Japan Travelog: Part 4. Financial Planning in Japan
Certified Financial Planners in Japan
According to the Professional Planner, an Australian publication, as of the end of 2022, Japan had the world’s third-largest group of CFP professionals at 25,098, behind the United States (95,137) and the People’s Republic of China (30,182), and just ahead of Canada at 17,259.
The Japan Association for Financial Planners (JAFP) is the non-profit organization that has been licensed to offer CFP® certification in Japan since 1992.
The JAFP also offers a domestic Affiliated Financial Planner® (AFP) designation. It could be likened to FP Canada’s Qualified Associate Financial Planner™ (QAFP) designation. This was the certification offered by the JAFP before they obtained the licence to offer the CFP from the Financial Planning Standards Board.
The Focus of the Financial Planning Profession in Japan
Formally, you will not find much difference between CFPs in Japan and elsewhere. The licensing of the CFP marks makes sure of that. It will therefore not be a surprise to read of a 6-step process similar to what we know in Canada:
- Establishing and defining the client-planner relationship
- Gathering client data and determining goals and expectations
- Analyzing and evaluating the client’s financial status
- Developing and presenting financial planning recommendations and/or alternatives
- Implementing the recommendations
- Monitoring the plan
Relating an Initial Financial Planning Encounter
I have not had any personal exposure to financial planning in Japan, although I understand that the JAFP offered volunteer services to people caught up in the earthquake that hit Kobe in 1995, where we were living at the time.
In a RetireJapan blog post written in 2016, so perhaps a bit dated, a long-time British resident of Japan described his experience with meeting a pair of financial planners for a free 50-minute consultation.
Some estimates were made of what the writer and his wife could expect in terms of pensions and the amount of savings at retirement. The planners concluded that the couple was on track. Interestingly, the writer brought robo-advisors up for discussion, concerning which the planners were completely unaware.
For people who own small businesses, or financial planners in Canada who work with small business owners, the planners were competent to discuss the value of the writer’s wife incorporating her business.
The writer observed that there was little focus on investing. The planners focused exclusively on accumulating cash, not on the compounding power of investing.
The planners questioned the wisdom of the writer and his wife carrying a mortgage. In 2016, mortgages in Japan were charging 0.5% while the couple were getting returns in the 3-4% range. Not focusing on investments, perhaps the planners’ attitude was understandable.
More broadly, it appears that many planners are involved in insurance sales, a product that is very much part of the popular culture in Japan (unlike neighbouring South Korea from what I’ve heard).
As in Canada, those seeking AFP and eventually CFP certification can do the coursework through specialized school programs either in person or at a distance, but unlike Canada, several Japanese universities also offer specific financial planning programs that will take students to a variety of levels. These programs are generally lodged in business or economics departments, although one school has its program in the Department of Life Management, which deals with family services and human welfare.
A Final Anecdote
Out of the blue one day back in the late 1990s when my family and I lived in Japan, I received a phone call from someone seeking to sell me on rubber futures contracts. As I recall, Thailand was a major producer. As the price of rubber had been falling recently, I was assured by the sales rep that the government was about to step in and take action that would force the value of rubber to rise, resulting in a virtually guaranteed profit for me. Ultimately, I chose to not step into that speculative world. I have no idea whether the representative was a financial planner, but that sort of “investment” was way out of my area of comfort.
This is the 218th blog post for Russ Writes, first published on 2023-10-09
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.
Image: Logo of the Japan Association of Financial Planners. The slogan: 「ひとりひとりの夢をかたちに」can be translated, “Giving Shape to Everyone’s Dreams.”