Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Д ОБРЕ Д ОШЛИ ! Consumer Benefits from Financial Planning in Austria Otto Lucius

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Agenda 1. What is Financial Planning about ? 2. Benefits of Financial Planning 3. Financial Planning in Austria 4. Some Perspectives

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 What is Investment Advice? If we advice a customer on different securities investments, on the pros and cons, the chances and risks, and how to invest, we call this investment advice. In most cases this is a one time advice! If we go one step further and give advice and / or assistance on how to structure a securities portfolio, this is also regarded as investment advice (some might call this the first step into asset management for private clients).

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Is this sufficient? Money is not in the focus of clients! It is all about desire and needs! All our clients have certain desires and needs they want to be fulfilled. Money is just a means to a certain end, i.e. the fulfilment of certain needs. This given, most clients want more than just an advice on how to invest money.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 What is Financial Planning about? Personal financial planning is a philosophy designed to enable consumers to achieve their personal financial goals and thus fulfil their personal needs and desires. Financial Planning is not mere number crunching although a financial planner has to meet a bunch of requirements regarding knowledge and skills. Nor is it limited to just plain investment advice.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Requirements for Financial Planning To recognise a financial service as proper Financial Planning some requirements have to be met: Financial Planning focuses on all personal and financial conditions of the client, his goals and needs; takes into account all asset classes (not only securities, but also real estate, commodities etc.); as a comprehensive service considers all interrelations between different measures taken; is based on a strict process.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Requirements for Financial Planning Besides these more technical questions regarding competence we must consider an ethical dimension! Consumers need to have confidence in their personal financial planner. Thus financial planners have to acquire professional experience in financial planning matters before they can act on their own. And - most important - all Financial Planners have to abide a strictly ethical behaviour.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 The Benefits of Financial Planning Looking at the principles of Financial Planning the benefits for the consumer become clear at once: Consumers can trust their Financial Planner because he will behave ethical. This means that he will act in the clients interest only; can be sure that selling of products is not in the focus of their Financial Planner; get a comprehensive service delivered enabling to stay comfortable even in times of turmoil;

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 The Benefits of Financial Planning Consumers get a plan showing them how to achieve goals like buying a house, providing for personal risks, retirement provision, estate planning etc.; can trust in the objectivity and neutrality of their Financial Planner; can also rely on their financial matters being kept absolutely confident; can expect that their financial plan is being updated regularly if they ordered their Financial Planner to do so.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 The Benefits of Financial Planning Some of these requirements are also laid down in EU regulation (especially the new MiFID). The huge advantage for the consumer addressing professionals being licensed as CFP ® is that ethical behavior can be enforced directly by the national association as a professional body. No one has to wait for months and years to get his rights before a court! Self regulation is a very effective means of enforcing rules and regulations!

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Are there further Benefits? Bearing in mind all the advantages explained before we can detect even further advantages! Consumers – in all countries – are not really fit in economic knowledge and financial literacy. Here the Financial Planner can assist in “educating the client”, by explaining how the markets work, by raising the understanding of risks in the capital markets, on the ‘magic triangle’ between liquidity, risk and return, and so on.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Are there further Benefits? Last but not least there is a benefit for the consumer which cannot be appreciated high enough: Every CFP-expert gets the license for a limited period of 2 years. During this period they have to undergo continuing education in the important fields of knowledge. This ensures that they remain on top of new developments and trends. Therefore the consumer is always advised by the best educated experts.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Financial Planning in Austria The market for financial services in Austria is a rather mature market. Nevertheless Financial Planning as a financial profession of its own was unknown. In 2000 our association started to introduce Financial Planning based on the CFP-philosophy we became an Associate Member and shortly afterwards, in 2002, an Affiliate Member of FPSB. Since then we have the right to license individuals as CFP- practitioners.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Financial Planning in Austria Especially in the beginning a lot of efforts had to be put into creating awareness for this new type of financial service. By now its mostly banks that show interest in delivering Financial Planning as a service to affluent customers as well as to High Net Worth individuals. The trade mark CFP ® has become anchored in the minds of market participants as well as of clients.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Financial Planning in Austria Since 2002 we have licensed 93 individuals, while loosing 5 licensees (1 died, 3 changed jobs, 1 being expelled due to unethical behaviour). Given the small market place in Austria this is quite a remarkable growth. And after all: For us it’s quality that counts more than sheer numbers! By the end of 2006 we expect to have nearly 120 CFP-licensees. The market potential should be about 200 to 250 CFP-licensees.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Financial Planning in Austria Another experience might be interesting: Given the fact that the bulk of customers are retail clients there is a significant need for excellently trained advisers. In 2004 we introduced as a ‘level entry designation’ the so-called Diplom.Finanzberater = Certified Financial Consultant. These people are officially registered with our association Until now we have licensed more than 170 experts, with another 40 to come until the end of 2005!

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Some Perspectives Financial Planning is gaining momentum in Austria. Financial Planning as a financial service is not a product for the mass retail market. Focussing on the affluent segment and offering also target oriented plans (but on a comprehensive basis) will boost the future of Financial Planning. It took a long time until suitable software was adapted to national specifics (tax, law etc.). Now being available it will give a further boost. Our entry level designation serves as a ‘feeder fund’ for financial planning professionals.

Österreichischer Verband Financial Planners Prof. Otto Lucius Financial Education & Consumer Protection in Bulgaria – Sofija, /18 Thank you for your attention!