Talking to a Financial Planner in Japan

It was a little bit underwhelming to be honest

 
As part of my research into the Financial Planner test here in Japan, I had a look through the Japan Financial Planner Association website and discovered that they do free consultations in their regional centres (Tokyo, Osaka, Sapporo, Sendai, Nagoya, Hiroshima, Fukuoka, and Kanazawa).

Of course I called up and booked an appointment immediately for my wife and I.

Making the appointment was easy: just call up, give your name and a contact number, and let them know roughly what you are interested in talking about. I said I wanted them to look at our financial plan and give me feedback.

This provoked some puzzlement (the reason became clear once we met the planners) but wasn’t a problem.

We arrived five minutes early for our 50-minute session and were shown into an interview room with two men around my age. To their credit they didn’t seem particularly surprised to see me (is it bad that that is a positive?) and we soon got down to business.

The two FPs we talked to were both had Certified Financial Planner certification as well as the Financial Planner qualifications, so about as well-qualified as possible.

They confirmed that we wanted to get feedback on our finances, then asked some questions about our income, savings, etc.

Using that information they ran some simulations of pensions, etc. and gave us some estimates of what we would get under the current pension system, as well as how much we would be likely to save up with our current arrangements.

About halfway through the session they kind of gave up 🙂

Basically we are on track to meet our goals and have very solid finances. They were not able to suggest anything we’re not already doing, and in fact hadn’t heard of robo-advisors (I had to explain the concept to them).

We spent the rest of the time talking about my wife’s business and whether she should create a kabushiki gaisha to reduce taxes and make it easier to sell.

There were some positives from the session though:

  • I felt quite good that our plan met with their approval
  • More importantly, my wife came away much more confident about our strategy (two professionals had confirmed that I am not making all this stuff up)
  • Under current rules, we’d receive a fairly decent pension that would allow us to live a basic life even without supplementing it.
  • They reminded me that we can spend our principal. I tend to focus only on yield and my goal is never to sell anything, but this is probably overkill.

Now, of course I am under no illusions that pensions will remain the same, but we currently are not including them in our plans at all so anything we do get will just be a nice bonus.

I also learned more about financial planners:

  • They aren’t particularly focused or even knowledgeble about investing: I often felt that I was thinking several levels above them (they didn’t mention exchange rates, diversification, rebalancing, safe rates of withdrawal).
  • They seemed to just think about cash, not investments. All of their calculations appeared to assume that we would accumulate cash and then spend it. They didn’t take market growth or yield into account.
  • They aren’t familiar with the FIRE (financial independence, retire early) crowd. To the FPs, our plans are total overkill. According to their models, we could probably retire soon, spend down our assets until we get pensions, then live on the pensions. The idea of living off yield or self-insuring against Black Swan events provoked puzzlement.
  • On a related note, they advised us to pay off our mortgage to reduce our monthly expenses. They also asked why we had a 30-year mortgage on such a cheap property. Even after I explained that I am happy to borrow as much money as people will lend me at 0.5% if I can invest and get 3-4% they didn’t seem to get why carrying the mortgage might be better than paying it off.
  • FPs in Japan seem to be about fine-tuning minor details (insurance policies, monthly savings) instead of looking for major wins (cars, housing, earning).

All in all, it was a fun experience, and one that I would recommend if you are near a centre and have something you want to ask about.

We had the option to schedule paid consultations as a follow-up but even the FPs didn’t seem to think there was much point in doing that.

Friends of mine have talked to FPs that were trying to sell them insurance, etc. and it’s very common to run into them working for other companies. Needless to say I recommend talking to an independent FP over one working on commission or salary.

Anyone else have experience with Financial Planners in Japan?

14 Responses

  1. Very interesting write-up!
    Based upon your experiences, I think we can safely draw two conclusions:
    (1) It will be a lot better to tap on the collective wisdom within the community here, compared to FPs here in Japan
    (2) If the best among the community took their CFP certificates, banded together to create a company providing independent financial planning services, this company might even be running circles around the competition!

  2. Ha, ha, that might be fun.
    Let’s not get too far ahead of ourselves though. The main task right now is to publicise RetireJapan, as I get the feeling we’re only reaching a tiny number of the people we could potentially help…

  3. Skeptically, we actually tried visiting a financial planner in Sendai shortly after moving here. This was before we stumbled upon MMM, but we were already mostly minimalist and looking to save aggressively for our next step–at the time, we wanted to save enough to buy a house outright somewhere in Hawaii (plans have since changed a bit).
    It was a free consultation (read: commission-based), so she was definitely trying to sell us something. She showed us some timeline based on the saving/age/income/etc. details we had given her, telling us we’d need some crazy amount of money to raise a kid through college based on average spending. Then she told us about all her wonderful life insurance funds, but must’ve felt my eyes rolling and gave that up quickly and then presented a few foreign investing options to us, including a risky-looking Korean-based one that I decided to take a shot at with a small % of our stash and still hold.
    I wasn’t half as knowledgeable about things as I am now, but even then it really didn’t seem very worthwhile. Aren’t there any hourly fee-based higher level FPs in Tokyo or something?

    1. The guys I spoke to were hourly, and about as well-qualified as you can get…
      Guess the best thing to do really is to learn about it yourself 😉

  4. As you know I was badly burnt by financial planners a while ago in Japan. Commission-based insurance sellers that ultimately led to a loss of 2 years of savings.
    But I think the ones you visited were a less dangerous crowd. It’s interesting, but worrying to me, that professional people appear to know much less about personal finance than bloggers like us. It basically means that we are at a level where we have nowhere to turn to when we are doubting our plans. Some people probably enjoy the “treading uncharted territories” effect, but I’d love to have some professionals in Japan telling me “yes, we have clients like you who are investing in these ETFs and retired comfortably way earlier than the majority, it can be done and we have relevant advice for you…”

    1. I think one problem with the financial planners here is that, like many areas in Japan (English?), the tests are multiple choice and focus on knowing a bunch of esoteric information.
      Principles and concepts don’t seem to feature, and when planners deal with clients it’s a lot easier to say something like ‘if you switch your insurance policy you’ll save 1,500 yen a month’ than ‘let’s start with examining your relationship with money at a conceptual level’…
      We personal finance aficionados are not normal unfortunately!

  5. Thanks for the write-up. I am not sure if it applies to the financial planner you spoke to but I would hazard a guess that a lack of English ability and awareness of the trends in overseas markets significantly reduces the value add of the FPs here… especially for expats who will want more exposure to international currency and markets. This is probably why he was so focused on cash savings.
    Good to know that they were not commission based salespeople though.

    1. Just to clarify, we did the whole thing in Japanese, with me as Mr. Tanaka (my alias here).
      I think finding an English-speaking advisor would be a whole other blog post!

  6. Thanks for the write-up. I’m going to see if I can set up a meeting with one of them. It’ll certainly be educational in some way and might even be useful. At the least, it provides a focus point to (re)think about finances.

  7. My husband and I once had a free consultation with a man who I felt was a newbie. Very minimal information..and I think he was peddling some life insurance plan..but otherwise he didn’t seem very knowledgable..or he didn’t share anything useful with us. I was concerned he’d lead us in the wrong direction..but I don’t think he had much information at all. I’m sure he was called a “financial advisor”, but it led me to believe the title is used loosely…

    1. Hi Ann
      That sounds very likely. The thing to look for with financial planners is their qualification:
      (in order of increasing status)
      FP 3kyu
      FP 2kyu
      FP 1kyu (the best) -this is a knowledge-based test
      AFP
      CFP -these two are professional qualifications based on US standards
      There is also the question of whether they are independent (fee-based) or working for a third party like a real estate company, an insurance company, or a bank.
      Needless to say you should be very careful with ‘advisors’ who work for someone else!