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a Presentation by Philamlife at the BSP Regional Financial Literacy Campaign for OFWs in Bacolod City, Philippines on June 28, 2007
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Ang Paghahanda Para Sa Kaunlaran ng Pamilyang
OFW
Ma. Isabel “Mae” Elizalde
Financial Planner – Elizalde Agency
Philamlife
Story of the 3 Coins
ABILITY
TIME
EXPERIENCE
Why are we here?
Time to Protect(Pananatili)
Time to Transfer(Pagpapamana)
Time to Accumulate (Pagpapalago)
We are here to talk about TIME
Investment Triangle
Cash, S/A, C/A, T/D
Mutual Funds
Equities, Options, Derivatives, Real
Estate
Unit Investment
Trust Funds; Variable Universal Life
P R O T E C T I O NN
Basic Financial Foundation: Basic Financial Foundation: PROTECT THE BREADWINNERPROTECT THE BREADWINNER
Life Events (Financial Goals)
First Job/Business
Bigger House
House
Travel/ Family Vacations
Children’s Education
Get Married
Retirement
Business
Car
Legacy
More Cars
20s 50s 60s 70s +40s
Wealth Management It is a full-scale, needs-based management that aids individuals and
families in to accumulation (pagpapalago), preservation (pananatili) and transfer of wealth (pagpapamana) by customizing the right product solutions to meet financial goals and objectives
Designed to aid individuals and families to establish clear financial goals that will enable to fulfill your dreams for yourself and your family/
Made possible by creating a blueprint or financial plan that fulfills your objectives
WEALTH MANAGEMENTWEALTH MANAGEMENTIS FORIS FOR
EVERYONEEVERYONE
Investment Triangle
Cash, S/A, C/A, T/D
Mutual Funds
Equities, Options, Derivatives, Real
Estate
Unit Investment
Trust Funds; Variable Universal Life
P R O T E C T I O NN Pananatili…Pananatili…
Pagpapalago**Pagpapalago**
PagpapalagoPagpapalago
PagpapalagoPagpapalago
Pagpapalago*Pagpapalago*
Pagpapamana…Pagpapamana…
Investment = Savings
Investment: “ A temporary donation of money to a cause in expectation of making a profit.”
Savings: “ That which has been saved, particularly money that has been set aside for the future.
Source: www.wikipedia.org
Difference:
AMOUNT: Lump sum RegularHORIZON: Short/Medium Term Long TermMEASURE: Rate of Return "Maturity" Benefit
OBJECTIVE:Multiply/Accumulate/
Transfer Wealth
Future need: Education, Retirement,
etc.
Investing Saving
Let’s talk first about Investment…
“Temporary placement in expectation of making a
profit”
PhP 3.99 Trillion*
in Bank Deposits
*source: Bangko Sentral ng Pilipinas, Consolidated Statement of Condition as of Jun’06; for Universal, Commercial, Thrift, and Rural & Cooperative banks
How much investment is “sitting” in bank deposits earning between 1-4%?
Important Considerations in Making Investment Decisions
1. Credit-worthiness
2. Performance and Track Record
3. Risk Tolerance
4. Time Horizon
Credit Worthiness
What if you had the following choice, which one would you go for?
Bank Na Di Gaano360 days
TD rate for P100,000
Equitable PCI Bank360 days
TD rate for P100,000
12.0% 12.0% p.a.p.a. 2.4% 2.4% p.a.p.a.
or
Performance and Track Record
Fund Return
Philamlife Fixed Income Fund 13.85%
Philamlife Equity Fund 68.42%
Philamlife Dollar Bond Fund 17.17%
Philamlife Global Bond Fund 12.37%
Philamlife Fund Performance (One Year Return)* One-year return for year ended June 25, 2007
Non-Par/ Guaranteed Returns, Bank deposits
Participating Products
Regular VUL
Equities, Mutual Funds, UITFs, Real Estate
SP VUL
RISK
RETURN
Risk Tolerance
Risk Tolerance vs. Time Horizon
Ris
k
Age30 65
Important Considerations in Making Investment Decisions:
How do we fare?
1. Credit Worthiness
2. Performance and Track Record
3. Time Horizon
4. Risk ToleranceClient’s Personal Decision
1. Track record
2. As Little As P50,000
3. Exempt from estate taxes
4. Backed by Philamlife/AIG
5. Insurance Coverage
AIG Money Tree
Now, let’s talk about SAVING…
“Setting money aside for the future”
Are Filipinos saving enough compared to our
neighbors? What is our SAVINGS
culture?
Savings Habits in the RegionSavings Rates as % of GDP*
Singapore 48.60%
China 47.00%
Malaysia 43.30%
Rep. of Korea 33.30%
Vietnam 30.20%
Thailand 29.40%
India 29.10%
Indonesia 26.30%
Philippines 20.10%
Cambodia 13.90%
A typical Filipino saver puts 64% of his earnings
in regular savings deposits
Highest level of investment of the average
Filipino is in the form of time deposits
*Asian Development Bank 2006 Key Indicators (using 2005 figures)
The Typical Savings Mentality
Income – Expenses = Savings
High income does not equate to accumulated wealth
Expenses may oftentimes surpass income
Note!Note!
Financial Discipline
Growing your assets
How can we achieve a higher return in a low interest rate environment?
Asset Allocation: 91-TBill & 5-25YrFXTN rates (1999-August 2006)
Growing your assets
Year 91-day TBill
5YrFXTNs
7YrFXTNs
10YrFXTNs
20YrFXTNs
25YrFXTNs
1999 9.98% 13.28% 13.92% 14.43% 15.57%
20009.93% 14.11% 14.49% 14.81% 15.58%
20019.74% 14.43% 14.90% 15.18% 15.66% 16.02%
20025.50% 11.49% 12.34% 12.72% 14.18% 14.84%
20035.97% 10.62% 11.28% 11.59% 12.12% 12.61%
20047.31% 10.99% 11.47% 11.88% 12.15% 12.45%
20056.07% 10.05% 10.54% 11.09% 11.64% 12.02%
As of 8/17/06 5.38% 7.96% 8.13% 8.61% 10.62% 10.92%
TBill rates are average auction ratesFXTN rates are average bid rates from Bloomberg less 50bps
2.885% 91-day TBill yield as of Feb 2007
How to maximize returns in low-interest rate environment?
More Risk
Ret
urn
Investment Period
How much do you need to save every year for 5 yrs to have P1M after 10 yrs?
@ 10% interest p.a? P100,000
@ 4% interest p.a.? P150,000
Financial Instruments for Different Financial Objectives
Pure risk protection
Ordinary Life
A&H
Investment &
risk protection
Pure investment
Mutual funds
Unit-linked Investment Trust Funds
Time deposits
Real Estate
Long-Term Savings
and protection
In a nutshell, financial planning is…
Planning for the Best vs. Planning for the Best vs. Planning for the WorstPlanning for the Worst
Planning for Life: Planning for Life: Good or Bad times Good or Bad times
Planning for Death: Planning for Death: Most Filipinos Die Most Filipinos Die IntestateIntestate
