… con’t.

Getting into an investment program that will give you growth which is way below inflation rates (even at its lowest levels) over a long period of time was bereft of any sound reasoning. I was curious as to why he often proposed such a strategy and I was baffled by his response. He said the US dollar has historically performed well against the peso and showed me a chart that the average depreciation of the peso was about 8 percent per year. He then said  the 2-percent growth added to the 8-percent depreciation of the peso will result to an effective annual return of 10 percent over a period of 15 years.

Arguably, the explanation of the adviser will seem to be a compelling one to many. His mathematics being a bit off tangent notwithstanding, I politely queried about the possibility of the pesos depreciating slower than 8 percent and even a probability that the peso may actually appreciate against the mighty US dollar in a span of 15 years. He confidently replied that such a scenario will never happen, citing history and an obvious over-confidence on the US and a discontent for the Philippines.

With a bruised nationalistic pride, I could have carried on the discussion pointing at a closer review of historical data (a longer span of the parity rates will result to a lower depreciation rate), macroeconomic factors, geo-political considerations and fundamental analysis and so on; but it was not my place to argue my position. I just gave the adviser a personal advice to consider diversification in his recommendations and to think about other factors prior to making a pitch to his potential clients. Even at the time of the said discussion (The US dollar was still soaring), the argument of the advisor was full of folly, the most dominant of which is the consideration of risk factors.

Today, those who listened to the said adviser are now trying to accept the bad decision they have made. Clearly, they have lost a significant amount in the value of their hard-earned monies. Whilst I do understand that one can’t predict the future, economic or otherwise, sound financial principles such as diversification and asset allocation would minimize substantial erosion of one’s savings and investment. A good adviser would have considered many things prior to making recommendations and he must always stick to prudence before anything else.

Be careful before listening to any advice. It is not too difficult to discern competence if we listen intently.

“Whoever strays from the path of prudence comes to rest in the company of the dead.”­ —Proverbs 21:16, NIV

… con’t

More than a flourishing advocacy, I am very thankful for many things. On a personal finance note, my wife and I went to a challenging transition this year as my wife finally hangs her entrepreneur hat to focus on home-schooling our boys and to be a full-fledged home maker. After 19 years of supporting me financially, we felt that we make the necessary changes in the family. It was not an easy transition for me and my wife (and our understanding children) but we made the necessary adjustments by watching our budgets closer, avoiding unnecessary expenditure, cutting some costs—all without sacrificing quality living. Despite this overwhelming change, my wife and I still decided to build on our kitty and be deliberate about it. My wife often reminds me to practice what I preach and experience has taught me to always listen to the wisdom of my wife.

2010 has been a wonderful year for me and my family largely because of one thing: obedience. More than in previous years, we decided to be more obedient in the commands of the Lord, and we opted to be better stewards. Despite the challenges, the Lord has blessed us with everything we need and even more. This year, we gave away more than we ever did and the blessings keep on coming. This year we can really prove the saying “the more you give, the more you receive” is really a gospel truth. Besides, what we have and what we own are not ours anyway, we are merely managers of the resources God has endowed us with.

Despite the challenges 2011 may bring like a bear market, more fiscal issues and reversals in the economy and the like, we do not worry anymore for we believe that there are no recessions in God’s economy. We are looking forward to an even better year in 2011 and so should you. Remember this: “For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.” —Jeremiah 29:11, NIV.

A Happy New Year to all!

Convincing people that they need insurance, long term savings and a healthy cash flow is not that easy. You will hear all sorts of excuses and you will see people uninterested. However, when you see a sale on flat tv’s, cameras, mobile phones, branded clothes, etc., you will see long queues. I visited a gadgets sale a few months ago and saw an extremely long line. Going through a madness sale in a mall is really, well, madness. It makes me wonder how many of them are taking financial planning seriously – not many I assume. The biggest hurdle of a ‘would be’ financial planner is not so much on the acquisition of technical skills. People will not be so interested in the time value of money or financial needs analysis until it’s too late. Creating awareness and motivating people to do something are the biggest difficulties.

The fact that many in this profession are more interested in making a sale than actually helping people only adds to the difficulties. Making a sale is not an issue, one need to earn from his profession and sale of financial instruments is a very honorable profession. However, when a practitioner starts to misrepresent and mislead clients, that’s a big problem. Many practitioners would make unfounded claims for their products, like a low risk and high yield product — yeah right! Unscrupulous practitioners should be behind bars or at least barred from practicing. These practices make it very difficult for legitimate practitioners from gaining the trust of prospective clients.

Trust — it is the key to helping plan their financial future. A financial planner needs to build his competency and exhibit utmost professionalism at all times so that he will be listened to. If one wants to experience success in the financial practitioner profession, he needs to really build himself well.

Unscrupulous practitioners notwithstanding, Filipinos really need to hear from professional practitioners and must have open minds and open hearts. Our average financial condition is really disturbing and causing us a lot of difficulties in life. Further, the economic impact of a nation of uninsured poor savers is really precarious.

… to be continued