CHAPTER I

1.1 Background

We all realize that since mid 2008, the global economic condition has been in

chaos as a result of resulted from the collapse of capital market and finance in

the United States. It is obvious from this event that all countries in the world

have been so integrated that any financial problem that takes place far away in

United States of America has an impact on financial affairs in Indonesia. If we

recall that in the beginning of 2008, stock price at the Jakarta Stock Exchange

remained in a good position. This was indicated by the fact that Composite

Stock Price Index (IHSG) stayed at the level of 2000s, meaning that investors

who had started their investments since 2 or 3 years earlier, had truly enjoyed

the fortune known as capital gains from the stock portfolio they owned.

However, because the capital gains they received were still in portfolio,

meaning that as long as the said investors had not sold their stock, such capital

gains actually equaled zero. Therefore, as an investor in the capital market,

early on, an investor must first establish the objectives of doing investment in

the capital market. With clear objectives, investors will easily determine the

time horizon of their investments and definitely they will not follow in the
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path of speculators. The ability to read the proper timing to sell and buy

stocks is a critical matter in scoring capital gains in the capital market.

In this current situation, it is a very good time to start the implementation of

Financial Planning technique in a bank, because a bank is a place for

customers to do their financial services such as saving money, time deposit,

investing, borrowing, insurance, etc, and a bank is where financial tools and

customer’s needs are connected.

Financial Planner is a practicing professional who helps people deal with

various personal financial issues through proper planning, which includes

cash flow management, education planning, retirement planning, investment

planning, risk management and insurance planning, tax planning, estate

planning and business succession planning (for business owners).

People enlist the help of a financial planner because of the complexity of

knowing how to perform the following:

• Direction and meaning to financial decisions.

• Allowing the person to understand how each financial decision affects

the other areas of finance.

• Allowing the person to adapt more easily to life changes in order to

feel more secure.

   

 
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It has recently been a trend in Indonesia for individual customers to use the

services of a Financial Planner. He/She will take care all of the customers’

needs for financial plan based on their objectives, such as Education Fund,

Housing Fund, Emergency Fund, or other funds. A Financial Planner will also

help customer to be disciplined about their personal cash flow.

PT. Bank Commonwealth as a subsidiary of Commonwealth Bank of

Australia has a good growth in its banking business. After merged and

acquired PT. Arta Niaga Kencana Bank in 2008, it has had 52 branches in

Indonesia and has even opened 25 new branches this year. The bank has plans

to expand its market segment from Mass Affluent, Affluent, SME, until High

Net Worth customers.

Hitherto, PT. Bank Commonwealth has done a very good selling of its

products through its CS (Customer Service), RM (Relationship Manager), PB

(Personal Bankers) and the others Front Liners. But it sells its products

without any long term objectives and without customers’ monitoring. So the

customers only do the transaction that they choose and would stop any time

they want to do so. For example, when the economic crush in 2005 and 2008,

so many customers withdrew their money from the bank and closed their

account or move to another bank. It was because they were panic, did not trust

the bank and did not have any clear financial objectives.

   

 
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Using a good Financial Plans through the bank, we will avoid the problems

that often happen related to Personal Finance, such as:

1. Customers are enthusiastic about the high return from the products, but do

not anticipate the high risk that could happen.

2. There are some people who don’t believe in the investment technique, and

then they will prefer conservative saving products and cannot reach their

financial objective in the expected time horizon.

3. A lot of customers do the investment activity without any clear investment

objectives. So, the recommendation of the products provided by financial

planners to their customers is not a maximized one.

4. Indonesian customers usually have more than 1 (one) bank to do their

financial services, it means that they do not have a full trust to one special

bank.

5. A lot of loan customers do not pay the monthly installments, and this will

disturb the banks’ cash flow.

6. A lot of people do not have an emergency fund for themselves and for

their family, because they don’t understand how to do it.

   

 
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1.2 Problem Statements

1. How to assess whether it is financially feasible for Bank Commonwealth

to introduce Financial Planning for its customers? What is the target

market? How much profit that could be earned? What is the product

profitability of each financial planning product?

2. If it is financially feasible for Bank Commonwealth, what kind of

Financial Planning to be introduced and what are the reasons?

3. What is the advantage and disadvantage of Financial Planning for the

company?

4. What are the requirements for Bank Commonwealth to implement

Financial Planning from the point of view of organization structure and

human resource ?

5. What kind of procedure will support the implementation of Financial

Planning Model for Bank Commonwealth?

1.3 The Purpose of this Group Field Project

The purpose of this Group Field Project is to help Bank Commonwealth to

find the best solution of serving their customers’ needs of Financial Planning.

The project will be implemented immediately after the project preparation is

   

 
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completed and the staffs are ready to implement it. Then the financial system

model that is being developed should be maintained continuously and should

be developed based on market condition and supported by system, sales and

good promotion.

1.4 Objective and Benefit

The good Financial Planning Models in Bank Commonwealth will help to

take care of customers’ financial needs, by using their own financial

objectives. Using this method, the bank will not only sell the products to

customers, but also give the best financial analysis, solution, recommendation

and conduct monitoring of their financial needs to be followed by customers.

The objectives and benefits if Bank Commonwealth uses Financial Planning

techniques are:

• It will be trusted and obtain customers’ loyalty.

• Customer will use the bank’s products for middle / long term

period,which means that the bank will enjoy revenues in a longer

period of time.

• With a good of Financial Planner technique, people / customers will

promote this bank to their colleagues and relatives.

   

 
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The objectives and benefits for the customers using Financial Planning

techniques are:

• They will have their own financial planning and objectives.

• They will have a new target of their income to reach their objectives.

• They will understand more about risk and return, and more discipline

for their monthly cash flow.

• Will become the solution of all customer financial problems

• It will add the customer’s knowledge about Investment and Personal

Finance Management, which make them to be more discipline for their

financial life.

• With a good financial plan, customers will reach a wealth and

prosperity life which makes their dreams come true.

1.5 Scope

This Group Field Project will be discuss about Financial Planning approach

and some additional aspects or material which related with Investment

   

 
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Portfolio Management technique which could be use for Financial Planning

process.

The scopes of this Group Field Project are:

- The profitability analysis of Bank Commonwealth’s revenue of

Funding and Lending products for individual customers.

- The typical customers and detail products of Bank Commonwealth to

find the best of Financial Planning Models.

- The increasing of total active customers and total volume of products

for individual customer in Bank Commonwealth.

Our data base is only from PT. Bank Commonwealth that already has been

approved by management of PT. Bank Commonwealth to be used for thesis

purpose. The problem analysis only use some related theory. Our conclusions

here are not applied yet, we only make suggestion to the company for better

solutions, in the end any further decisions will depend on PT. Bank

Commonwealth decision maker.