Crouching tiger, hidden designation: financial planning in Asia

Early this year, an international battle between the controllers of the Certified Financial Planner (CFP) and Chartered Financial Practitioner (ChFP) designations erupted in the Asia-Pacific.

The Financial Planning Association of Singapore (FPAS), which issues the CFP designation, served a writ against the Insurance and Financial Practitioners Association of Singapore (IFPAS), alleging that the ChFP mark too closely resembled the CFP.

It mirrored a similar stoush in Australia between theAssociation of Financial Advisers(AFA) and theFinancial Planning Association(FPA) at the end of 2002, which led to the AFA backing down on its proposal to adopt the ChFP designation.

The dispute in Singapore being negotiated between the two associations has the potential to be repeated across Asia. The IFPAS is only one of the 11 life underwriters associations within the greater Asia Pacific Life Insurance Council (APLIC), which has adopted the ChFP mark to symbolise the growing level of education and professionalism of advisers under its umbrella.

Though the designation duel is yet to be played out, the move by insurance associations in Asia to take on professional designations and increase education standards is a symptom of an advisory industry trying to distance itself from its infancy.

APLIC board member and past AFA president John Hibberd says the advisory industry in Asia is still caught in the life insurance broking and product selling phase, and is struggling through the first stages of a transition towards advice-based planning.

He says that between 85 and 90 per cent of advisers in Asia are tied to institutions and that less than 20 per cent are up to CFP standard.

The majority of advisory businesses in Asia are the arms of large financial services groups in search of distribution and sales, according to Hibberd, resulting in businesses with massive infrastructure. This means there are teams of up to 600 advisers, paid on low commission bases and focusing on selling volumes of products to large organisational client bases.

Despite this, the advice-based model of financial planning has started to make inroads in the region, with relatively young planning associations in countries such as Hong Kong, India, South Korea and Malaysia promoting the benefits of financial advice while educating members up to the level of the CFP.

Financial Planning Standards Board (FPSB) chief executive Noel Maye says this growth has come from a need for financial advice in Asia, as opposed to just products, as life expectancies and retirements lengthen and governments give increasing retirement responsibility to individuals, resulting in a growing uncertainty about the financial choices and products available.

The key to this growth spurt in financial services within Asia has been evolving legislation, though Maye says regulation that lags behind the marketplace is the biggest challenge the financial planning industry in Asia faces.

He says Taiwan’s Financial Holding Company Act of 2001 has opened up vast potential for growth, but China’s marketplace is still regulated along restrictive functional lines, making it hard for someone to practice financial planning.

Singapore has been a particular regulatory success story for financial planners. The introduction in October last year of the Financial Advisers Act (FAA) streamlined the laws governing planners to allow more independence from institutions.

Hong Kong’s legislation is following just behind that of Singapore, with regulators there looking at the Australian financial planning model as a guide for their own changes.

Maye says that financial planning in Asia, as growth continues, is likely to follow a similar pattern to the rest of the world, with planning evolving at the high end of the market.

However, Hibberd believes there is a long way to go in the transition from product-based distribution to advice-based planning, estimating that Singapore and Hong Kong are five years behind the Australian market, while India could be up to 20 years behind.