Puppie perspective (Half-full or half-empty)

A few decades ago, I was what you would call a "Puppie," an upwardly mobile professional, a derivative from "Yuppie" (young upwardly mobile professional), a term that was popular in the late eighties. I would have gladly accepted the term back when President Ramos was in place, but not now. Another term applicable to me was "Dink" (double income, no kids), till we had our three beautiful kids. Nowadays, I would just classify myself as a "BarBen" (barely breaking even, sorry, just made that up).

Having read the book by Robert Kiyosaki (Rich Dad, Poor Dad) made me realize that a lot of financial planning still needs to take place to cover the downside scenarios of our lives.

Health insurance. Not only should I consider planning for medical insurance for my immediate family, I should also consider for my now aging folks. Of course, I was oblivious to this until my dad hit the hospital twice in a month. Then again in my eyes, my mom will always be 45, as I will always see my daughter as eight, my wife, of course, will always be 25, and I have never left puberty. (Just call me Mr. Pan).

Life insurance. As we are mere mortals and we live by the grace and will of the Big Guy up there, we cannot always predict when we pass to the next life. We want to make sure our surviving family lives the lifestyle they are accustomed to. One either gets the basic term insurance or one can get really complicated with an attached savings and investment plan attached to it. To keep things simple, one should just buy term and only think about the other hybrids only if you cannot see a better investment alternative out there.

Property insurance. Living in Manila with unreliable utilities, we have constant spikes in voltage and electrical surges that increase the likelihood of an electrical fire. Car accidents are predominant risks as well.

College education. Education is a necessary investment and getting a good college education just increases our kids’ chances of surviving in this ever more competitive world. Saving for this is quite critical and you need to start early.

Retirement plan. Some people save for retirement. In the US, it is encouraged through the IRA (Individual Retirement Account) and 401K plans, where pre-tax dollars are earmarked into these accounts and not considered taxable until you pull it out after you hit 55 or later. The Philippines does not have this system yet but my sources tell me that the PERA bill is designed to do just that. (When it happens? Hmm… comments not for printing.)

My own personal plan for retirement is to have two or three businesses generating cash, maybe a pancake house franchise or a sari-sari store or maybe an apartment building? (Hmm… slum lord has a good ring to it.) Who knows? Really, I cannot see myself retiring, likely to drive my wife crazy.

Next step. Choosing service providers is key to this whole process. You need to buy insurance or prepaid plans from companies who have been in the business for a while and are likely to be there for a long time so you can collect on their promise to pay.

Insurance companies like Pioneer Allianz (Lorenzo Chan, the EVP, was my high school classmate, mention my name and you might get a better rate and maybe, I can get a commission) and Zurich have capital backing from Switzerland that is likely to outlive all of our grandchildren. They can offer both basic insurance and the hybrid savings plans.

Pre-need plans by their definition is a savings plan to cover your future need. Unlike insurance, which covers an uncertain event like death, disability or fire, pre-need companies cover a need that is certain to occur like college and retirement. You can call Atty. Miguel Vasquez, the president of the Philippine Federation of Pre-Need Plan Companies, for a recommendation on how to choose from the 40 companies currently registered.

IT and the pre-need industry

According to Atty. Vasquez, the pre-need industry is growing more than 15 percent a year. The industry today has 10 million plan holders and is growing with more than 600,000 new plans a year. The industry has close to 180,000 licensed agents. With a population of 70 million, the Philippines is underserved and this industry could double in two or three years. Can you imagine the growth of this industry with the PERA bill? With growth you need good tools.

Sales. With these many sales people, communication between them and the branch is key. I can see them using Internet cafés to file their sales reports, applications and request for quotes. In fact, a cheaper alternative is to use DFNN’s mobile messenger for wireless data applications (shameless plug alert!!) to both broadcast from HQ to salesman as well as retrieve data from HQ’s servers.

Commission, deposit and claims processing. With 10 million plans comes a significant amount of transactions for deposits, commissions and payouts. To handle high-volume transactions, you need a good solid process that ensures the quality of the data and integrity of the process. The document flow and process flow need to be designed carefully and reviewed closely. You need computer systems and programming that are both scalable and robust, I would argue to the level of bank systems. (You can call Intelligent Wave Philippines for this type of programming for high-volume transactions – another shameless plug alert!)

Plan administration. Ten million plans automatically need a good database which has significant backup protocols and hack protection. Keeping these many plans in a database costs a lot of money and with an average 250,000 per company, the investment can be quite redundant. I would propose that the industry develop a central server farm to serve its members where they can share the data center for hardware, software and staff. Scale economies would be achieved, lowering the cost to its members. Then again, some companies may consider their IT strategy as a competitive advantage.

My Two Cents. Always look at the glass as half-full. Start saving early. Simplify your life.

Presidentiables

I have been receiving a few e-mails lately talking about whom we should support as the next president of this country. (Of course, I wonder why, since I can’t imagine my reader base to be more than five.)

Though I may not be a political analyst nor for that matter a political animal, I know what makes for a good company to work. In this case, Philippines Inc. has several structural flaws – the biggest flaw being lack of leadership and political will.

Every firm needs a good and strong leader with a good strong vision. He or she does not need to be well-liked but people need to understand and support the vision. He or she needs to make tough decisions that serve all stakeholders and not just the loud minority. I have seen several firms turn around simply from putting in a new leader as well as several firms declining when the leader has left, e.g. IBM with Lou Gerstner and GE declining without Neutron Jack Welch.

In a company, we have a board of directors that sets the policy directions while the management team executes these policies. The number of directors is normally under 20. In a country, you have congressmen and senators that number in excess of 200. Structured for failure, it is hard enough to have a consensus with 20, more so with 200. America has this problem as well but with the Republicans in the majority in both legislative and executive teams, significant progress is at hand. You need a solid alignment from the policy folks as well as competent executives to execute. You definitely cannot have micromanagement take place.

Danding Cojuangco. Mr. Cojuangco is currently the chairman and CEO of San Miguel Corp. Taking over from the heirs of the founders, he has turned around the nation’s biggest food and beverage company and today has a war chest to expand across Asia. His hobby is agriculture.

Jaime Augusto Zobel. Jaza, as he is frequently called, has a good head on his shoulders. He and his management team have taken a real estate company into telecommunications, creating a combined company bigger in value than PLDT, the former monopoly.

Bayani Fernando. Mr. Fernando turned around Marikina because he was frustrated with its infrastructure. He is currently making good improvements in both MMDA and DPWH. He makes tough decisions and does not worry about his pollster reports.

My Two Cents: These are just some names of a few competent leaders. I am sure there will be more as the election draws near. I just hope the people vote based on ability and not on popularity.

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Dickson Co is CFO (C is for Cheap) for Dfnn, Intelligent Wave Philippines and HatchAsia.com. For comments or suggestions, e-mail [email protected].