A couple of years ago my wife and I had a free consultation with some independent financial advisors. That consultation was a bit underwhelming, but overall was useful and they gave us knowledgeable, concrete advice.

Last month my wife heard about a free lecture on personal finance in Sendai, so she figured it might make a good date for us (we lead exciting lives).

For anyone who is going to stop reading here, in my opinion this lecture was not worth attending, proving once again the old adage that there is no such thing as a free lunch.

The full title was 「女性のためのマネープラン」and my wife claimed it was okay for her to bring her husband along. I ended up being the only male there other than the speaker, but either because it was okay, or because they were polite or scared, no one said anything.

There were only ten spaces for the lecture, and nine people turned up. It was held in a very fancy office belonging to a financial advisory company specializing in insurance.

The speaker was a man, which I thought was slightly suboptimal given the topic matter, but I was willing to give him the benefit of the doubt.  A couple of the participants were talking about how they were hoping to learn about iDeCo and NISA before the lecture started, and I was looking forward to seeing how someone introduced the concepts in Japanese.

The speaker actually spoke quite well, but he spent the first fifteen minutes or so talking about himself and how wonderful he was (grew up poor, became the best salesman in Japan in his company, quit to spend more time with his family, and now he does 100 free lectures a year about personal finance to various groups).

Then he talked about the way Japanese society is changing (mainly marriage/divorce trends and longevity trends), making life plans, three ways to use money (spend it, invest it, use it to buy insurance), buying versus renting a home, paying for children's education, and how much income/savings you might need in retirement.

He then touched upon a few elements of personal finance: the importance of time/interest, and diversification. He spent quite a long time trying to explain compound interest by comparing it to driving to Tokyo(?). And then we ran out of time, and he skipped the last 1/3 of his slide deck. From the slides, that seems to have been where all the useful information was.

We were then given the chance to sign up for free individual consultations (he was completely overbooked but might be able to fit us in at the end of September).

I was a bit disappointed with the lecture, and I think some of the other participants were too. The speaker spent too much time talking about himself and not enough time talking about practical aspects of investing. He didn't mention any relevant qualifications. I felt he misjudged the audience, who seemed fairly savvy professional women.​ And I felt uneasy because I couldn't see the catch.

I presume he was going to use the private consultation to evaluate everyone's insurance situation and suggest improvements (ie products he was selling). Still, it wasn't clear what his purpose was or what he got out of it. Nor was it clear what the hosting company would get (he was an invited speaker).

It felt a bit sleazy.

So that was a bit of a waste of time. I think it can be worth talking to a financial planner, just make sure they are an independent one and are working for you.

Any financial planner that works for a bank, a construction company, or an insurance company is not working for you, and you should not trust them to act in your interest. Either consult an independent advisor or do your own research after talking to a financial advisor with a conflict of interest.

If you need personalized help with something related to investing, pensions, or personal finance in Japan you might find our coaching service useful. You can also post in the forum for free :)

We've written about this before (in fact, it was the first post on the blog, and the reason RetireJapan was born).
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I received a very pleasant message from someone the other day asking about writing a guest post for the blog or posting in the forum. They offered to provide people with a free overview of their UK pension situation, followed by some tailored advice. This seemed interesting but also a bit too good to be true.

We exchanged emails and it turned out this person worked at one of the investment firms that target expats. They were completely pleasant, professional, and even self-deprecating throughout, so I am not going to write their name or the company they work for in this post.

However, this does illustrate very well how no-fee advisors get the initial meeting with potential customers (marks?). They offer to give you some advice for free, then get your confidence, then sell you some horrendous financial product.

Follow the money. If someone is providing a service for free, you need to ask why. They are probably getting paid somehow, and if you don't know how much the fee is there is a good chance that you wouldn't like it ;)

Be careful out there! Remember you can always post in the RetireJapan Forum to see what other people have to say about a potential investment before making it. The reason this site and community exists is to help us all make better decisions going forward.

How about you? Any stories to tell? What investments do you regret or are happy to have passed on?

Long-time readers may remember that I took the Financial Planner test (3-kyuu) in January. I wrote about the test here and my experience taking it here.

​My results arrived a couple of days ago. As I discovered by scoring my own paper after the test, I barely passed the 'practical' paper (financial planning focus, one of three options including insurance and real estate) and failed the 'academic' one.
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I was happy to see that I got full marks on the investing sections :)

My poor performance on the latter sections is explained by the fact that I didn't finish going through my textbook before the test. The last two chapters were on real estate and inheritance, and those are the sections I bombed on the test...

I have now finished going through the textbook, although it is slightly out of date (2013 edition and several laws have changed in the meantime). I'll start going through a new textbook today and hopefully will finish in time to take the academic module of the next FP test in May.

Wish me luck!
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So I took the Financial Planner 3rd Grade test yesterday in Sendai. It was quite interesting and I enjoyed the process (I'm weird, and like taking tests).

A few thoughts below:

1. My Japanese language skills (and my reading skills in particular) aren't really good enough for this. I ended up guessing a few of the questions from context.
2. This is not a particularly good test. The multiple-choice structure with only 2-3 items means that a monkey choosing bananas should get around 42%... 
3. There were lots of students there. High school students and university students. I guess this is one of the 'professional' qualifications that is fairly easy to get.
4. So I guess that is why you often see Financial Planner qualifications on meishi from people working in construction or insurance companies.
5. The test gives waaaaaay too much time. It's in two parts, a two-hour academic test and a one-hour practical test, and I finished both in under half the time, even with my basic reading skills. If it were in English I'd have finished in about ten minutes...

I won't get the results until March, but the association uploads the answers in the afternoon of the same day. I scored my own, and it seems like I passed the practical test (I chose the investment option rather than the insurance option), and failed the academic test. Maybe I should have gotten more than half-way through my study guide...

Luckily you can take them separately, so I'll be retaking the academic paper whenever they hold the test next.

Ultimately I would like to pass the 2nd Grade test, which seems achievable (unlike the First Grade, which is unlikely to be worth the sheer effort I would have to put in: the pass rate is low for that one, even among the professionals that tend to take it).

However, I am not very impressed with this qualification. The financial planners I talked to last year had CFP qualifications as well as the FP, which I think is more rigorous and practical. I still found them very solid on details and less so on strategy or goals.

Looking at the financial planner test, I kind of understand. The test broadly includes taxation, insurance, investing, inheritance, and real estate. As it's a multiple-choice test, the focus is on details: rules and regulation, numbers, ratios, etc.

The result is you get a bunch of people with no practical experience (the high school and university students I took the test with yesterday) who think they know about these subjects because they have a paper qualification, but only know the fiddly bits.

They don't understand why people would want to make certain choices, or what is possible.

I also don't really understand why all this stuff is on the same test. I mean, I guess it makes sense to require financial planners to have a basic understanding of all aspects of personal finance, but it seems to me to be far preferable to have separate tests for each topic so that they can go a bit deeper.

For example, the investment portion of the test (the only part I did well on) had questions on calculating bond yields over five years or defining PER, but didn't ask why people would want to invest or how to think about asset allocation.

I would argue that those are far more important than something you could look up, although probably harder to test ;)

Anyway, my big takeaways from yesterday: I need to study more next time, my Japanese really should be better after 16 years in the country, and I wouldn't give the FP qualifications too much credit.

Anyone else have any experience with this, either in the form of taking the test or dealing with someone with an FP qualification?

As I kind of hinted at in last month's blog post, I have decided to take the Financial Planner 3級 test in January.

The main reason is that I would like to learn more about personal finance in Japan, and it would be useful for this site if I had some formal qualifications.

The FP tests are not as scary as I first thought. There are three levels, level 3 which I will take in January, level 2, and the top level 1.

Level 3 consists of a theoretical exam (2 hours) followed by a practical exam (1 hour). Luckily both are multiple choice, so I won't have to embarrass myself trying to write kanji by hand.

Level 2 is similar, except that you have to write for the practical exam (although it seems to be mainly writing numbers, which I can handle).

Level 1 consists of a theoretical exam and an interview test. The pass rate is under 10% for this one. Might hold off on taking it for a while :)

So what's on the test? Budgeting, retirement, educational expenses, pensions, real estate, investing, taxes, insurance, disability, and inheritance.

Right up our alley! The level 3 test costs 6,000 yen (3,000 yen for each of the two sections, which can be taken individually -good news if I fail one).

I took a past paper to see where I am at before studying, and got the following results:

Academic paper = 27/60 (pass mark is 36)
Practical paper = 10/20 (pass mark is 12)

So not too bad. Either I know more than I expected or it's a pretty easy test (or I lucked out with the multiple choices).

There were quite a few kanji I didn't know and a fair amount of content (inheritance law, land utilization law, and how to calculate various things) but I am feeling pretty good about January.

Next step is to look up all the words I didn't know and read one of those study guides.

I'll post again with updates once I have a chance to study a bit.

Anyone have experience with Financial Planners in Japan?

 
As part of my research into the Financial Planner test here in Japan, I had a look through the Japan Financial Planner Association website and discovered that they do free consultations in their regional centres (Tokyo, Osaka, Sapporo, Sendai, Nagoya, Hiroshima, Fukuoka, and Kanazawa).

Of course I called up and booked an appointment immediately for my wife and I.

Making the appointment was easy: just call up, give your name and a contact number, and let them know roughly what you are interested in talking about. I said I wanted them to look at our financial plan and give me feedback.

This provoked some puzzlement (the reason became clear once we met the planners) but wasn't a problem.

We arrived five minutes early for our 50-minute session and were shown into an interview room with two men around my age. To their credit they didn't seem particularly surprised to see me (is it bad that that is a positive?) and we soon got down to business.

The two FPs we talked to were both had Certified Financial Planner certification as well as the Financial Planner qualifications, so about as well-qualified as possible.

They confirmed that we wanted to get feedback on our finances, then asked some questions about our income, savings, etc.

Using that information they ran some simulations of pensions, etc. and gave us some estimates of what we would get under the current pension system, as well as how much we would be likely to save up with our current arrangements.

About halfway through the session they kind of gave up :)

Basically we are on track to meet our goals and have very solid finances. They were not able to suggest anything we're not already doing, and in fact hadn't heard of robo-advisors (I had to explain the concept to them).

We spent the rest of the time talking about my wife's business and whether she should create a kabushiki gaisha to reduce taxes and make it easier to sell.

There were some positives from the session though:

• I felt quite good that our plan met with their approval
• More importantly, my wife came away much more confident about our strategy (two professionals had confirmed that I am not making all this stuff up)
• Under current rules, we'd receive a fairly decent pension that would allow us to live a basic life even without supplementing it.
• They reminded me that we can spend our principal. I tend to focus only on yield and my goal is never to sell anything, but this is probably overkill.

Now, of course I am under no illusions that pensions will remain the same, but we currently are not including them in our plans at all so anything we do get will just be a nice bonus.

I also learned more about financial planners:

• They aren't particularly focused or even knowledgeble about investing: I often felt that I was thinking several levels above them (they didn't mention exchange rates, diversification, rebalancing, safe rates of withdrawal).
• They seemed to just think about cash, not investments. All of their calculations appeared to assume that we would accumulate cash and then spend it. They didn't take market growth or yield into account.
• They aren't familiar with the FIRE (financial independence, retire early) crowd. To the FPs, our plans are total overkill. According to their models, we could probably retire soon, spend down our assets until we get pensions, then live on the pensions. The idea of living off yield or self-insuring against Black Swan events provoked puzzlement.
• On a related note, they advised us to pay off our mortgage to reduce our monthly expenses. They also asked why we had a 30-year mortgage on such a cheap property. Even after I explained that I am happy to borrow as much money as people will lend me at 0.5% if I can invest and get 3-4% they didn't seem to get why carrying the mortgage might be better than paying it off.
• FPs in Japan seem to be about fine-tuning minor details (insurance policies, monthly savings) instead of looking for major wins (cars, housing, earning).

All in all, it was a fun experience, and one that I would recommend if you are near a centre and have something you want to ask about.

We had the option to schedule paid consultations as a follow-up but even the FPs didn't seem to think there was much point in doing that.

Friends of mine have talked to FPs that were trying to sell them insurance, etc. and it's very common to run into them working for other companies. Needless to say I recommend talking to an independent FP over one working on commission or salary.

Anyone else have experience with Financial Planners in Japan?