Do not buy financial products | Company Applicant


Q uestion: A seller of financial products had been asking me for a meeting for a long time every time I went to his office to do business. I finally granted the meeting. At this meeting, the salesperson presented me with a multitude of instruments to choose from. Not knowing what to get, I just told the person that I would look at the proposals first. But I don’t know where to start. Can you help ? Answer: The best way to go is to challenge yourself and the seller to figure out what you really need. For example, what would be best to use, a hammer, a mallet and a jackhammer? You will probably ask me for what purpose.

In the case of investment instruments, there are three basic asset classes to consider, namely money market, bonds and stocks. As yields become potentially higher from the money market to bonds and equities, the risks to profits and return of capital also increase. It is therefore important that you know what returns you should achieve, depending on the risk you are willing to take.

So ask the seller to help you calculate the inflated future value of your lens. If the seller is worth their salt, that future value will be compared to what you currently have and what you can periodically add to get the return you need to earn based on the risk you are willing to take. Then and only then can you and this seller determine which financial instruments you need.

The above exercise is what we call in the industry Comprehensive Financial Planning (CFP). When done correctly, the CFP will produce objective advice on how to manage your finances by looking at both the forest and then the trees. The CFP can cover the following: 1) analysis of your statement of assets, liabilities and net worth (i.e. SA-L=N); 2) the evaluation of your human capital (ie the present value of your potential future income); 3) creating plans on how to finance your children’s education, your purchase of a car or a house; 4) calculation of retirement funding needs with pension and retirement benefits from a private sector employer, social security system and/or utility insurance system included; 5) estimation of inheritance rights and potential donors; 6) determining the effective interest rate on loan offers; 7) calculation of the ideal (supplemental) life insurance cover; and 8) derivation of the level revenues necessary to achieve the financial plans. The full-service CFP will also help monitor plan execution in investments and business ventures while taking advantage of tax saving measures provided by laws such as the Personal Retirement Account (Pera) and Barangay Micro Business Enterprise (BMBE). We will need a separate discussion. on Pera and BMBE.

Investing can be complicated, with all the numbers thrown in. But don’t be shaken. Also, ignore the glare and dazzle of huge payouts that are expected in the future. Often, the actual return on these payments is not that significant. To paraphrase Oscar Wilde and make his quote literal, many know the price of everything and the value of nothing. To paraphrase again, but this time John F. Kennedy, don’t ask if an investment is good; rather, ask yourself what good an investment can bring you. The same goes for other financial products, whether simple deposits, loans, fixed income instruments, shares, options, currencies, commodities and insurance.

So don’t just buy financial products. Instead, work towards your future. INQ

Send questions via the free “Ask a friend, ask Efren” service on, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook. Efren Ll. Cruz is a Registered Financial Planner and Director of RFP Philippines, a seasoned investment advisor, a bestselling author of personal finance books in the Philippines, and a Yaman Coach. To consult a Yaman coach, send an e-mail [email protected] To learn more about personal financial planning, attend the 98th RFP program in October 2022. To inquire, email [email protected] or text 09176248110).

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