A key part of the challenge facing the three finalists in the SCMP/IFPHK Financial Planner Awards 2011 is how best to handle a situation which is both true to life and different from anything previously encountered.
The final round requires contestants to analyse a case study similar to ones they are likely to come across in their work. The assignment asks that contestants identify priorities, outline investment choices and review decisions that will have an impact on family life, children's education and comfortable retirement.
What adds to the degree of difficulty is that finalists have just 20 minutes to present their conclusions to a panel of 10 experts, with a subsequent 10-minute Q&A session.
However, Willie Yiu, business manager for ipac Financial Planning HK, took it in his stride, making it clear that good financial planning is about finding solutions that best fit a situation. The case concerned a businessman in his mid-40s working for his family firm and earning around HK$1 million a year. The businessman has the chance to move to Guangzhou and double his salary, but his wife's job is in Hong Kong and their younger children - twins - have been diagnosed with a medical condition that requires special treatment.
The family has a home valued at HK$16 million, but with mortgage payments outstanding and general living expenses to cover, it means there is little to save. Ideally, the husband would like to retire at age 55 with around HK$25,000 to cover monthly outgoings and to have enough to pay for the overseas university education of his children.
Yiu's main point was to show the client's alternatives. He also emphasised the human effects of financial decisions. He advised that the businessman should take the job in Guangzhou because of the higher salary, but move to Hung Hom to make travelling easier and to be closer to medical care. This would free up funds for insurance, retirement-related investments, and education.
Yiu also suggested restructuring the investment portfolio to reflect market conditions and current economic uncertainties.
The first concern for Henry Ho, district manager for Ageas Insurance Company (Asia), was that the family is living slightly beyond its means. The twins' medical condition also calls for the family's insurance cover to be renewed. Ho's plan included holding on to the present home on the assumption that it would continue to appreciate in value over the next 10 years. Selling it at that point, for possibly HK$30 million plus, would provide funds for the children's overseas education, a nest egg for retirement, and enough to buy an affordable home elsewhere.
"I also said the husband should make a will," Ho says. "If anything should happen, the money would then go straight to the wife and kids."
The focus for Julian Cheung Ming-fai, senior international relationship manager for Standard Chartered Bank (Hong Kong), was to enhance the client's cash flow and liquidity. Hence, his key recommendation was to restructure the current mortgage. This might prolong the repayment period, but it would be at a low rate of interest, making more money available for retirement planning and other investments offering a reasonable rate of return.
"Right now, the equity markets and global situation are not very stable, so I advised a very conservative retirement portfolio," Cheung says.
"It included renminbi deposits, global bonds and gold. I calculated that if this client invested conservatively, he could reach all his goals. Restructuring the mortgage was a must, because it would make it possible to maintain the family's lifestyle on their current income and to retire at 55 with as much as HK$37,000 per month."
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