When asked about wealth management in the Philippines, Ritchie Horario, CWP, CEPP, a four-year MDRT member, did not sugarcoat. “If there is no wealth to manage, then wealth management is not needed yet. Wealth management is primarily for the affluent, and unfortunately, this is only a small group in the Philippines. In my experience, only about three out of 15 clients can move forward with wealth management policies.” 

According to the Philippine Institute for Development Studies (PIDS)’ most recent report, only 4.87% of Filipinos belong to high-income households.  

“Many Filipinos need to improve their financial literacy to be more equipped in saving and investing to be able to build wealth,” Horario shared. “The median age of Filipinos is 25, suggesting that many are still in the wealth-building stage. In this landscape, financial advisors need to help clients get life insurance, then investments. Once achieved, advisors can then prime their clients on the role of wealth management over the assets they are accumulating.” 

Despite the small market, Horario says wealth management is still relevant. “Wealth management in the Philippines is primarily offered to help clients create more wealth, reduce potential expenses, and eliminate the likelihood of debts. In the past two years, there has been a heightened interest in wealth management because the likelihood of death suddenly became immediate,” he added.  

He emphasized that advisors need to know the client’s goal when getting wealth management plans such as other policies. Based on his team’s clientele, the most common reasons for wealth management planning are estate, retirement, education, and business capital growth. “While estate planning is highly focused on the affluent market, the other goals are more achievable for middle-class individuals as long as they can allocate their savings for investments. As financial advisors, we can help them invest in growing their money.” 

When can a client be considered for wealth management planning? “Generally, if a client has around PHP 3 million (USD 60,000) worth of assets, they would already require the assistance of a wealth management planner. However, as long as their assets are above PHP 1 million, we can already offer policies to help manage their money for growth,” Horario shared. “While this is unique to our company, It would help to identify if a client is a high-income individual, typically those who can save PHP 20,000 (USD 400) a month or pay a premium of PHP 200,000 (USD 4,000).”  

Compared to other policies, insurance plans with estate planning need higher coverage due to the significant expenses of owning a property. “In the Philippines, the property tax is 6% of the total asset value per quarter. On top of the 6%, the client would need to pay for the professional fees of their lawyers and accountants, documentary stamp costs, transfer of titles, and penalty fees if applicable. Insurance companies usually make the policy coverage at 10% of the property’s value to ensure all these expenses can be covered and protect clients’ hard-earned wealth.” 

However, Horario shared the stigma that financial advisors are only after commissions persist in the affluent market. “Some prospects would think estate planning is just commission for advisors. These people are comfortable paying the taxes and other expenses with their cash because they can. While this is true, it would still be affordable for them to spend for insurance in advance rather than paying the estate-related expenses with cash later.” 

Wealth management solutions are often offered as resell during policy reviews. “There are at least three types of insurance policies: protection, investment, and wealth preservation. Depending on my client’s needs after getting protection, I offer them policies that would help them build or preserve their wealth, whether for retirement, education, or growing business capital. 

I start by asking the client what their target figure is for their purpose and how they would like to achieve it. For example, if they want to have PHP 5 million pesos (USD 100,000) to expand their business in five years, I ask them how much money they could save by a given time. I offer them options such as getting a bank loan to get the money immediately but paying for interest or getting a policy that will help build their wealth for expansion in five years.” 

In the past year, Horario assisted the family of a client who died of COVID-19 by helping with the death claim used for hospital bills, funeral costs, and home renovation. 

“In 2022, it will be beneficial for clients to invest in the stock market or variable-unit life insurance, which has both life protection and investment components. While the Philippines recovered from the recession in Q3 2021, the market has yet to return to its pre-pandemic state, which is an opportunity to try the strategy of buying low and selling high in stock markets. Real estate can be considered as it’s generally at a lower price point today than pre-COVID-19 rates. The goal is always to diversify your portfolio to minimize risk to your wealth.” 

Contact: MDRTeditorial@teamlewis.com