Financial Planning in Hungary

I. FINANCIAL INTERMEDIARIES IN HUNGARYdr. József Banyár,

Counsel and supervisory commissionar of HFSA Hungarian Financial Supervisory Authority

II. LICENSING, TRAINING AND MARKET EXPERIENCES IN HUNGARY

dr. Daisy Huczka, SB Chairwoman of HAQFP Hungarian Association of Qualified

Financial Planners, Counsel of Ministry of Finance

III. THE HUNGARIAN CFPTM PROGRAMZoltan Luttenberger PhD,

General Manager of HAQFP

FINANCIAL INTERMEDIARIES IN

HUNGARY

dr. József Banyár, HFSA Hungarian Financial Supervisory Authority

Major financial indicators of Hungary (end of 2007)

PopulationMillion

10,143

GDPBillion €

100,15

GDP/capita €9.95

9CPI

7,4 %

Unemployment7,7

%Net financial assets of households

Billion € 62,2

International reservesBillion € 16

Currency ratio €253,

35Hungarian banking sector – Profit after tax (billion €)

2001. 2002. 2003. 2004. 2005. 2006. 2007.

0,45 0,51 0,67 1,07 1,29 1,41 1,26

Comparison of reserves

Annual insurance premium (billion €) and its distribution between life and non-life

Changes of premium to the previous year (%)

Composition of intermediary marketNumber of insurance intermediaries(2008.03.31.)• 39.896 Insurance intermediary natural person. Out of this:

• dependent (agent): 19.889• independent: 20.000• advisor: 7

• 10.990 organization. Out of this• 406 broker, • 44 multiply agent

Agents of banks:•(mainly institutions): 292•(mainly natural persons): 22.320Investment advisory firms: 27Securities agents: 2375Agents of financial undertakings (non banks and consumer credit organizations):•351•8356

Tendencies in insurance intermediaries:• until 2007 constantly increased the number of intermediaries – now it is stagnating• gradually increases the share of independent intermediaries

Financial advisors versus insurance intermediaries

The insurance intermediary market is:• quite strong• well regulated (compared to the other’s)It is mainly the basis of the financial intermediaries on other fields:

•Credit (personal and mortgage)•Pension (and health) funds•Building societies•...

In insurance two sub-markets are strong:- Unit Linked (the share of this constantly increases in the life business)- Third party motor liabilityThe lack of regulation allows agents to sell UL without investment advice knowledge and license

Education and market experience

Educational requirements only for insurance intermediaries → transitional period → approaching to the end → insurerers lobbying → softening the requirements are in process

About 70% of the intermediaries does not have the required exam

The independent intermediaries a bit more educated than the dependents – some insurers are better, then the rest

The role of HFSASo far we mainly concentrated to the supervision of insurance institutions – thinking, that the intermediaries belong to these

It is less and less true with the increasing importance of independent intermediaries

HFSA recommendations about transparency of commission and cost of (savings type) life insurance contracts – plan to regulate the level of commission indirectly

We would like to know the problems and risks on this field → an ongoing HFSA research project on financial advisor industry;

LICENSING, TRAINING AND MARKET EXPERIENCES

IN HUNGARY

dr. Daisy Huczka, SB Chairwoman of HAQFP Hungarian Association of Qualified

Financial Planners, Counsel of Ministry of Finance

LICENCE REQUIREMENTS' MODEL FOR FINANCIAL INTERMEDIARIES

• State recognized upper degree ie. BA or MA• Financial or insurance professional licence issued by the

Authority (HFSA register, exams by Ministry of Finance)• The National List of Professions = the official list of the state

recognized professions in Hungary

LICENCE REQUIREMENTS FOR FINANCIAL INTERMEDIARIES

• The content of the list: recently 800, now about 400 professions

• The requirements for getting licence to become skilled professional for any profession are appeared in a ministerial decree

• The modernization of the list: in 2007.

LICENCE REQUIREMENTS FOR THE FINANCIAL PLANNER

• Difference between the old and new list: COMPETENCE based structure

• In the banking sector: medium and upper degree• In the insurance sector: medium and upper degree

(intermediatory and adviser)

LICENCE REQUIREMENTS FOR FINANCIAL INTERMEDIARIES

• New official exam for the intermediatory register from 1st July 2008

• Last but not least: the new training and exam for Registered and Quailified Financier Planners

• The future: the state/official approval/recognization of the CFP program

MARKET EXPERIENCE

• The future: Quality instead of volume• The more sophisticated economy, the more need of

professionals• The higher financial culture, the more need of

professional financial advises

The Hungarian CFPTM program

How did we start up a new industry in Hungary?

Zoltan Luttenberger PhD, General Manager of HAQFP

Step I: RESEARCH (2004-2005)

Certified Financial Planners®

o Regulation, history, organization and best practice (www.cfp.net, www.fpanet.org, www.fpsb.org)

o Education: job profile, competencies, planning cases

Financial Planning in the EUo IFA, private banking, Finanzplanungo Consumer protection: MCR - Minimum Competency

Requirements, transparency rules, needs analysis etc.

Step II: SETUP (2006-2008)

Start program, launch project companyContract and co-operation with FPSB Financial Planning

Standards BoardEngage stakeholders

o National: leading IFA networks and FI, regulators (HFSA, Ministry of Finance), Consumer protection, education institutes

o International: professional and education organizationso Secure resources: colleagues+competency+cash

Corporate and public PR campaignsRegister national trademarks Registered + Qualified

Financial PlannerDesign FP training and exam system

Step III: establish the new standards

Train, examine and certify FP professionals:o 2 national levels (RFPH - “lite”, QFPH - ISO 22222)o Prepare for CFPTM certification

Write and approveo Practice Standardso Code of Ethicso Others regarding "4E" and in line with int. standardso Customer info kit and “demo” plan

Publish and deploy (execute)o principles: volunteers, democratic, professionalo regulationso in both HU and EN (www.mptsz.hu)

Why financial planning?

"Client first"

Professional community

The public interest

Good job

A lifelong trust based relationship

Setting the benchmark

Financial health

High quality clientele and exceeding income

How to succeed?

Motivated professionals (FP, IFA)o volunteerso democratic

Professional managemento projectso knowlegdeo PR and IT

Corporate stakeholders collaboratingo FIo Regulators (financial and education)o Professional educators

Join the international community

CEE opportunities

Share knowlegdeBuild a regional network/team/organization of FP

professionalsEstablish new national FP industriesSet the standard/benchmarkStrengthen (the economy of the) CEE region

Qestions and answers

Thank you for your attention!