It is fair to say that the Maltese people love the sea and when thinking about financial planning, one can quite easily make an analogy with the sea, or to be more accurate with boats
The sea can be enjoyed in a number of ways. There are those who own a super yacht, others a cabin cruiser or a typical ‘frejgatina’. For those people who get sea-sick or do not own a boat there is also another alternative; enjoying the sea as a swimmer or even as a sunbather. The point is that every one enjoys the sea in accordance with his or her means. The same principle applies equally to Financial Planning. Financial Planning principles can be applied to the very rich and also to the small to medium saver or investor.
HSBC’s approach to financial planning, therefore, is aimed at providing individual solutions tailored to meet individual needs. We firmly believe that if you fail to plan you are effectively planning to fail and this article will look at some of the issues HSBC focuses on when we discuss their financial future with them.
In order to emphasise the importance of financial planning and to help customers appreciate its relevance, we usually look at events that most of us meet either in our business or indeed in our day to day life.
For people who are in business, a discussion with a qualified financial planning officer or manager can highlight events or needs such as loan protection or group life assurance needs. For some people group life assurance can be looked upon as a cost to the business, but in real terms, a motivated workforce is an asset. In a country like ours where up to 50 per cent of the wealth we create is based on a service element, a truly motivated workforce is a good investment!
On a more individual level, one can look at a completely different set of needs, which are either expense led, or alternatively income led. The former could include the arrival of a new baby in the family, future higher education for children, a new house or maybe the holiday of a lifetime. Saving and ensuring that these future expenses can be met is an integral part of what a Financial Planning Officer from HSBC will help you with.
On the other hand it is not inconceivable for individuals to be in line for career advancement or nearing the repayment of a loan. These two events both produce an increased disposable income, which can in turn be managed to optimise financial resources.
Know your customer
At HSBC the first stage in the process of financial planning requires our financial planning officers to get to know their customers. KYC is invaluable in helping both HSBC and the client to establish basic facts about the customer’s financial status, to identify needs as opposed to wants, to clearly identify a risk profile and to help the customer to look at his/her finances logically and analytically.
The fundamental premise on which financial planning is based is protection. This involves tackling difficult questions such as thinking about what will happen if a partner dies suddenly or is affected by a serious illness. How would the household income be affected? Who would look after the children? Would the surviving partner afford to maintain a standard of living? Could any debts be repaid?
This, clearly, is a distressing subject but in real life all of these questions need to be addressed and although money can not solve emotional problems, having access to protection takes care of problems or issues which could compound an already difficult situation.
With the customers needs identified, the next stage in the process is the actual investment. The most frequent questions from customers are; “When should I invest?” and “What are the risks involved?” These are questions that need to addressed before considering making investment decisions.
Attitude to risk
HSBC considers the customer’s attitude to risk to be a crucial question and we encourage customers to talk about this subject. This helps the customer to identify the right investment products that fit his or her risk profile.
Through discussions with the customer, HSBC’s financial planning officers are usually are in a position to understand whether a customer has a profile described as: zero risk or some risk or adventurous. Even after having established this profile, we still ensure that customers understand the value of the need for emergency funds and for the need of protection.
In a low interest rate environment guaranteed income has been elusive. In the last five years, most investors have had to look for income via capital gains. Compared to the 1970s and early 1980s, income from fixed interest vehicles has been low.
The aftershocks of the 11 September 2001 attacks on the financial markets, brought the focus sharply on to what is probably the most important word in a Financial Planner’s dictionary, Diversification. It is true to say that in the present circumstances nowhere is completely safe but at least a spread of investments provides a measure of protection.
Once again diversification is not only accessible to the rich investor.
Small investors can also diversify their hard-earned savings by investing into Fund Managed products which effectively pool savers’ monies and then invest in a wide spread of countries, currencies, shares, bonds and bank deposits. Diversification decreases overall risk many times over
Some of the questions we ask our customers are: ‘What age would you like to retire at?’, ‘How are you going to build sufficient capital?’, ‘What level of expenditure do you anticipate at retirement age?’, ‘What standard of living do you want to have?’. Answering these questions may require the customer to defer consumption now in order to ensure a good standard of living during retirement.
Financial Planning is quite painless when you have a competent, trained and licensed person to help you and to guide you make decisions. HSBC knows that Financial Planning is for everybody and through it one can gain access to a large range of onshore and off-shore products to meet the needs of all types of customer from the large investor to the small saver. Customers also have a guarantee that their financial matters will be dealt with in the strictest confidence. HSBC Bank Malta p.l.c. has the knowledge, competence and ability to help our customers ensure that they and their families are adequately catered for throughout their life.