I’ve received a couple of inquiries requesting information on just what Registered Financial Planners (RFPs) do. Specifically, these individuals wanted to know what we do, what we don’t do and how to engage the services of an RFP like me.
What we do
In a nutshell, RFPs, as the name implies, design financial plans for people. We make them plans and strategies that will allow them to achieve their personal financial goals within their desired time frame.
For example, assume you wanted to plan for the college education of your child. You have an idea of how much it would cost if your child went to college today, but what if your child will go to college in five years? 10 years? 15 years? How do you estimate how much tuition will be at that time? Next, assume that you have an estimate of tuition in 15 years.
How then will you pay for it?
Of course, if you are already rich then it may not be much of a problem. But if you are not, finding a way to pay for that expense will occupy a lot of your time and energy.
Specifically, how do you evaluate and decide which investment product will give you the best chance of meeting that goal? Do you stay with a savings account? Purchase blue-chip shares on the Philippine Stock Exchange? Make a placement in a unit investment trust fund? How about a mutual fund? Variable life insurance? Preneed plans?
How do you know which of these instruments, if any, would give you the best chance of achieving your desired goal within your desired time frame? Put another way, who would you ask if you wanted to know which investment alternative is best for you? Answering these questions is pretty much the entire point of being an RFP.
What we don’t do
As a general rule, we do not actually hold or manage any of the money of our clients. (Though there are some who do.) We design the plans and monitor them but implementation is ultimately left to our clients.
To better illustrate what I mean, consider the following scenario. Let’s say you want to improve your general physical fitness. Of course, there are so many choices available. You can go on a diet. Go to a gym. Take up yoga or Pilates. Learn a sport. Now, while you can definitely just jump onto the Internet, do some research and develop your own plan; it would be more efficient and less risky to your health if you engaged the services of a trainer. That way, you can avoid many of the pitfalls novices fall into as well as have someone to monitor your progress and keep you motivated.
Registered financial planners pretty much work the same way—we help our clients develop a plan, we monitor the plan and we motivate our clients to stick to the plan. However, much like the fitness trainer cannot do your situps for you, RFP’s cannot do your investing for you.
Where to find us
OK, just in case you’ve decided that engaging the services of an RFP is for you, the next concern would, of course, be where and how do you hire one. A comprehensive list of RFP’s can be found at http://www.rfp-philippines.com. Once you’ve established contact with one of my colleagues there engaging their services boils down to the following process:
First, tell the RFP what it is you are planning for. Is it credit minimization? Educational planning? Estate planning? Increased investment returns? This is very important because it will allow the RFP to determine if what you are looking for is something he or she can provide. If the RFP says that what you are looking for is beyond his purview, then ask him for a recommendation as to who can meet your needs.
Second, along with telling the RFP what you want to achieve, be sure to give him an idea of when you want to meet said goals as well. This way, he will give you an initial feedback as to how realistic your goal is and if he can meet them.
Third, ask him how much he charges. In general, RFP’s charge either per project or per consultation. Rates, of course, vary and depend on the particular project and individual RFP.
Miscellaneous
With all of that said, I would like to emphasize the following points before I end my column this week:
First, does everyone need the services of an RFP? The answer is no. If you are pretty much happy with your finances and don’t find yourself wondering where to put your money on a regular basis, then getting the services of an RFP would be pretty superfluous. However, if you are having problems figuring out where to put your money or which of several investment options is best for you, then an RFP may be your best bet in answering those questions.
Second, the RFP can only tell you what you should do. At the end of the day, it will be up to you if you decide to follow your RFP’s advice or not. To paraphrase the old adage—RFP’s can bring you to the trough but we can’t force you to drink from it.
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