Address by
Y Bhg Datuk Dr Zainal Aznam Yusof
Commission Member, Securities Commission

at the
Welcome Cocktail Reception held in conjunction with the
ISO Technical Committee on Personal Financial Planning Plenary Meeting

24 February 2004

Yang Amat Mulia Tunku Dato’ Seri Nadzaruddin Ibni Tuanku Ja’afar, Deputy President of the Financial Planning Association Malaysia;
Mr Stuart I. Kessler, Chairman of the ISO Technical Committee on Personal Financial Planning;
Puan Mariani Mohamad, Director General of the Department of Standards Malaysia;
Distinguished Delegates;
Ladies and Gentlemen.


First of all, allow me to thank the organisers, namely the Department of Standards Malaysia (DSM), SIRIM Berhad and the Financial Planning Association of Malaysia (FPAM) for inviting me to speak today.

The gathering of financial planning experts from various jurisdictions today is indeed a timely one and credit should go to the organisers for making this event a success. In spearheading the developmental efforts relating to the domestic financial planning industry, the SC has always maintained a consultative approach in undertaking the facilitator’s role. Hence, making today’s event consistent with the SC’s approach.

I am also please to note the presence of the ISO-Technical Committee, an international committee whose objective is to establish a set of customer-focused standards/benchmarks for financial planning on a global basis. The term “Customer-focused” is also relevant to the SC’s efforts in enhancing “investor protection” and going on this route it is evident that there is an alignment of focus between the SC and the Technical Committee. On this note, the SC acknowledges that from a Malaysian context, the development of financial planning has always been undertaken on a multi-effort basis, involving relevant regulatory authorities and industry representatives, including the FPAM.

The SC takes note and with interest, of the work and findings of the Technical Committee, as it is beneficial for the SC to be kept abreast of the developmental efforts within the financial planning industry, whilst ensuring that it is in line with the SC’s developmental plans for the industry and the capital market. Hence, the focus of my speech today is to share with you SC’s developmental and regulatory initiatives in elevating the status of the industry. Hopefully this will bring forth greater appreciation and understanding of SC’s initiatives and will act as food for thought in the drafting of standards that will not only be customer-focused but also eventually strengthen the integrity of the profession.

The Importance of Financial Planning in the Capital Market

Ladies and Gentlemen,

A viable financial planning industry will complement the capital market in general and the investment management industry in particular, as the presence of independent financial planning professionals will help broaden consumer awareness of the different products and strategies available to them. More importantly, as financial markets and products become larger and more sophisticated, and as the array of choices available for retirement benefit planning grows, the services of qualified financial planners will become increasingly important.

From a growth context, the need to inculcate greater product sophistication is crucial and this can be accomplished by factoring in the existence of the multitude of financial goals. On this note, the SC has been collaborating with financial planning industry participants in broadening the investor’s awareness on various financial products. This collaboration will not only benefit the financial planning industry but also contribute towards the development of various segments of the capital market, particularly the investment management and private pensions industry.

The financial planning industry also plays a complementary role in promoting greater professionalism within the capital market, encouraging greater mobilisation of funds, and enhancing investor sophistication. The success in achieving such roles would no doubt serve as a catalyst for the further growth of the domestic financial planning industry and the capital market as a whole.

In carrying out these roles, the SC envisions financial planning intermediaries providing value added services to their clients, whilst maintaining high levels of professionalism. Value added in the sense of being able to provide sound investment and unbiased advice, which is not influenced by any commission or remuneration arrangement. In a broader sense, this will result in capital market intermediaries moving up the value chain, from being mere distribution channels to a one-stop financial centre linking the client’s investment needs to the financial means of achieving it. Through such a move, it is possible to alter the perception of financial products being promoted by intermediaries on a sell-mentality manner, changing it into a buy-mentality on the clients’ part instead.

Emphasis on Standards and Education

In ensuring a higher standard of skills and expertise, the SC reviews the various purported financial planning qualifications and provides a schedule of recognised qualifications, which doubles as an eligibility condition for licensing. This is where customer-focused standards fit in, as it would complement the regulatory framework and most importantly provide greater confidence to the public in obtaining the services of a financial planner.

To enhance competency amongst financial planners, the SC awards 20 Continuing Professional Education (CPE) points for the purpose of license renewal to all persons that are licensed by the SC, who have obtained professional qualifications such as the Certified Financial Planner (CFP) and Chartered Financial Consultant (ChFC). The SC’s contribution to the education process is not only confined to financial planners but also extends to the most important party in the financial planning process, namely the customer himself.

Customers’ or investors’ understanding and awareness is an essential factor in ensuring the successful development of the industry. In this regard, the infrastructure development and competency of financial planners is enhanced via education and awareness-building efforts to change the public’s perception of financial planning. In facilitating this process, the SC’s training and education arm, the Securities Industry Development Centre (SIDC) has been, and will continue conducting, various seminars on financial planning, aimed at enhancing the awareness and understanding of the investing public.

Raising Standards Through Industry Initiatives

Ladies and Gentlemen,

The industry should always pursue higher standards in ensuring investor protection and the integrity of the industry. Lessons learned from other jurisdictions involving the misuse and abuse by lesser-qualified parties serve as food for thought for all in constructively developing the domestic financial planning industry.

This dominant industry issue can be addressed through several ways. The first being, requiring financial planning associations to maintain the highest standard of professionalism through self-regulation, since many of the financial planners are members of an association and are required to adhere to Code of Ethics and Best Practices for financial planners.

Second, is the need for financial planners to be transparent with their clients on the remuneration received from the services provided, which would increase the level of investors’ awareness of their rights and this would in turn put the pressure on financial planners to act in the best interest of their clients.

Linking to professionalism and transparency is self-discipline. Financial planners should focus on their core business and the task of providing professional services to clients, and not be distracted by the amount of commission obtained from the sale of financial products. As a nascent industry, its success would largely be dependent on market confidence and acceptance.

Regulatory Framework For Financial Planning

Ladies and Gentlemen,

Whilst the industry plays their role in maintaining high standards and professionalism, there is also a need for a facilitative regulatory framework to provide the right legal environment within which the industry can grow. I would like to now share with you the SC’s efforts in this regard.

Financial planning activities are primarily advisory in nature and investment advice is an integral part of the process. Consequently, financial planning falls within the regulatory jurisdiction of the SC pursuant to the Securities Industry Act 1983 (SIA). Hence, financial planning is an important part of the capital market, and this is recognised in the Capital Market Masterplan stating that the SC would facilitate the development of the financial planning industry. Towards this end, the SIA was amended in 2003 including, among others, the definition of “investment adviser”, to provide clarification on the position of financial planning within the regulatory framework.

Arising from this, the regulatory treatment towards financial planning activities is no different from that of other capital market activities, whereby financial planners are required to be licensed by the SC as an investment adviser under the SIA. If the activities of the financial planner also involve the management of client’s funds, then a fund manager’s license would be necessary.

Amendments to the SIA further confines the use of the “financial planner” title to holders of a dealer’s licence, fund manager’s licence or an investment adviser’s licence. The licensing requirement and the restriction on the use of title would distinguish qualified financial planners from others and elevate the financial planning process from being associated with pure product selling.

In ensuring that the SC does not “over-regulate” the financial planning industry, the SC has conducted various meetings (i.e. Dialogue session and tea-talk) with industry players to seek their views on regulatory requirements as well as learning about present developments.


Ladies and Gentlemen,

I have spoken at length on the regulatory developments and initiatives undertaken as well as the complementary efforts that the industry can contribute. Once again, I am pleased to say that the presence of standards-setting Technical Committee comprising members from diverse jurisdictions certainly instills confidence in developing a financial planning environment that addresses investor protection and is customer focused.

The SC hopes to see investors having greater access to comprehensive financial planning services that will enable their personal financial planning services to be managed holistically and in accordance with their needs. Irrespective of the remuneration structure or arrangement, financial planners must always place clients’ interest first and ensure that any advice provided does not in any way contradict this principle. In other words, the financial advice must not be tainted by salesmanship.

In conclusion, once again, I would like to thank the organisers for inviting me and I hope to see the formulation of more customer-focused standards to pave an even brighter future for financial planning on a global scale.

Thank you.