Difference between a Financial Planner and an Agent

17 Mar Difference between a Financial Planner and an Agent

Many Malaysians think that financial planners and agents are the same and they both sell you financial products.

Here is the low-down their roles. The tied agents (aka insurance or unit trust agents) are tied to a financial institution and sell products marketed the institution. They are remunerated by commission and incentives based on the volume of sales and retention.

Role of a Licensed Financial Planner

Licensed Financial Planners is to help their clients crystalize their life goals and priorities, draw up a customized financial plan to help clients navigate through all economic cycles. Purpose is to keep their clients on track to achieve their goals. Their approach will be holistic.

If you are financially-savvy, you may be able to DIY your own plan, but for someone who is too busy or are not numbers inclined, the financial planner is worth the fee as it helps you optimize your finances and avoid costly mistakes.

Financial Planners and Organisations are Licensed by Securities Commission
Licensed financial planners and the organisations they are attached with are listed in the website of Securities Commission Malaysia. You can also find information on the organisation such as when it was set up, what activities they are licensed to provide. The planner’s scope of service is based on the license of the company. It also shows the names of those who are terminated.

Selecting a Licensed Financial Planner

1. First off, have a good idea what you want in your financial life and what help you would want.
2. Speak or meet with at least 3-5 prospective planners before deciding.
3. The prospective planners should also provide their profile and their organisation’s financial planning service guide. Review and compare carefully.
4. The information and meeting are to help you decide whether the competency, experience, their organisations and personality traits are aligned with yours to ensure a smooth and harmonious working relationship.

Engaging a Licensed Financial Planner

1. When you have shortlisted the financial planner, the planner will prepare a Letter of Engagement (LOE) with all the agreed terms, conditions and fees for the both of you to sign. Where applicable, any conflict of interest should be included in the letter.
2. The financial planner helps you to determine your life goals, financial needs and time horizon. After that, they are required to obtain relevant information to help you analyse your current financial situation based on your goals.
3. After analysis, they will craft your financial plan which includes solutions and actions to be taken by you based on your current financial situation. This is followed by suitable financial products and services recommendation where necessary.
4. The planner then presents your financial plan to you. If you accept the plan there will be an implementation schedule towards the end of the plan for you to work with financial planner when and how to implement it. This process is in stages and the duration from beginning to implement is dependent on when you can provide the required information to the planner.
5. No plan is cast in stone. Hence there will also be an agreed plan review interval to monitor the implementation and ensure the goals are on-track. From here, you will determine how long you need the services of the financial planner.

Red Flags

1. Always cross-check recommended financial planners or those who approach you. If you are unable to locate the financial planner’s name on Securities Commission Malysia’s register, the person maybe unregulated or even worse, a scammer. Be very careful.
2. If the planner is licensed but the service does not meet with the profile provided, you will need to decide whether you want to proceed with this planner and whether the service is in line with what you are seeking. If not, approach the organisation for either a change of financial planner or exercise the exit clause.
3. Beware of ‘financial gurus’ from abroad and in Malaysia. Best to check on the credentials and licensing of the ‘guru’ before subscribing to their programme. If in doubt, avoid taking action and seek a licensed financial planner to work with instead.If you are still wondering whether you need a financial planner, read the blog on Only High Net Worth Individuals Need Financial Planning for better insights before deciding.Wishing you a better and more fulfilling financial life.