Introduction |
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| 1. | I am pleased to be here today at the Annual Signature Financial Planning Symposium 2021, and am even more delighted that this event is being jointly organised by three key associations in the financial planning industry. I would like to express my sincere appreciation to the organisers, namely the Financial Planning Association of Malaysia (FPAM), the Malaysian Financial Planning Council (MFPC) and the Malaysian Financial Planners and Advisers Association (MFPAA), for inviting the Securities Commission Malaysia to share our views with all of you this morning. |
| 2. | I applaud this significant collaboration within the industry as well as the continued partnership with the SC in pursuing our common objective of driving orderly and sustainable growth of the industry for the benefit and betterment of its various stakeholders. |
| 3. | Furthermore, greater collaboration across the capital market and financial sector value chain, is essential to ensure a holistic development that will enable the industry to strategically and fully capitalise on opportunities arising from evolving customer needs. As we know, prioritisation of customers’ goals is paramount as it is the foundation to business sustainability. And it is equally crucial that this is done in a manner that engenders trust and confidence, hence the universal relevance of the theme of today’s symposium “Interplay of Ethics & Sustainability for Greater Growth”. |
| Ladies and gentlemen, | |
| 4. | The recently launched Capital Market Masterplan 3 (“CMP3”) outlines strategic initiatives to be undertaken over the next five years, guided by six key development and regulatory thrusts. One of these thrusts is “Empowering investors for a better future”. We have defined this as the need to empower Malaysians with, having knowledge to invest, information to make decisions, access to products and services, as well as options to compare and diversify their investments. |
| 5. | The financial planning and advisory industry is well placed to harness these powerful components to shape investors’ experience, and safeguard their future. In turn market intermediaries can offer a seamless, convenient and safe environment for their customers to receive quality financial advice. |
| 6. | In the last three years, the industry has seen a significant 57%1 growth in the number of financial planners, although a recent report2 highlighted that a majority of Malaysian respondents still do not utilise the services of FPs. Therefore there is still a need for the industry to invest in continuous outreach programmes while managing the varied expectations and requirements of current and future clients. As such, investor awareness and education must remain a cornerstone of industry development initiatives. |
| 7. | The CMP3 also recognises that there is a broad spectrum of investors in respect of their advisory needs – from self-directed, more independent investors, to those requiring tailored solutions and services. There is clear opportunity therefore for the industry to meet these demands by offering appropriate advice and recommendations that suit the various investor segments. |
| 8. | While advisory services have been increasingly accessible to Malaysians in recent years, more can be done to strengthen investment advice offerings for more informed decision-making and better investment outcomes. This includes encouraging innovative investment advisory models to evolve and thrive in Malaysia, thus raising the bar on quality of financial planning and advice. Towards this end, the SC intends to facilitate a dedicated framework for digital investment advice to empower investors and advisers on their digital journey. |
| 9. | Another key recommendation under the CMP3 is to co-develop a comprehensive investment advisory approach with market participants. We aim to incorporate industry feedback for better understanding of the various operating models and how an end-to-end financial planning and advisory service can better serve investors’ needs. |
| 10. | In addition, a study on possible consolidation of licensing regime for financial planners and financial advisers (or FAs) will be jointly pursued by the SC and Bank Negara Malaysia. This aims to promote more holistic advisory models towards offering consumers a wider scope of services, and reducing regulatory costs for intermediaries. |
| 11. | These measures will augur well with the central role of the industry to assist investors in their advisory and investment needs, ranging from wealth accumulation, to preservation and decumulation. |
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| 12. | The capital market has seen significant shifts since the start of the pandemic including a new generation of investors, with diverse approaches and expectations, majority of whom have different preference on how they receive advice, make investment decisions, and even on whether they wish to interact with a human being. This will influence and shape the use of technology in the delivery of financial advisory and planning services. |
| 13. | In this regard, as clearly articulated in CMP3, digitisation can enhance existing processes and encourage innovation. This will allow financial planners to offer better analysis, insights and proactive ‘real-time’ value-added services while transforming the reach of advice and the way advice is experienced. |
| 14. | Nevertheless, with financial planning being a fundamentally people-centric business, the role of the advisor remains relevant even as advice goes digital. A hybrid approach, combining in-person and virtual tools, is likely. This will necessitate the rethinking of client relationships, front-and-back-end business operations and firm culture. |
| 15. | A recent report by the Institute for Capital Market Research Malaysia (ICMR)3 revealed that millennials and Gen Zs are more inclined to utilise robo-advisory services but would seek human advice as their portfolio grows. However, this hinges on trust, relatability and absence of product pushing. Therefore, financial planners must adopt more holistic needs-based approach in offering their services. |
| 16. | Similarly, the EY Global Wealth Research Report 20214 highlighted that clients are willing to pay more to receive specialised and tailored advisory services. These trends suggest that the financial planning industry’s value proposition moving forward will have to be refined to address the various shifts in consumer needs and expectations. |
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| 17. | Today, more investors are taking a closer look at their personal financial goals towards enhancing their financial protection and security. A key area for financial planning includes serving the need for retirement planning as Malaysia transforms towards being an ageing nation. There has been increasing attention on the issues relating to insufficiency of retirement savings among many Malaysians, hence there is not only an opportunity but also responsibility for financial planners to contribute towards alleviating the concerns through their services. The SC, on its part, is actively evaluating potentially new frameworks for products and solutions that can better serve the needs for retirement savings. |
| 18. | Malaysia’s Islamic financial planning segment continues to expand primarily to meet growing needs of discerning Muslim clientele looking to achieve their financial goals in accordance with Shariah requirements. In view of the gradual yet steady growth in the share of Islamic capital market in the Malaysian capital market, Islamic financial planning will likely enjoy sustained demand, and would benefit from further innovation in the Islamic finance industry in terms of product and service offerings. |
| 19. | Malaysia is also well positioned to capitalise on this increasing demand, being the pioneer to offer Islamic financial planning certification. The opportunities for growth and interest in practising Islamic FP is evident by the increasing number of candidates that have completed Islamic financial planning certification. Since 2019, we note a 35% - 38% growth in terms of the number of persons that have completed either Shariah RFP or Islamic FP by the respective certification bodies. |
| 20. | In a related area, more recently, there is an ever growing focus on the sustainability agenda. As a result, we can observe a clear shift in preference towards sustainable and responsible investing, and with this comes the opportunity for financial planners to serve this demand by equipping themselves with the knowledge base and understanding to offer ideas and advise on investments that are aligned with the social, environmental and financial goals of clients. |
| 21. | Over the last several years in particular, many businesses have been transforming their business models to adjust to the changes in the environment, as well as building capacity to understand and respond to ESG imperatives. I would say that today, embracing the sustainability agenda is essential in supporting the sustainability of the financial planning industry. |
| 22. | In enabling the industry to meet the needs of its customers, having facilitative and effective mode of communication as well as convenient access are vital for the growth of the industry. Industry-driven platforms such as SmartFinance can play a pivotal role in this aspect. Therefore, it is encouraging to see more financial planners profiled on its website and we certainly welcome other initiatives to connect investors with licensed planners. |
| 23. | However, amidst the opportunities for further growth and development of the financial planning and advisory industry, unfortunately there has also been a proliferation of investment scams particularly during the current pandemic. This highlights the need for the industry to intensify initiatives to enhance investor awareness in order to prevent investors from falling prey to such scams and to make it difficult for these irresponsible parties to take advantage of vulnerable investors. |
| 24. | These initiatives include employing digital tools to enhance investment awareness and literacy. Given pandemic-related physical restrictions, the SC through our InvestSmart® initiative has utilised digital and social media platforms as the primary medium for investor outreach and anti-scam awareness during this period. |
| 25. | In addition, given the prevalence of online scams as a result of market uncertainties, the SC established an internal task force to investigate and take enforcement action against identified scammers. |
| 26. | At this juncture, I would like to commend the industry’s proactive measures in establishing an investor protection industry-led group to centralise assessment of doubtful or unlicensed activities. We certainly look forward to this initiative producing the desired outcomes. |
| Ladies and gentlemen, | |
| 27. | As the demand for trusted advice grows, there is also a need to ensure high level of investor confidence. Firms can secure a space for themselves as trusted financial planners by ensuring that high level of professionalism, and priority of clients’ interest, are always maintained. |
| 28. | To enable financial planning and advisory industry to always act in the best interest of their clients, SC will continue to enhance industry growth by undertaking appropriate measures to expand the scope and standards of service of the entire advisory value chain. This includes measures such as last year’s liberalisation of the scope of FP advice. |
| 29. | The SC is also currently developing principles-based conduct and governance guidelines to be applied across all licence holders to ensure, among others, that the required governance policies and practices are in place to promote a culture which reinforces ethical, prudent and professional behaviour, and safeguards against unethical conduct, mismanagement and fraudulent activities. Industry players are also encouraged to build a strong internal culture that places clients at the forefront. |
| 30. | In this regard, the SC is pleased to note that the industry associations are working together on relevant initiatives, with an industry-wide firm operating standards in the pipeline. We are also supportive of the recently published code of ethics and best practices specifically for FPs. The six code of ethics - ranging from integrity to fairness to competency - will harmonise practices and act as a benchmark for professional standards across all firms. |
| Closing Ladies and gentlemen, |
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| 31. | In concluding, allow me to extract a statement from the CMP3, that there is a “Need for broader spectrum of advisory, to complement different levels of investment literacy, and to strengthen Malaysians’ ability to invest for retirement.” |
| 32. | From the SC’s standpoint, the financial planning and advisory industry plays a critical role in helping to meet this objective. It enables investors to manage their financial needs and plan for their future while meeting the universal objective of wealth accumulation. |
| 33. | To play this role effectively, and towards ensuring sustainability of the industry, there is a need to regularly re-evaluate business practices and redefine future priorities in order to align with client expectations. |
| 34. | I am confident the industry will rise to meet these expectations as we continue to democratise financial planning and advice in a continually-changing environment. |
| 35. | With that, I wish all of you a fruitful and engaging symposium ahead. |
| Thank you. | |
