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FPA in China: Despite Solid Progress by Young Planners, More Work to Do

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Having just concluded a knowledge café with our financial planner counterparts from FPSB China (Financial Planner Standards Board), I come away both impressed with how far financial planning has come in China and how much work they still have to do. [See AdvisorOne FPA in China home page for more coverage of the trip and China news and anlysis.]

One of our table participants at the knowledge café graduated from the first CFP class conducted in China in 2004 only seven short years ago. And, speaking of young, the average age of a CFP certificant in China is 32!  Remember that the average age of an FPA member is now in the mid 50’s. The energy and enthusiasm of these young financial planners who had come from all over China to meet with us was infectious. I found myself thinking back to when I started as a financial planner at the age of 29.

I learned today that FPSB China actually grants four different certifications in the financial planning field:  CFP – Certified Financial Planner, AFP – Associate Financial Planner, EFP – Executive Financial Planner, and CPB – Certified Private Banker.  The initial training for these certifications is held at four cities in China and is conducted by FPSB China run educational programs.  I was told that several universities are now in the process of setting up degree programs in financial planning as its popularity grows.  Our Chinese hosts were amazed at how many colleges and universities in the United States offer financial planning degree programs.

In China, almost all financial planning is conducted through CFP and AFP certified planners who are employed by large banking institutions.  Much as in the early years of the development of financial planning in the United States, the focus of the relationship tends to be around product sales rather than around the delivery of the planning process.  The difference in China is there are trained professional financial planners who, while they are young, have a strong desire to move toward a process-driven financial planning engagement.

Another element that will need to change is how the Chinese consumer looks at the value of financial planning.  A comment that struck me as profound is the fact that most wealth in China is first generation wealth that did not exist 20 to 30 years ago.  These Chinese consumers of financial planning services currently view financial planning as a way to gain more wealth through investments while the consensus in the group discussions was that American financial planning clients view financial planning more broadly.

Since there is no estate tax in China as well as a preponderance of first generation wealth, the estate planning process is still in the development stages.  An interesting tidbit I learned was there were no joint accounts in China only individually titled ones.  This can make asset transfer challenging at death.  Our discussion when attempting to define “middle class” in China was interesting.  In the U.S. we tend to define middle class less by the amount of income earned and more by how the person sees them self.  One Chinese planner suggested that the threshold for being middle class in China would be a household income of about 30,000 U.S. dollars per year.

I consider our first professional meeting in China a rousing success and look forward to continuing the adventure!