Keynote Address at the 9th MFPC e-Conference on Shariah Wealth Management & Financial Planning

20 April 2022 | By Sharifatul Hanizah Said Ali, Executive Director , Securities Commission Malaysia

Keynote Address

9th MFPC e-Conference on Shariah Wealth
Management & Financial Planning

“Post-Pandemic Transformations: Aligning Focus and Assessing Impact”

Sharifatul Hanizah Said Ali
Executive Director, ICMD
Securities Commission Malaysia

20 April 2022

Bismillahirrahmanirahim Distinguished guests, Ladies and Gentlemen, Assalamu’alaikum, Good Morning and “Ramadan Kareem” to all Muslim participants
1.	It is a pleasure to be here today to deliver the keynote address at the ninth Malaysian Financial Planning Council or MFPC e-Conference. I would like to extend my appreciation to the MFPC for their commitment in facilitating the flagship conference via the hybrid approach, as we transition to the endemic phase.
2.	As we do so, the notion of agility, adaptability, and perseverance has been consistent and shared across organisations, businesses, industry players and the public in general.
3.	As a result of the collective efforts of the society including from the government and regulators playing their respective roles by extending various measures and reliefs, growth of the economy remained on a recovery path in tandem with rapid vaccination progress, a decline in virus cases, and the gradual easing of movement restrictions.
4.	Given the theme of today’s event, ‘Post-Pandemic Transformations: Aligning Focus and Assessing Impact,’ I will begin with a few relevant key domestic economic statistics before delving further on the SC’s strategic priorities to provide perspective to the financial planners and other participants here this morning, on the journey ahead. Malaysia's real gross domestic product growth is projected to accelerate to between 5.3% and 6.3% in 2022¹, as the recovery momentum picked up towards the end of 2021 and most mobility restrictions were lifted.
5.	Zooming into an area that hits home, it is encouraging to witness that the Malaysian capital market remained resilient with a 3% growth from (Ringgit Malaysia) RM3.4 trillion in 2020 to (Ringgit Malaysia) RM3.5 trillion in 2021².
6.	Notwithstanding the various challenges brought by the fluctuating economic conditions, the capital market continued to play its critical roles in financing the economy with notable increase in fundraising activities and encouraging growth of the overall fund management industry.
7.	Total funds raised in the capital market remained robust, rising to (Ringgit Malaysia) RM130.9 billion in 2021, and above the five-year pre-pandemic average of (Ringgit Malaysia) RM121.4 billion³.
8.	Likewise, the fund management industry grew further last year, with assets under management (AUM) totalling (Ringgit Malaysia) RM951.1 billion, which is an increase of 5.04% from (Ringgit Malaysia) RM905.46 billion in 2020. This reflects increased diversification of financial assets in domestic and foreign markets, with the unit trust segment remaining the largest source of funds for AUM⁴.
9.	Growing hand in hand, AUM recorded an increase of 3.69% from (Ringgit Malaysia) RM216.80 billion in 2020 to (Ringgit Malaysia) RM224.80 billion last year.
10.	In the Islamic wealth management space, the Islamic fund and wealth management continued to help propel the Islamic capital market (ICM) to greater heights. The number of Islamic Collective Investment Schemes comprising unit trust funds, wholesale funds, private retirement schemes, real estate investment trusts, and exchange-traded funds stood at 386 as at December 2021 including 16 Islamic SRI funds.
11.	Whilst the Malaysian capital market is set to benefit from the projected domestic economic recovery, it is essential for the stakeholders to align focus and assess impact to deploy different approaches and initiatives that best cater to the needs of the market. In doing so, the SC has produced the Capital Market Master Plan 3, or CMP3 – a 5-year strategic plan for the growth of Malaysia's capital market.
12.	Allow me to share highlights from the CMP3 relevant to the financial planning industry, which is also meant as a shared journey to be undertaken to build a thriving Malaysian capital market.
13.	The strategic initiatives over the next five years will be guided by key development and regulatory priorities. These strategic thrusts focus on catalysing competitive growth, empowering investors for a better future and shaping a stakeholder economy, whilst embedding shared accountability, prioritising efficiency, and outcomes, as well as embracing technology.
14.	Central to the developmental landscape is the rise of the stakeholder economy where there are growing calls and demand for businesses to create value for society and environment besides fulfilling the goals of shareholders. Shaping a stakeholder economy can be facilitated through effective capital mobilisation manifested by Sustainable and Responsible Investment (SRI) and the ICM solutions to achieve a transformative economy that is both sustainable and accessible.
15.	The investors are at the ‘heart’ of achieving this goal, and therefore I would be remiss if I did not speak on the importance of the roles the financial planners play and that is to uphold the highest standard of professionalism by giving the investors sound financial advice and ensure they meet their long-term financial goals. Investors need to be able to assess the impact of their investments and priorities, and financial planners are indeed the ‘bridge’ to enable investor empowerment.
16.	At the SC, we aim to facilitate a conducive environment to support investor empowerment and elevate financial literacy in line with the CMP3. Under the aegis of the SC’s InvestSmart brand, various investor education initiatives were conducted to empower the Malaysian public. These include the annual InvestSmart event, free financial planning clinics organised under #FinPlan4U in collaboration with MFPC and FPAM, seminars, online webinars, and joint events with other agencies. As in previous years, over 450 free one-on-one financial planning sessions with licensed financial planners were offered to the public at the virtual #FinPlan4U financial planning service desk held in October 2021⁵. Since its establishment in 2014, InvestSmart has reached out to almost two million individuals through these initiatives. As of January 2022, I am pleased to note that there are 15,802 registered individual members of MFPC⁶ out of which 7,145 are registered financial planners or Shariah registered financial planners, signalling the financial planning profession’s growing importance and reputation in the financial services industry.
17.	Another area of the CMP3 that the stakeholders can also realign focus is within the ‘social’ component of environmental, social, and governance. This is especially crucial given that the health pandemic has brought about social issues to the forefront of investors’ attention, raising the need for businesses to play a larger role in respect of their broader stakeholders that include consumers within vulnerable communities.
18.	Preserving these interests of society are also in line with the Islamic concept of maqasid-al Shariah as mentioned in the CMP3, where it promotes the attainment of benefits and prevention of harm for the people. It also underlines the essence of sustainable economic development, encompassing key aspects of life and community including inclusivity as well as facilitating investments for socially beneficial outcomes.
Ladies and Gentlemen,
19.	As we strive to enhance professionalism in the financial planning industry, it is imperative to raise the bar on professional standards and conduct requirements. In this respect, the SC on the 1^st of April this year issued ‘Guidelines on Conduct for Capital Market Intermediaries’, which also applies to licenced financial planners. These Guidelines aim to foster good business conduct and a good corporate culture that is centred upon the fair treatment of clients and to promote trust in all intermediaries.
20.	Within the financial planning space, it is well recognised that the corporate culture has a dominant influence on the way one conducts business with customers. The financial planning industry’s asset – trust – can be significantly undermined by poor conduct and affect sustainability of business.
21.	Further to the requirements under these new conduct guidelines, financial planners would need to demonstrate skill, care and diligence when providing specific advice on listed securities and unlisted debt securities by complying with enhanced requirements added a year ago in the Licensing Handbook. As at the end of 2021, 20% of financial planning firms had representatives fulfilling the additional competency requirements to provide specific advice to investors on a wider spectrum of securities. Towards ensuring that the specific advice provided is suitable for clients, a financial planner must undertake suitability assessment before making recommendations to ensure that the product is suitable for the client and if it matches the risk profile and needs of the client.
22.	Whilst regulation can play a role to promote the right culture, the industry must also continue to shape the right behaviours within their own organisations. To this end, it is commendable to see the industry’s harmonisation and elevation of the code of ethics and best practice standards by the relevant certification associations. The industry code of ethics which espouses principles such as integrity, fairness, and objectivity, sets the professional conduct expected of a licensed financial planner.
23.	Staying with the professionalism aspect this time specific to the ICM, the SC have also taken steps to strengthen the Shariah Governance Framework by revising the Guidelines for Shariah Advisers. The revision had been undertaken to prescribe greater professionalism for Shariah advisers in carrying their roles and responsibilities as well as to scale up their knowledge and expertise on capital market developments incorporating continuous professional development as a requirement. Furthermore, the revised Guidelines for Shariah Advisers emphasises the need to possess relevant qualification, experience, and provides greater clarity on conduct requirements.
24.	The CMP3 also sets the tone and direction for the next phase of development that includes focusing on facilitating greater digital inclusiveness across a spectrum of investors. In facilitating economic recovery on the back of the pandemic situation, there is a need to embrace greater technology adoption as we see how the impact of technology and its evolution with innovation has changed the way we live today. This is due in no small part to its capabilities in facilitating more affordable devices, secure payment processes and high-speed communication infrastructure. From a capital market perspective, digital advances allow for greater upscaling of existing capabilities, open new market segments and business modalities and provide more inclusive solutions for fundraising.
25.	Inclusivity has also been driven through digital intermediation models, when in 2021 the market saw the emergence of another digital-only broker to cater to the growing number of retail investors utilising online brokerage accounts. This is especially relevant given the increased retail interest in the equity market during the pandemic therefore pushing digital brokers to new highs, gaining a retail market share of more than 5%⁷. Another digital segment, the digital investment management – or DIM, continued to expand its capital market offerings and grew in an upward trend over the years with a total AUM of more than (Ringgit Malaysia) RM1 billion as at end 2021. These digital avenues have proven that the application of technology will enable greater reach to the growing investment needs of the emerging digital generation of investors.
26.	The economy is beginning to recover from the economic fallout of the pandemic. Whilst we are transitioning to the endemic phase, we must remain vigilant in aligning our focus to serve the greater good and needs of the investors in these challenging times.
27.	Against this backdrop, we must continue to explore all options to mitigate this impact and support recovery. Together with the collective efforts of the financial planning industry, we can play a crucial role in facilitating economic recovery from the pandemic and provide avenues for investors to play that role as well.
28.	With that, I wish everyone a good and productive conference ahead.

Thank you

¹Bank Negara Malaysia (BNM) via The Edge; BNM sees 2022 GDP growth at 5.3% to 6.3%, a shade below official projection (March 2022)
² The SC Annual Report 2021
³ The SC Annual Report 2021
⁴ The SC Annual Report 2021
⁵The SC Annual Report 2021
⁶ MFPC Website
⁷ The SC Annual Report 2021