting their own interests ahead of investorsIndustry’s reluctance to punish wrongdoersLack of internal controls to prevent wrongful actionsInsider tradingInsufficient disclosure of risks to investorsAccounting churningInsufficient disclosure of fees to investorsTransaction fees/commissions too high RFPConference(Manila)_Sep12 23
  24. 24. Private Banking vs. Family Office ModelCharacteristic Private Banking Family OfficeWealth Management Product-oriented Product NeutralMethodology Investments are managed in Investment-management the context of the family focused “balance sheet” Advice centered on “in-house” Advice reflects a full view of portfolio only client’s assets Little or no coordination / Coordinates / collaborates collaboration with third-party with all providers to develop providers an integrated wealth strategy Service oriented toward Service focuses on the mid-tier individual mid-tier millionaires millionaire family “entity” RFPConference(Manila)_Sep12 24 Source: Cap Gemini/Merrill Lynch World Wealth Report 2005
  25. 25. Private Banking vs. Family Office ModelCharacteristic Private Banking Family OfficeProcess & Pricing Transaction-based pricing now Historically Asset Under moving towards Assets Under Management-based pricing Management or “by service” fee menu Ad-hoc investment process; Investment process is often reacts to market conditions documented and standardized, according to agreed-upon investment policy Portfolio reviews based on Portfolio reviews are regularly standard templates scheduled and customized, according to client’s needs and preferences RFPConference(Manila)_Sep12 25 Source: Cap Gemini/Merrill Lynch World Wealth Report 2005
  26. 26. Programming RFPConference(Manila)_Sep12 26
  27. 27. NLP : Neuro-Linguistic Programming RFPConference(Manila)_Sep12 27
  28. 28. Find the Man in the Coffee Beans RFPConference(Manila)_Sep12 28
  29. 29. Value areas in our lives CareerSpirituality FamilyHealth & RelationshipsFitness Personal Growth & Development RFPConference(Manila)_Sep12 29
  30. 30. The Information Filters We exist in our external environment and select information through our senses of sight, hearing, smell, taste and touch. Our senses or our receivers are bombarded by over two million pieces of information at any second. RFPConference(Manila)_Sep12 30
  31. 31. The Information Filters In order to make sense of what’s going on around us, we have to decide which pieces of information we are going to pay attention to. RFPConference(Manila)_Sep12 31
  32. 32. RFPConference(Manila)_Sep12 32
  33. 33. LANGUAGE once Paris A in a in the bird in thea lifetime the spring the hand RFPConference(Manila)_Sep12 33
  35. 35. The Power of Context RFPConference(Manila)_Sep12 35
  36. 36. The Power of Context RFPConference(Manila)_Sep12 36
  37. 37. Kirlian Photography RFPConference(Manila)_Sep12 37
  38. 38. Children’s GradesThe questions posed to parents was: “Yourchild shows you the following grades: English– A; Social Studies – A; Biology – C; Algebra –F. Which grade deserves the most attentionfrom you?” RFPConference(Manila)_Sep12 38
  39. 39. The vast majority of parents in every countriesfocused on the F. COUNTRY Focused on A’s Focused on F’s U.K. 22% 52% Japan 18 43 China 8 56 France 7 87 U.S. 7 77 Canada 6 83 RFPConference(Manila)_Sep12 39
  40. 40. The Magic RatioJohn Gottman’s pioneering research onmarriages suggests there is a “magic ratio” of 5to 1 – in terms of our balance of positive tonegative interactions. RFPConference(Manila)_Sep12 40
  41. 41. Practitioners Psychiatrist Psychologist Therapist Psychotherapist RFPConference(Manila)_Sep12 41
  42. 42. Smart PersonIf you understand others you are smart.If you understand yourself your are illuminated. Lao Tzu RFPConference(Manila)_Sep12 42
  43. 43. Illuminated PersonChoose a job you love, and you will never have to work a day in your life Confucius RFPConference(Manila)_Sep12 43
  44. 44. Financial Planners = Friends? RFPConference(Manila)_Sep12 44
  45. 45. Thank YouQuestions?RFPConference(Manila)_Sep12 45
  46. 46. Contact Website: Email : Tel: (852) 3105 1744 Fax: (852) 2186 7136 Address: Room 504, Blissful Building,243-7 Des Voeux Road Central, Hong Kong RFPConference(Manila)_Sep12 46