2. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific

3. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific What is Financial Planning? Financial Planning is the process of setting, planning, achieving and reviewing your life goals in different stages through the proper management of your finances. Source from IFPHK

4. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific What is Financial Planning? (cont’d) It also helps people to accumulate assets, to grow assets and ensure their assets are under protection A comprehensive Financial Planning helps people to prepare for the unexpected life events e.g. illness or disability

5. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Scope of Services The comprehensive approach to financial planning provides for an initial analysis of the client’s total financial well-being – both now and into the future.

6. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Scope of Services The comprehensive financial planning approach addresses the areas of investment, estate planning, insurance risk management, income and expenditure, wealth accumulation and taxation.

7. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific The Work of Financial Planner Financial Planners help people achieve their financial goals, whether it be buying a home, saving for their children’s education, investing their hard earned money, managing debt, or planning for retirement.

8. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific The Work of Financial Planner Financial Planners help clients to: Make informed decisions about their money and how it can be used to best advantage Develop a sound financial plan covering all aspects of their financial well-being Choose products that meet their specific needs Review their financial situation on a regular basis and revise their financial plans as necessary

9. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Purpose for conducting Financial Planning Fulfilling Dreams – plan to make dreams come true: –For example: Purchasing property, cars, reducing liability, travel etc –When and how to make it becomes true:“Plan early, enjoy life later”

10. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Benefits of conducting Financial Planning Prepare for the unexpected Fulfill the goals in different stages Improve financial situation

11. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Financial Needs in Life-stage As Student Life Cycle At birth Working Marriage/Mortgage Retirement Wealth Accumulation & Parenthood

12. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Life Goals Include buying a home, getting married, raising children and planning for their education, insuring yourself and your family, setting aside money for retirement and investing it, estate and tax planning, etc Are not limited to personal matters; they may involve starting a business or joining a partnership, etc

13. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Time Horizon of Financial Planning 1.Short-term FLess than 5 years uE.g. house deposit, buy a car, plan for holiday, reduce personal / family expense by 10% 2.Medium-term F5 – 10 years uE.g. mortgage reduction, savings for children’s education 3.Long-term FOver 10 years uE.g. retirement, financial independence, estate planning

14. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Key Scopes of Financial Planning Cash & Credit Management Insurance Planning Investment Planning

15. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Cash & Credit Management

16. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Most common ways of using credit: Loans and Credit Cards

17. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Types of Loan Clean Loan: Personal Installment Loan Personal Overdraft Secured Loan: Home Mortgage Loan Car Loan Secured Overdraft

18. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific What is a loan? BorrowerLender Loan principal Repayments + interest

19. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Credit card Cardholder Card issuer Monthly payments Credit Card with a revolving credit limit

20. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Cash & Credit Management oKeep planning your Spending vs. Income oUnderstand Needs & Wants before Spending oProper use of Credit Card or Loan Product

21. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Insurance Planning

22. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Insurance Planning Purpose –Ensure the existing standard of living if income discontinues –Protect the things you own –Achieving your financial goals even in the worse scenario –Cover you liability

23. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Types of Insurance Life Insurance –Death & Disability; personal & family income Assets –Your property, household contents, personal belongings. Liability –Any harm, loss, or damage to other people or their property that you are legally liable for their losses. Accident –Medical & hospital expenses and loss of earnings resulted from accidental injury. Medical and Hospital Insurance –Medical expenses and hospital expenses in the event of hospitalization or prolonged critical sickness –Out-patient expenses

24. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Different Types of Life Insurance Term Life Insurance –No saving element Traditional Life insurance –Guarantee Cash Value + Non guarantee dividend Investment Link Life Insurance –Cash Value depends on investment performance

25. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Life insurance is not a luxury. It’s as basic as food, clothing or shelter…

26. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific “I don’t need insurance!” But your family needs it.

27. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Forms of General Insurance (covering assets, liability, and accident) Home Travel Motor Vehicle Accident Domestic Helper

28. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Forms of Medical and Hospital Insurance Hospital Expenses Hospital Cash Out-patient

29. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Investment Planning

30. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Important Concepts Inflation ( 通貨膨脹 ) 1985 $0.1-$0.5 2005 $2-3 1995 $1-$1.5

31. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Power of Compounding: HK$5,000 / Month starting at age 35 with 0%, 5%, 10%, 15% return p.a. HK$1.8M HK$4M HK$11M HK$30M

32. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Cost of Delay: HK$5,000 / Month Starting at age 35, 45, vs 55 at 5% return p.a. HK$4M HK$2M HK$900K

33. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Important Concepts Risk & Return ( 投資風險及回報 ) – What is your Risk Tolerance Level ( 風險承受程度 ) Will you sleep well?

34. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Important Concepts Factors in accessing Risk Tolerance level –Age –Education background –Personal characters –Financial situation –Investment objectives –Investment experiences

35. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Major investment vehicles Time Deposit ( 定期存款 ) Bond ( 債券 ) Certificate of Deposit ( 存款證 ) Stock ( 股票 ) Unit Trust ( 基金 ) Property ( 物業 )

36. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific High Risk = High Return ????

37. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific HSI Performance (1987-2006)

38. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific HSI 1-Year Return Distribution (1987-2006) Mean Return: 17.5% Probability of positive Return: 65%

39. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific 19871988198919901991199219931994199519961997199819992000200120022003200420052006 Japan 43% Emg Mkt 40.4% Emg Mkt 65% Govt Bond 12% Emg Mkt 59.9% HK 32.1% HK 116.8% Japan 21.8% U.S. 38.2% EM Bond 37.8% U.S. 34.1% U.S. 30.7% Emg Mkt 66.2% EM Bond 12.7% EM Bond 9.7% Govt Bond 17.2% Emg Mkt 56.3% Emg Mkt 25.9% Emg Mkt 34.5% Europe 34.3% Govt Bond 18.4% Japan 35.2% U.S. 31.2% HK 9.2% HK 49.6% High Yld 18% Emg Mkt 74.9% Europe 2.66% EM Bond 20.5% HK 33.1% Europe 24.2% Europe 28.9% Japan 63.1% Govt Bond 1.8% High Yld 2.3% EM Bond 13.7% Europe 39.2% HK 25.1% Japan 25.7% Emg Mkt 32.6% Europe 4.1% HK 27.9% Europe 29% U.S. -2.1% High Yld 49.2% Emg Mkt 11.4% Europe 29.8% U.S. 2% HK 22.5% U.S. 24.1% High Yld 12.8% Govt Bond 14.5% HK 59.1% High Yld 1.1% Govt Bond -1.4% High Yld 4.1% HK 38.1% Europe 21.4% EM Bond 10.3% HK 30.3% U.S. 3.9% Europe 16.4% HK 8.5% Europe -3.4% U.S. 31.3% U.S. 7.4% Japan 25.7% Govt Bond 1.8% Europe 22.1% Europe 21.6% EM Bond 10.8% Japan 5.1% U.S. 22.4% Europe -8.1% Emg Mkt -2.4% Emg Mkt -6% Japan 36% Japan 16.3% Europe 9.9% U.S. 15.3% HK -4% U.S. 15.9% Govt Bond 4.3% High Yld -8.3% Govt Bond 15.8% Govt Bond 6.4% High Yld 24.7% High Yld -6.2% High Yld 20.5% High Yld 17.8% Govt Bond 1.2% HK -2.9% EM Bond 19.6% U.S. -12.5% U.S. -12% Japan -9.8% High Yld 32.4% High Yld 13.2% HK 8.3% High Yld 13.7% Govt Bond 4.4% Japan 1.8% Emg Mkt -10.6% Europe 13.7% Europe -4.3% Govt Bond 14.1% Emg Mkt - 7.3% Govt Bond 18.3% Emg Mkt 6.0% Emg Mkt -11.6% High Yld -4.8% Europe 16.2% HK -14.8% HK -18.6% HK -17.8% U.S. 29.1% EM Bond 11.6% U.S. 5.7% EM Bond 9.8% Japan -36% Japan 9.1% Japan -21.4% U.S. 10% EM Bond -19.3% Japan 0.42% Govt Bond 1.7% HK -23.3% EM Bond -8.1% High Yld 10.4% Japan -28.3% Europe -19.6% Europe -18.1% EM Bond 22.2% U.S. 10.7% High Yld 3.6% Japan 6.4% HK -28.9% Emg Mkt -5.2% Japan -15% Japan -24% Emg Mkt -25.3% Govt Bond - 1.5% Emg Mkt -30.6% Japan -29.5% U.S. -22.7% Govt Bond 12.4% Govt Bond 8.7% Govt Bond -6.5% Govt Bond 4.6% Data Source: Ibbotson Benefit of Diversification

40. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Efficient Frontier and Optimisation Source: Ibbotson

41. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Optimal Asset Allocation Asset ClassStableBalancedGrowthAggressive Growth World Investment Grade Bond 8022 Global High Yield Bond 201713 Emerging Markets Bond 10 US Equity161730 European Equity111410 Emerging Markets Equity 152430 HK Equity92230

42. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Historical Performance of Optimised Portfolio StableBalancedGrowthAggressive Growth Standard Deviation6%11%17%21% Source: Ibbotson

43. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific High Risk ≠ High Return

44. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Important Concepts Time Horizon ( 投資期 )

45. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Index Time Important Concepts Time Horizon ( 投資期 )

46. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific Important Concepts The longer the time horizon, the more options an investor will have to reduce or manage risk Time Horizon ( 投資期 )

47. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific To keep your learning continue, please visit our HSBC Living Finance Website 滙豐理財小百科 www.hsbc.com.hk/livingfinance

48. HSBC Living Finance - Young Financial Planner Competition Learning and Development, Asia-Pacific