Keynote Address at FPAM Annual Signature Financial Planning Symposium 2024
Speaker: Dato’ Seri Dr. Awang Adek Hussin, Chairman SC Malaysia Location: Kuala Lumpur Delivered: 8 May 2024
Key Highlights:
In his keynote address, SC Chairman, Dato’ Seri Dr. Awang Adek Hussin, touched on the various opportunities ahead for the financial planning industry to capitalise on. He also stressed the continued need for the industry to elevate their levels of professionalism and integrity while prioritising clients’ needs.
Here are highlights from his keynote address:
The economy is projected to remain on a moderate growth trajectory of 4-5% in 2024, underpinned by firm consumer and investment spending and recovery in external trade.
This will attract more foreign flows and investors into the domestic capital market, giving financial planners opportunities to expand their client base and help exisiting clients grow their wealth.
The SC extends the DIGID grant to mid-tier capital market entities, with revenue of up to RM100 million for projects with cutting-edge solutions that utilise advanced tech, such as Generative AI or provide industry-wide tech utility infrastructure.
The SC and FIMM will issue a Guide to help planners and consultants navigate the intricacies of the SRI Funds space and ensure that SRI considerations are incorporated.
The SC and Private Pension Adminstrator (PPA) will work with PRS Providers to develop a digital process for PRS members to switch across funds more seamlessly.
The SC Chairman recommends FPAM to leverage on PPA's network with universities to cultivate a pipeline of quality talent for the financial planning industry.
Full Text
En. Alvin Tan, Presiden FPAM, Ahli lembaga Gobenor FPAM, dan En. Alex Lee, ketua pegawai eksekutif FPAM, Dif-Dif jemputan, Tuan-tuan dan puan-puan, Assalamualaikum warramatullahi wabarakatuh, salam sejahtera, selamat pagi.
Pertama sekali, saya ingin mengucapkan terima kasih kepada Financial Planning Association of Malaysia atas undangan untuk saya menyampaikan ucapan pembukaan Forum tahun ini.
Tema forum pada kali ini, yang menekankan perjalanan masa depan industri perancangan kewangan memberi peluang kepada kita untuk merenung sejarah, melihat kepada pengalaman kita yang lepas, supaya kita boleh merancang untuk ke masa hadapan yang lebih mampan dan menguntungkan.
Oleh itu, ucapan saya pada hari ini adalah mengenai pelbagai peluang di hadapan, bagaimana perancang kewangan boleh merebutnya untuk memangkin pertumbuhan industri, dan membantu rakyat Malaysia mengemudi masa depan kewangan mereka. Sebelum itu, izinkan saya menyentuh sedikit tentang prospek ekonomi dan pasaran modal kita.
The Malaysian capital market remains resilient
Ladies and gentlemen,
In 2023, the Malaysian economy continued to grow moderately, supported by a resilient domestic private sector activity despite challenging global trade conditions. Total market capitalisation expanded to RM1.80 trillion as of the end of last year, up from RM1.74 trillion at the end of 2022. Fund management ‘s total AUM hit a new high of RM975.5 billion, up 7.6% from RM906.5 billion in 2022, surpassing the RM951.1 billion recorded in 2021, a record-breaking year. Yesterday our stock market capitalisation touched RM2 trillion for the first time, with the index exceeding 1600 psychological level since 2022. The market has gone up more than 10% thus far this year.
Recently, the US-based Milken Institute published its Global Opportunity Index (GOI) 2024. Malaysia was ranked as having the best overall investment conditions among Asia’s emerging and developing nations, with a global ranking of 27, ahead of Thailand (37) and China (39). Additionally, Malaysia “performed significantly” above average among emerging and developing nations in financial services and institutional frameworks, owing in part to strong investors’ rights1 accorded with the capital market framework.
Meanwhile, GDP estimates by the Department of Statistics showed that the economy grew by 3.9% in 1Q 2024, up from 3.0% in the previous quarter, led by the services sector. The Malaysian economy is projected to remain on a moderate growth trajectory of 4-5% in 2024, underpinned by firm consumer and investment spending and an expected recovery in external trade. We anticipate that this will attract more foreign flows and investors into the domestic capital market, giving financial planners opportunities to expand your client base and help existing clients grow their wealth.
Professionalising to navigate the winds of change
Ladies and gentlemen,
The “baby boomer” generation, born between the 50s and 60s, are now retiring and passing on their wealth to the next generation. According to HSBC2, Asia is expected to see a US$ 1.9 trillion transfer of wealth in the coming years. This is likely to be the largest intergenerational wealth transfer in history, with far reaching implications for the global capital markets.
The financial planning industry is well placed to capitalise on this opportunity due to long-term relationships built over the years. Such opportunity might lead to industry growth, with more firms and reps. It should also deepen the quality of financial planning services provided.
While the industry has seen good growth in the number of firms over the past few years by more than 32% since 2015, navigating the winds of change and seizing the opportunities will require greater professionalism amongst financial planners and firms.
In this regard, FPAM’s release of the ‘Firm Operating Standards’ handbook is a positive step towards professionalising the industry. This will serve as a guide to support firms in developing a stable foundation and introducing good conduct that prioritises clients’ needs.
Furthermore, the SC has issued the revised Guidelines on Conduct for Capital Market Intermediaries, to elevate standards of professionalism and integrity. This will assist in attracting and retaining the next generation of long-term clients.
The revised guidelines reinforce the role of an intermediary’s board and senior management in inculcating a corporate culture, where clients’ interests are prioritised. It also clarifies the SC’s expectations on an intermediary’s duty to act honestly and fairly, without misleading or deceiving clients. In addition, the revisions reframe obligations to ensure that intermediaries exercise care, skill and diligence and consider the client’s interest when providing personal advice to clients.
While these revisions have been issued, they are only effective from Oct 2024 to give intermediaries enough time to ensure compliance. Financial planners should thoroughly review and take the necessary steps to ensure compliance, especially with regards to the personal advice obligations.
Ladies and gentlemen,
Financial planners and advisers must protect their clients and ensuring they do not fall prey to unlicensed schemes and activities. This has become increasingly important.
Between 2019 and 2023, the SC received over 3,000 complaints and enquiries related to unlicensed activities and scams, a 321% rise from under 800 in 2019. We have seen individuals and entities being duped, misled and even pressured to part with their money and retirement savings by dishonest and unscrupulous actors, who promise unrealistic returns over a short period of time. Promises which are too good to be true. With losses in the billions, unlicensed activities and scams have truly become a menace.
As such, we continue to look to financial planners and advisers, as the first port of call to investors, to strengthen their trust and confidence in the capital market and protect their clients against this plague of scams.
Become future-ready with DIGID
Ladies and gentlemen,
To attract the next generation of clients, financial planners and advisers must offer personalised and digital offerings that appeal to the tech-first millennial generation. Investments into technology are therefore crucial to sharpening businesses’ competitive edge in order to deliver personalised services and improved investor experience.
In 2022 the SC, in partnership with the Capital Market Development Fund (“CMDF”) introduced the Digital Innovation Fund or DIGID. The fund aims to co-fund innovative projects that use technology to enable new and competitive proposition in Malaysia’s capital market.
Since it’s inception, a total of three3 financial planning firms have been selected to receive the DIGID awards to fund initiatives that include developing AI-enabled apps for financial planning, to a data-driven customer relationship management (“CRM") system, for more tailored financial planning services to clients.
Previously, DIGID grants had been awarded solely to smaller capital market entities, to support their digital transformation journey. I am pleased to share that the SC now extends the grant to mid-tier capital market entities, with revenue of up to RM 100 million for projects with cutting-edge solutions that utilise advanced tech, such as Generative AI, or provide industry-wide tech utility infrastructure. Successful parties can defray up to 70% of their project cost, and we welcome more applicants as we work to enable greater digitalisation across the capital market, including in the financial planning industry.
Meeting investors’ sustainability preferences
Ladies and gentlemen,
Another area of growing interest amongst the new generation of investors is sustainability. According to a survey by the Institute of Capital Market Research (ICMR), more than 70% of millennials and Gen Zs are “more likely to invest in options that also promote sustainability and good causes”.
While many investors have good intentions, they may lack knowledge about sustainable investments like ESG or SRI Funds, which we in the capital markets industry may be used to. In this respect, they may rely on financial planners to advise them on the many types of SRI funds that might help them to meet their sustainability goals.
As such, financial planners must increase their understanding and develop their capabilities in this area. To facilitate this, the SC and FIMM will issue a Guide to help planners and consultants navigate the intricacies of the SRI Funds space, and ensure that SRI considerations are incorporated as a routine component of advice.
We aim to enable planners and consultants to ensure that investors are well-informed of their investment options and provide them with the right advice to align their preferences and investment goals.
Improving retirement security amongst Malaysians
Ladies and gentlemen
Financial planners also play a crucial role to help Malaysians plan for their retirement. As many of you are aware, Malaysia’s retirement security is a big concern, which has been exacerbated by the pandemic and EPF withdrawals that were allowed during that time. Against this backdrop, we are also seeing long-term structural trends such as an ageing population, digitalisation and the changing nature of work.
Private retirement schemes play a crucial role in supplementing the public mandatory retirement scheme, and in offering long-term savings flexibility. However, there is a need to adapt the PRS framework to address these structural trends to better cater to the local retirement savings needs. One of the measures being considered is to provide full tax exemptions on small withdrawal amounts for emergency purposes.
Another has to do with improving the process for members to transfer across funds and Providers. Let me elaborate on this.
The PRS ecosystem benefits from a diverse pool of funds available to members. If a member’s chosen fund or default fund does not provide a commensurate return over a certain period, they can switch to a different fund or Provider. Portability between different PRS Providers is permitted once a year. This process should be as easy and seamless to increase PRS’s appeal and competitiveness of the industry. The SC and PPA recognise this and will work with PRS Providers to develop a digital process for members to switch across funds more seamlessly.
Conclusion
Ladies and gentlemen,
To capitalise on the various opportunities and ensure sustainable growth of your business, financial planning firms must cultivate a pipeline of quality talent. These individuals will need the right aptitude and mindset, which means they must be properly qualified and equipped with digital skills. Final year students looking for industry placement is a good source of talent. In this regard, I recommend that FPAM leverage on PPA’s network with universities to promote the flow of talent into the industry.
The SC recognises that smaller firms, may struggle with market profiling. Hence, I am pleased to announce that Capital Markets Malaysia, the SC’s promotional arm, will work in tandem with the SC to provide a platform to further profile financial planning firms. This will serve as a contact point for prospective investors to connect with firms for various financial planning needs.
Today, FPAM has assembled a stellar line-up of speakers covering a wide range of topics, from tax to sustainability and AI. There is much to be gained from paying close attention to what these speakers have to say, and picking their brains during the Q&A sessions after.
On that note, I wish you a fruitful and engaging conference ahead.
The Securities Commission Malaysia (SC) was established on 1 March 1993 under the Securities Commission Act 1993 (SCA). We are a self-funded statutory body entrusted with the responsibility to regulate and develop the Malaysian capital market.
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