Question

Hi, can you answer this question in more detail?

Subject: Hong Kong Personal Financial Planning Practice

Q4. B

Monthly investment plan for stocks is getting more popular in Hong Kong. Analyze the characteristics, advantages and disadvantages of such investment plan with examples.

(Words: 600 - Don't direct copy)

Answer 1

Hong Kong Personal Financial Planning Practice:

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FWD Financial Planning has a range of services on offer, details as follows:

1. To provide students with concepts of the principles of insurance in the context of economics, risk management, finance cost control, relevant legel aspects of insurance contracts, and insurance coverage analysis. In this section,students should learn the theory of insurance and thus, understand what insurance is, why insurance works and how to determine insurance needs.

2. To provide students with practical knowledge of insurance operation; function of insurance, insurance markets, insurance regulation and financial assessment. In this section, students should learn how insurance works along with its practical operation procedures.

3. To provide students with knowledge of major insurance products, such as life insurance, health insurance, property and liability insurance. In this section, students should learn to evalute various knids of insurance plans as well as the contract selection criteria from a cost benefit point of view.

4.The Institute of Financial Planners of Hong Kong (IFPHK) announced a new designation - Associate Financial Planner (AFP) and revamped the CFP Certification Education Programme in June 2011. The new programme provides a progressive study pathway for students to acquire the new AFP qualification in financial planning industry. There are now 3 levels of programmes and examinations leading to AFP and CFP: the AFP Certification Education Programme, CFP Level 1 Certification Education Programme and CFP Level 2 Certification Education Programme.

To obtain CFP and AFP certification, participants must fulfill the 4E requirements. These are Education, Examination, Experience, and Ethics. The rigorous certification process ensures that CFP and AFP practitioners are highly regarded as they have achieved high standards of competence and ethical practice.

Advantages and Disadvantages of Financial Planning:

These are the advantages of financial planning; It will set out clearly the money that you need to put together to start the business and then to run it for a period. It will help you to obtain funding if you need it. It will help prevent you from going into a business that will not be successful. Highlight periods where your business may need extra financial help. Inspire confidence in lenders and banks that you may have to approach for finance. It will help you to spot problems early so you can make plans for the necessary solution. For example, it will highlight whether you are holding too much stock or whether your collection is less than it should be or that you will be short of cash at a particular time.

Limitations of Financial Planning:

• Forecasting.
• Changes.
• A Problem of Coordination, and.
• Rapid Changes.

Forecasting:

Financial plans are prepared by taking into account the expected situations in the future. Since the future is always uncertain and things may not happen as these are expected, so the utility of financial planning is limited. The reliability of financial planning is uncertain and very much doubted.

Changes:

Once a financial plan is prepared then it becomes difficult to change it. A changed situation may demand a change in financial plan but managerial personnel may not like it. Even otherwise, assets might have been purchased and raw material and labor costs might have been incurred. It becomes very difficult to change a financial plan under such situations.

A Problem of Coordination:

The financial function is the most important of all the functions. Other functions influence a decision about the financial plan. While estimating financial needs, production policy, personnel requirements, marketing possibilities are all taken into account.

Unless there is a proper-co­ordination among all the functions, the preparation of a financial plan becomes difficult. Often there is a lack of coordination among different functions. Even indecision among personnel disturbs the process of financial planning.

Rapid Changes:

The growing mechanization of the industry is bringing rapid changes in the industrial process. The methods of production, marketing devices, consumer preferences create new demands every time. The incorporation of new changes requires a change in financial plan every time.