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BUSINESS MODEL

April - June 2010

A GrowingBusiness Franchise

Abusiness can exist because it is ableto provide a product or service which

is needed by the customer or a need

has been created by the business or

the customer. As the Malaysian economy

develops, the need or nancial productsand services can be ullled through

various sales and services platorm.

Some oer one product or one line o

products as it is ecient and the customers

appreciate the ocus given by the business.It is an attractive business model because

it is simple and can create value either

through a high volume o transactions or

a high-touch, personalised and tailored

boutique oering. Medical insurance

oered either through mass marketingor multi-level marketing is an example

o single product oering generating a

high number o transactions. There areexamples in some developed economies

where sophisticated and personalised

medical insurance are oered exclusivelyto the high net worth market. As products

become commoditised, it becomes more

dicult to maintain the latter approach.

A product or service goes through dierentstages o marketing development. We

are in the ortunate position in Malaysia

(this is true or most parts o Asia as well),

that at our stage o development, there

are signicant business opportunities

which allow various market segmentsto exist. Businesses can target the mass

market, auent markets as well as high

net worth and knowledgeable consumers.

While the marketing o a single product

through high volume transactions is still a

signicant market, it is getting to be verychallenging or businesses to maintain

adequate margins without substantial

investments in business acquisitions.

This translates to the need or greatereconomies o scale; as well as lower

compensation and the need to achieve

higher transaction numbers perdistributor associated with the business.

In todays business environment, various

actors can impact a business resulting incycles o plenty and paucity. The business

and the people involved in the business

see large fuctuations in their income. Onthe other hand, the number o high net

worth individuals who have achieved a

very high level o knowledge are likely

to have their own accountants and

corporate nancial advisers, the balanceo which would preer to deal with larger

corporations rather than individual

nancial service or product providers.

Financial Care Centre

CIMB Wealth Advisors Bhd (CWA) has ound

a small but developing market or nancial

advisory service through our Financial Care

Centre (FCC). But the challenge or the

advisory service is to convince customersto pay or the service to make the business

monetarily viable or the nancial planning

practitioners who serve this market. Hence,oten the nancial planner draws his

income rom both advisory services as well

commissions rom the execution o theplan.

We have a small practice o about 20

competent and enthusiastic nancial

planners who are supported by anintegrated inrastructure rom management

support, product and service oerings

and a sophisticated nancial planning

inormation technology (IT) platorm

interaced with up-to-date value o assets

that enables meaningul interpretations ocustomers investment inormation.

What dierentiates this practice rom

others in the marketplace is our ability to

provide a suite o products through our

institutional unit trust agent (IUTA) licenseand our ability to source other nancial

products on a business-to-business basis

with strategic partners as well as rom

the CIMB Group. These include unit trust

unds rom ve unit trust managementcompanies (UTMCs), insurance and takaful,

credit cards, mortgage loan reerrals,

estate planning services, private equityinvestments, structured instruments and

a complete suite o banking products

some o which are provided on areerral basis. This should be signicantly

enhanced when Bank Negara Malaysia

approves our application or a nancialadvisers license which will allow our

nancial planners to source insurance and

takafulrom dierent providers.

CWA has also invested signicantly inproviding the inrastructure and the

management ocus on this business

as we believe that this is going to be

an important emerging business. The

inrastructure and the management ocus

also provide great value to the otherdistribution platorms, the 4,300 strong

agency orce which operates rom our 38

branch and agency oces throughout the

country. The business practices, service

and sales methodologies used in the

business are researched and rst appliedin our FCC beore being modied or

the agency orce. This allows our agency

orce to be ahead o the marketplace withsuperior service and sales practices.

The Multi-Product Distributoron an Open Architecture

CWAs larger distribution platorm ound

a signicant segment o the marketsnancial products and services which

has moved rom mass market product

oerings to customers who begin to

question the value o the product oering

and how these products and services

can meet their personal needs. Ourmulti-product platorm, enabled by the

various business licenses and business

relationships, creates a one-stop centre

that is unrivaled in the agency distribution

business.

Even so, what is more important is our

ability to train our agents to make an

oering o multiple nancial products

through our Total Financial Freedom

bundled solutions approach. Forinstance, in the oering o a Business

Value Protection Solution, we can bundle

wealth accumulation instruments, withinsurance or takaful as well as a trust

Instrument or eective asset distribution.

This benets the customer tremendouslyas a value added superior solution has

been provided to the customer without

By Tan Beng Wah

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the need to approach three dierent

distributors who may not be able to

articulate this integrated approach or

the customer. The distributor similarly

benets rom being able to oer a solutionin an integrated manner without having

to go to three dierent manuacturers

and orming a business relationship withthem. He also benets rom three streams

o income with one solution oering. Mostimportantly, he does not suer rom the

ups and downs o a single product market

as he is always catering to the needs o

the customer, rather than being subject

to the vagaries o market cycles in a single

product environment.

Best of Class Holistic Solutions

In addition to an extensive product range

that we provide or our distributors, wehave also innovated bundled solutions

to meet the needs o our customers. The

Business Protection Solution is an example.

We have also innovated similar solutions

to meet customers needs or an educationplan or their children and also the

retirement market which we believe will

be a growing opportunity which cannot

be ignored. We also see the need or estate

planning both in the conventional market

as well as in the larger market o Islamicestate planning. These services will help

our consultants and nancial planners toadd value to customers in a manner that is

unique in the marketplace.

CWAs three-in-one Education Plan isanother example o the innovation we

make to provide a superior solution

or the consumer. The underlying asset

accumulation instrument is a Target Dated

Life Cycle Fund which is invested in adiversied portolio o asset classes. The

premise is that throughout the duration

o the plan, more risks can be taken at

the beginning o the plan and a more

conservative approach is used nearer thetime when the education und is needed.

This allows the und to generate between

eight and 12 percent per annum returns

depending on the duration o the und.

Should an unexpected event occur such

as natural or accidental death, terminalillness or total and permanent disability

bealls to the plan owner, the und is

topped up to the level it was planned

at that point in time. This is superior to

plans that only waive the contributionand build up to the planned amount at

the end o the planned period. As this isan investment plan, there is no penalty

to partially redeem or ully redeem the

investments during the plan period and is

acilitated by a trust instrument.

Empowering our BusinessPartners

In order or this business model to work,

much eort has been placed on training

and education and the maintenance ostandards o practices in the marketplace.

Systematically we build upon new

agents coming into CWA, the new agent

development training programme, the

manager level training, and most recently,CWA launched the Leadership Trophy Series.

This is a high-impact business leadership

and agency management training

programme tailored or our agency leaders.

The two-and-a-hal-month comprehensive

programme is aimed at developingdynamic leaders capable o building and

managing high-perormance agencies

based on business entrepreneurship. Westrive to develop orward thinkers who are

well equipped with the proper skills and

relevant knowledge to drive CWA to greaterheights.

On the other hand, the FCCs main ocus is

to develop strong customer networks as

it reaches out to customers who see theneed or a holistic approach to managing

their wealth. CWA holds a Capital Market

Services License (Financial Planning) which

enables us to provide comprehensive

nancial planning services as well as to

execute the plans our clients. However, wedo also oer plans on a modular basis. For

the FCC, education and training ocuses on

providing the support necessary or these

proessionals to provide independent

advice to our clients.

The Ultimate Financial ServicesEngine

As we move orward, we plan to put thenal piece o this model in place over

the next 17 months. We have provided

the products and services or the marketsegment identied. We have ensured that

our people are able to identiy, analyse

and provide the right solutions to meetthe needs o the customers through the

empowering them with skills, knowledge

and marketing support.

To put the nal piece o cog in our

nancial services engine, we are buildinga comprehensive business platorm which

is enabled by the best-in-class customerrelationship management system a

database engine that manages customers,

products and distribution inormation

and integrated by a compensation engine.This will allow the management, the

distributor and the customer to have a

single view o the various products and

services oered to the customer and

enables CWA to provide superior serviceeven though the products and services

are sourced rom various parties.

What will be interesting is the ability o

a distributor to bundle a solution on the

fy as the customer reveals his needsand be able to present this holistically

to the customer. The distributor will be

compensated based on the total solution

that he provides without the need to

worry about which product to ocus on

and thereby receiving multiple streamso income which is more stable than

depending on one source o income.

At CWA we believe in the business associate

who is working with us as an agent or a

nancial planner to serve the customer. He/she should eel adequately empowered

to perorm his/her task and believe that

he/she is airly compensated, given the

right support through training, products

and services as well as inrastructure. Wealso believe that a customer deserves to

be served by a true nancial planning

proessional who is empowered to assist

him to eciently meet all his nancial

needs, i not directly, then through a

reerral o product or service provider andthus truly be able to create, protect and

preserve the customers wealth.

Tan Beng Wah is the CEO of CIMB Wealth

Advisors Bhd and the current DeputyPresident of the Financial Planning

Association of Malaysia.