Financial Planning Association of Malaysia (FPAM) Financial Planning Symposium 2019 Date : 3rd April 2019, Wednesday
Mr Ismitz Matthew, President of Financial Planning Association of Malaysia (FPAM), |
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| Introduction | |
| 1. | Firstly, I would like to thank FPAM for inviting me to speak at this annual conference once again. The theme of this year’s conference is timely in light of the industry’s growth momentum as well as to prepare itself for future challenges. |
| 2. | On this note, I would like to provide a regulator’s perspective on several key fundamentals toward a more robust financial planning industry. These are particularly important in this time of evolving and complex financial system. Before I delve deeper into this topic, allow me to provide some updates on the capital market. |
| 3. | Despite uncertainties stemming from rising trade tensions and tightening global financial conditions, and by the end of 2018, a slower global growth, all segments of the Malaysian capital market remained resilient. As at end of 2018, the size of the Malaysian capital market stood at RM3.1 trillion - an equivalent of 2.2 times the size of the domestic economy. This comprises domestic bonds and sukuk outstanding, which rose to RM1.4 trillion and equity market capitalisation of RM1.7 trillion. On the buy-side, the fund management industry with assets under management of RM743.6 billion continued to play a key role in savings intermediation. Despite emerging competition, Malaysia remained a global leader in the Islamic capital market with RM1.9 trillion in Shariah-compliant equity and sukuk outstanding. Malaysia also continues to be the world’s largest sukuk market. |
Ladies and gentlemen, |
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| 4. | These continued growth and developments in the capital market is not made possible with just a stroke of luck. It is without any doubt, a product of committing to long-term vision and planning. We believe that the same should be applied to the financial planning industry in order to bring it to the next level. The secrets for sustainable success is not in doing things only for short-term gains but also to look at the longer-term objectives that will shape and transform the industry, and key to this is the formation of a very a close alignment of the interest of your firm with that of your clients. Building a financial planning business with a team of dedicated and highly professional planners that treat clients fairly and take care of their long-term financial interests would appeal to all investors. Simply put, building recurring income in a successful firm boils down to having a genuine concern for financial needs of investors. |
| 5. | Delivering holistic advice on a proactive basis is another important trait in building an ideal financial planning practice. While there has been a lot technological development happening within the capital market such as robo-adviser and artificial intelligence adoption, they would not be able to replicate the intricacies of human connection. Hence, building a deep professional relationship with your client is an integral component to ensure their financial issues and needs are catered for and co-ordinated through the planning process. What clients value the most is unbiased financial solutions stemming from financial plans constructed by the financial planners they trust. |
Leadership and professionalism |
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| 6. | The other component in building a successful practice that I would like to touch on would be leadership and professionalism. Professionalism is about character – it embodies the highest standards of integrity, ethics and responsible conduct. One way of achieving this is by holding financial planners accountable to a strong code of ethics. Professionalism is also about competence. Being qualified is just a starting point. In order to build a successful practice, there is a need to pay attention to training and stay current and up-to-date with knowledge to keep up with the latest market and regulatory developments. |
| 7. | Following the engagement with the industry at the SC industry dialogue last year, I would like to highlight some recent updates relating to the enhancement of fee structures for Corporate Unit Trust Scheme Advisors and Corporate Private Retirement Scheme Advisors (also known as CUTA and CPRA respectively). Towards this end, I am pleased to share that the measures have been implemented to provide more flexibility and take into account the different business strategies employed and remuneration models. |
| 8. | In lieu of this, all 17 CUTA and CPRA are able to establish a mentorship model within their firm. The SC expects that this structure would enable junior financial planners to be assigned to senior ones to gain practical understanding, and build soft-skills, while helping to retain intellectual knowledge within the firm. In exchange for mentorship and guidance, remuneration of commissions may then be shared between the mentor and mentee. Firms should not misuse this structural liberalisation such as by forming a ‘pyramid structure’ - which would only benefit a small group of planners in expense of the others. Instead, it is hoped that firms would be able to capitalise this to its best advantage to enhance the attractiveness and sustainability of the profession in the long-run. |
| 9. | I would also take this opportunity to highlight on the referral activities by financial planners in reference to the Marketing Representative framework. Financial planners in this room would find it beneficial to note that you would not be required to be registered as a marketing representative should you refer clients to another holder of capital market licence in the course of providing financial planning services. But if the referral is not in the course of providing financial planning services, the planner must be registered as a marketing rep accordingly. |
| 10. | The SC also acknowledges that FPAM is spearheading efforts to elevate the professionalism of the industry with their plan to organise an industry roundtable. The roundtable, which would be co-organised with the SC is aimed at garnering further insight on the business and practical aspect of the industry. These sessions would provide essential viewpoints towards enhancing the regulation of the overall financial planning industry. |
| 11. | Following the launch of the SC’s annual report last month, one of the areas which the SC continues to focus on is to raise standards of conduct and maintain market integrity. In this regard, the SC intends to have a more detailed supervisory review on licensed financial planning companies. This is particularly timely due to the increasing importance of the industry within the capital market. As a first step, a questionnaire on the assessment of business proposition, governance structure and policies procedures was issued to all financial planning firms. The feedback is currently being analysed and further engagements will take place with industry players to better understand the various business models. This should be viewed positively as it will bring more opportunities for collaboration between the SC and financial planners to enhance the quality of practice standards in the industry. |
Understanding, adapting and embracing technology |
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| 12. | Over the past several years, we have seen technology disrupt many businesses from transportation to payment solutions and investments. The financial planning industry is not immune from this as there are increasingly more clients and investors who are tech-savvy and prefers digital solutions than traditional methods. |
| 13. | Indeed financial planners face a daunting array of tasks in building a successful practice, but one of the most important areas that is often the last to be addressed is how firms can adopt more technological tools to ensure that the business is productive and competitive. Today we see how technology may be further adopted to streamline processes – which enable financial planning businesses to be more cost-effective, and have the ability to provide a more holistic financial planning services rather than just advice. It is envisioned that these advantages will ultimately lead to new opportunities for growth and business development. Further, technology allows for more collaboration with clients and creates a clearer path for goals-based planning. |
| 14. | Technology should also be leveraged by financial planners to reach to the masses in spreading awareness on financial planning and its importance. It is the duty of all parties in the industry to collaborate to enhance the current level of financial and investment literacy among Malaysians. This is where true excellence lies, as only by education do minds change and realise the importance of financial planning. |
| 15. | In light of this, it is heartening to see that the web portal smartfinance.my – which I had the honor of launching during last year’s conference, have garnered positive outcomes in terms of investor outreach. The SC is pleased to note that within nine months, there has been 370 thousand visitors to the website with 75 licensed financial planners on the database and 50 learning videos ranging from financial budgeting to setting up for retirement available on the platform. While these figures are encouraging, I hope to see more planners to be on the website as this would be an opportunity for them to connect with Malaysians beyond traditional and geographic reach. Also, for the industry to collectively and continuously promote the importance of the profession and financial planning through smartfinance.my and other means. |
Ladies and gentlemen, |
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| 16. | Following greater recognition of the global impact of various economic, social and environmental issues, the clarion call for more inclusive, sustainable and equitable economic growth has amplified. |
| 17. | There is now a greater need for the industry to consider longer-term interests of society and the environment in their business practice through Sustainable and Responsible Investment (SRI) and the Islamic capital market (ICM). As the largest market in sustainable investment in Asia (ex-Japan)1 and a global leader in ICM, Malaysia is well-positioned to drive the sustainable finance agenda further, given the alignment of principles underlying Shariah investing with those of sustainable finance. |
| 18. | Financial planners are at a prime position to further drive demand for SRI and Islamic investments. Recent data have shown growing appetite for such investments - especially from women and millennials2. Moreover, aligning financial advice with individuals’ motivations and values, and helping to invest in what matters most to them can be one of the most powerful ways to attract, retain and connect further with clients. |
| 19. | In this regard, planners should also take advantage of their ability to provide advice and make specific recommendations on a wide range of products which include ETFs, REITs, wholesale funds and fixed income. A technical note was issued by the SC to provide clarity on activities and products within the scope of financial planners. |
| Ladies and gentlemen, Conclusion |
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| 20. | While the SC continues to encourage efforts and initiatives in growing the industry, the essentials for a strong financial planning industry inherently lies on the financial planners themselves. The long-term sustainability and success of financial planning firms would depend on how focused planners are in serving their clients well. |
| 21. | To take the business to the next level of growth, financial planners must be equipped with the right knowledge to point out new opportunities to clients. Apart from that, they must also remain abreast with current trends beyond the nation’s shores to be a step ahead of others in the industry locally and globally. It is our mutual goal to see the continuous growth of the financial planning industry together with a higher level of financial awareness among Malaysians. |
| 22. | Before I conclude, I would like to once again thank FPAM for graciously inviting me to speak today. I hope that financial planners are able to benefit from the line-up of talks especially arranged by FPAM today, and use the knowledge gained to further grow your respective careers and the industry. On that note, I wish you a fruitful and engaging symposium ahead. |
| Thank you. | |
