With an average annual income of Php 313,000 (approximately USD 5,690), most Filipino families need help from financial advisors to prepare for the costly expenses that lie ahead as they strive to achieve long-term financial security for their families. Among these potential financial burdens are the steep tuition fees of private universities, which can soar as high as Php 200,000 per year (about USD 3,630). Additionally, they must contend with the considerable out-of-pocket expenses associated with critical illness treatment, averaging around one million pesos (approximately USD 18,000). Compounding these concerns is that most Filipinos must be equipped for retirement, as only 20% of the 7.6 million individuals aged 60 or older are covered by retirement schemes such as Social Security or the Government Service Insurance System.

These challenges can be overwhelming for Filipino parents, so financial advisors must take proactive steps to find the best solution for their needs and goals. Three MDRT members from the Philippines share how their comprehensive financial planning helps clients confidently navigate the delicate dilemma of securing their future and their children’s.

Put on your oxygen mask first

“Parents need to secure themselves first,” Catherine Tsang, a two-year MDRT member from Quezon City, Philippines, said. While there’s a delicate balance between education planning and health or retirement savings, she prefers to start with a solid protection foundation. She calls this “love insurance,” emphasizing the importance of prioritizing protection for oneself. Clients must safeguard their health and well-being before chasing other financial goals.

During the first meetings with clients, Tsang introduced the concept of financial building blocks (FBB), which identified their priorities in life. Love insurance protects them first, followed by other goals such as education and retirement. “During the discussion, if the client has good cash flow and emergency funds, we can plan for education and protection. However, if not, we can take on educational planning after protection.”

Tsang discusses her client's aspirations for their children's education, considering factors like preferred schools or universities. She is cognizant of the challenges of prioritizing educational plans, especially for families with multiple children. In this situation, she recommends securing the eldest child’s education for equity among the siblings. It ensures fairness among siblings and allows parents to allocate resources equitably, considering age, academic aspirations, and financial need.

“Whether prioritizing health protection, funding educational aspirations, or building a nest egg for retirement, we must ensure that our clients feel empowered and informed every step as we guide them towards their life goals.”

Probe to come up with a more personalized plan

Cleveland Crisostomo, a two-year MDRT member from Biñan, Philippines, believes it is about finding and filling the gaps when addressing education and retirement for his clients. “As financial advisors, we need to fulfill each need per life stage of our client using short-term plans. First, we must protect the clients by providing comprehensive protection against life's uncertainties. Next, if they have kids, we present our educational and retirement plans.”

Whether it's funding a child's dream of attending a prestigious university, pursuing a specialized degree, or exploring alternative educational paths, he tailors his financial program to meet his clients’ specific needs. “I ask them about their aspirations for their children, the possible time frame before university, and the type of educational institution, private or public. This way, we assess the required amount for savings and investments. It is important for educational planning to bridge the gap between dreams and reality by offering practical solutions and financial strategies to make education more achievable.”

Next, for retirement savings, Crisostomo factors in their preferred monthly spending as he wants his clients to maintain the lifestyle they envision for their golden years, including travel, leisure activities, and everyday expenses. He finds out their target retirement age to determine the number of years to accumulate savings and investments before retirement. Lastly, their possible income sources so he can assess their reliability, liquidity, and growth potential, thereby crafting a diversified retirement income strategy that maximizes financial security and peace of mind.

"As financial advisors, we must encourage our clients to express their thoughts and concerns openly, even if their viewpoints or preferences may conflict with our professional recommendations. It is crucial to actively listen and understand their perspective if they want to prioritize their children's needs before securing their financial future.”

Budget wisely to accommodate goals and priorities 

Kathlyn Anne Sarmiento, a six-year MDRT member from Quezon City, Philippines, emphasizes the necessity of starting with a comprehensive assessment of the client's financial landscape, including budgetary constraints and long-term aspirations. "We must ask for the budget upfront. Understanding the client's financial capacity allows us to tailor our recommendations to align with their priorities."

One approach Sarmiento suggests is splitting the budget between education and retirement. "We can start by allocating a portion of the budget towards education planning. While safeguarding our children's future, we must protect ourselves in our unproductive years."

Acknowledging the challenges of balancing competing financial goals, she reassures clients that allocating lesser amounts for retirement is acceptable. "When the budget does not permit, it's crucial to prioritize saving first. However, we must have a plan to top up these savings as our financial situation improves."

She illustrates the financial implications of education planning with a tangible example. "Consider a scenario where a child's education costs Php 300,000 (around USD 5,400) per semester in a prestigious university. "Over ten years, this amounts to a significant financial commitment."

Sarmiento suggests developing a plan that meets the client's needs while adhering to a minimum premium requirement to mitigate the financial strain. "By starting with a manageable premium, we can gradually increase contributions over time. Setting aside 30,000 pesos monthly lays the groundwork for a robust education planning strategy."

When guiding clients, it's crucial to prioritize protection in planning. Start by safeguarding their present with comprehensive insurance coverage, then allocate resources strategically between education planning and retirement savings. Balancing immediate needs and long-term aspirations makes a secure future possible.

Contact: MDRTeditorial@teamlewis.com