The Ultimate Guide On How To Be A Financial Advisor in the Philippines

Let’s face it, the Financial Industry is a very confusing maze to go to. There are lots of jargons that are really overwhelming – the ticker tapes, bears and bulls, life insurance, stock market, corporate bonds, treasury bills, and really, a whole bunch of them.

The bigger challenge is that we really need to learn about these financial products in order for us to effectively use them in planning and preparing our own personal finances – for our present, and for our future.

One of the few professionals who are actively trying to bridge the gap – from not knowing about financial instruments, to making use of them in enriching an individual’s financial life, are Financial Advisors.

What is a Financial Advisor?

The word “Financial Advisor” is a very broad term – encompassing many professions like bankers, stockbrokers, insurance advisors, and many others that provides “advisory services” to promote the financial products that they are affiliated to.

In this guide, when I refer to Financial Advisors, I’m talking about life insurance agents – and how fascinating, exciting, and fulfilling this profession can be.

Roles of Financial Advisors in the Society

The role of life insurance agents, insurance advisors, financial consultants, or financial advisors, whatever the professionals are called, is to provide solution to a certain need – whether a person/client is conscious about that need or not.

It’s true that many people don’t think that they need life insurance, or don’t think there’s a need to invest. In those situation, the role of a Financial Advisor becomes an educator, a teacher – giving light to an aspect in life that is most of the time neglected until it’s too late to act.

Truth is, Financial Advisors change lives, one client at a time – greatly contributing to a grand advocacy of financial literacy for the Filipino people.

No wonder many doctors, accountants, business people, and other professionals dropped what they do to take on the role of a Financial Advisor full time because of the rewards and fulfilment it bring to one’s life (to themselves and to other people).

What do Financial Advisors Really Do?

Full time Financial Advisors are self-employed professionals. This means that they are not really tied up to an 8 to 5 work week. This also means that financial advisors tend to have different activities individually, but can still be summarised as follows:

1. Reaching and Connecting to people needing the service
2. Meet future clients and conduct Financial Needs Analysis to further diagnose the need and be able to provide the most appropriate solution
3. Assist the implementation of the Financial Plan of the client
4. Monitor the progress of the implementation of the Financial Plan and make adjustments, if necessary.

Reasons Why Some People are Attracted to be a Financial Advisor

Here are some of the reasons why many professionals and business people decide to be a full-time Financial Advisor.

1. The opportunity to meet new people everyday
2. The opportunity to learn different things from other people
3. The freedom to take control of one’s time and be flexible in spending it in enriching the business
4. Endless opportunities in increasing income

It is true that it’s possible to be a part-time financial advisor. But it is really more enjoyable and worthwhile to do it, full time.

Requirements to be a Financial Advisor in the Philippines

Financial Advisors are regulated by the Insurance Commission (IC). To operate as a Financial Advisor here in the Philippines, you’ll need to get a license issued by the IC.

There are two kinds of life insurance license that are issued by the insurance commission.

One is the license to sell Traditional Life Insurance. These are the more “classic” type of life insurance that offers either just life insurance (term insurance) or life insurance with savings (whole life and endowment).

The second license obtained by Life Insurance Advisors is the license to sell Variable Unit Link Insurance, popularly known as VUL. This is the newest type of life insurance that have a built in investment component on it.

Now the question is, what are the requirements to obtain those license and be a Financial Advisor?

Truth is, you’ll just need to be sponsored by a life insurance company and be at least a College Graduate to take the licensing exam.

With that, let’s talk about the whole process on how you can be a Financial Advisor here in the Philippines.

Process to be a Financial Advisor

There are four parties involved in this process. They are:

– You
– The Life Insurance Company that you are applying in
– Your recruiting manager
– The Insurance Commission

In general, the process would flow in this order.

1. You submit your application to a recruiting manager. If you don’t know someone, you may submit your application in this link and we’ll connect you with them.

2. The recruiting manager will review your qualifications and subject you to some personality exams and interviews. Nothing much to note here but to just be yourself.

Each recruiting manager has his/her own standards of people to include in their team. If, by any chance, you were rejected by a specific recruiting manager, you may always try to explore with other recruiting managers.

Most of the time, rejections are due to personality mismatch between applicant and the recruiting manager.

3. Once you have completed the exams and interviews, you will then undergo a training program to prepare you for the licensing exam with the Insurance Commission.

4. Then, you’ll take the actual exam.

In most cases, the reviewers provided by the life insurance company usually corresponds nearly to the content of the exam provided by the Insurance Commission.

That does not guarantee anything though. It’s best to study and prepare yourself well for the exam.

5. After passing the exam, the next part of the process is the contract signing. Generally, this is the stage where compensation package and other monetary benefits are discussed.

Each life insurance company’s benefits will greatly differ though.

6. After contract signing, and once you have met your branch’s minimum requirements, you’ll then be “coded”. Coding is a technical term used to mean that an advisor has been officially entered in the life insurance company’s system.

Once you are coded, you become officially part of the Financial Advisory profession.

However, you should always prove that you deserve that title. You can do that by accumulating as much knowledge as possible and by becoming a credible professional that provides advice that makes sense.

Understanding Term Insurance and Variable Universal Life (VUL) Insurance

We all know that life insurance is an indispensable tool in planning our finances, you’re done with that.

One problem though, as you begin checking out the life insurance that you’ll be getting, you’re starting to get overwhelmed on the many choices that you have out there – Term Insurance, Variable Universal Life, Whole-life, and Endowment.

The question is, which one?

Confused? Let’s talk about each one of them, starting with the two types.

Two Types of Life Insurance

1. Traditional Life Insurance

Life Insurance has been a part of financial planning for several centuries, where the first policies were taken out in the early 18th Century. It had evolved so much back then.

Traditional Life Insurance are the type of insurance where our parents and grand parents are familiar with (they are, well, traditional). Kinds of Life Insurance here in the Philippines that fall in this classification are the following:

  • Term Life Insurance
  • Endowment Life Insurance
  • Whole-Life Insurance

These types of insurance may generate cash values and/or provide dividends.

2. Variable Universal Life Insurance

The evolution of life insurance has lead to the creation of Variable Universal Life Insurance, popularly referred to as VUL.

Since the introduction of VUL to the market, its acceptance lead it to become the best-selling Life Insurance policy during the past few years – taking 80% to 90% of life insurance policies sold.

VULs are popular for combining the protection brought by Life Insurance and the ability to grow your money through investments through Managed Funds

Confused?

Let’s dig deeper on two types of policies – Term Life Insurance and Variable Universal Life Insurance.

Understanding VUL & Term Life

Term Life Insurance

Plain vanilla Life Insurance – no frills, no complexities, just life insurance, period.

Term Life is the simplest type of Traditional Life Insurance, or in all types of Life Insurance in general. It does not earn dividends, no cash values accumulated, nothing – just life insurance, plain and simple.

The best feature of a Term Life Insurance is it’s inexpensive compared to other types of Life Insurance. It could provide the highest Life Insurance Coverage for a very low budget.

To provide you a perspective on how much it is, a Term Life Insurance for a 30-yr old non-smoker male, a P2 Million Pesos Coverage will cost around P9,300 per year (sample proposal from Sun Life’s SUN Safer Life).

However, since there are no cash values and/or dividends accumulated for this life insurance policy, you will be paying for it all throughout the lifetime of the policy while it’s enforced (active).

Also, premium rates increase as the years progress, how often depends on the design of the policy by different life insurance companies. It could increase every year, every 3 years, or in the case of the sampled proposal above for Sun Life’s SUN Safer Life, every 5 years.

Is Term Insurance for you?

Here are some profiles that fits perfectly the policyholders of Term Life Insurance:

  • You have a low budget and a very high need of considerably high life insurance coverage
  • You have short term needs of high life insurance coverage, e.g. used as Mortgage Redemption Insurance (MRI) for housing loans, or to protect your children to ensure whatever happens, they’ll be able to study, etc…
  • You opt to manage investments and savings separately from insurance – implementing the Buy Term Invest the Difference Strategy, often referred to as BTID

Variable Universal Life Insurance

Popularly known as VUL.

In the simplest context, a VUL is a combination of Life Insurance and Investments on managed funds, e.g. Mutual Funds (if you are not familiar on how managed funds work, you may check out the video that I have created here).

The Life Insurance portion is actually a term insurance, identical to what have discussed above.

Once we understand the separate concepts of Term Insurance and Managed Funds, understanding VUL is a breeze.

Two Types of VUL

Should you find yourself in a position wherein you’re inclined in getting a VUL, there’s one thing you should know – there are two types of them: Regular Pay VUL and Single Pay VUL.

Single Pay VUL (SPVUL)

As its name implies, this type of VUL requires a one-time pay investment – usually around P50,000 and up, depending on the insurance provider.

Single Pay VUL focuses on investment with a very minimal life insurance component. It is an insurance product in form, but really, an investment in substance.

I have dealt a very detailed explanation about SPVUL on an earlier blog post. You may check it out here.

Regular Pay VUL

If SPVUL focuses on investment, Regular Pay VUL “generally” focus on Life Insurance.

I used the word “generally” because it’s still flexible enough to focus on investment or life insurance, depending on how it is designed.

For a comparative analysis, let me show you some differences of Term Insurance and Regular Pay VUL using the same profile that I have used in the Term Insurance example above.

Term VUL
Annual Premium at age 30 9,300.00 44,160.00
Annual Premium at age 60 21,650.00 44,160.00
Estimated Fund Value at age 60 @ 10% Compounded Rate of Return 5,863,942.00

Please note though that this is not an apples-to-apples comparison. I showed this table so I can illustrate the differences between the two. For it to be comparable, you need to compare Regular Pay VUL vs. the BTID strategy. For more info, check it out here.

In the table, you may be able to spot some differences:

  • Term Insurance is way cheaper than Regular Pay VUL
  • Annual Premium for term insurance increase. Regular Pay VUL’s does not.
  • Regular Pay VUL accumulates fund values (cash values) which can be withdrawn anytime. Term Insurance does not.

Again, I don’t intend to show which is better. The purpose is to show the differences.

Is Regular Pay VUL for you?

Here are some profiles that fits perfectly the policyholders of Regular Pay VUL:

  • You opt to get “something back” to Life Insurance policies that you are paying.
  • You don’t have a considerable budget to go for BTID, but you want to target both Life Insurance and Investment at the same time.
  • You are diversifying your strategies – availing VUL while doing BTID.
  • You prefer monitoring less accounts and combining both Life Insurance and Investments makes it more manageable for you.

Which one is better?

It depends on a lot of factors.

The better choice will always be the one that meet your objectives. Thus, in choosing, it’s best to describe first to your Financial Advisor what you wish to accomplish – that’s the job of the advisor, to find a solution that will meet the requirements of the goals you want to achieve.

Should you wish to receive a FREE QUOTE/PROPOSAL, you may request here. A Financial Advisor will keep in touch with you.