Speaking of a comfortable retirement, Malaysians often rely on the Employees Provident Fund (EPF) as a source of savings. According to EPF Malaysia, 64 percent of EPF members aged 54 have less than RM50,000 in their savings. And, most members spend all their EPF savings within 3 to 5 years.
Earlier this year, the Department of Statistics (DOS) stated that 71.4 percent of self-employed respondents have sufficient savings of less than a month, while 82.7 percent of private sector employees have sufficient savings for up to two months during the Movement Control Order (MCO).
The above-mentioned statistics clearly indicates that Malaysians lack the necessary knowledge or preparedness of saving up for rainy days, and this is where wealth management becomes a vital part of life. The 2019 Economic Survey of Malaysia by Organisation for Economic Co-operation and Development (OECD) revealed that an individual tends to spend 20 years in retirement if he/she retires at 60.
Whenever savings become a topic of discussion, investment becomes the ‘why not’ factor as opposed to plain savings.
A study survey by Dalia Research showed that around 31 percent of Malaysian millennials do not have an investment strategy while 43 percent of millennials say they do not invest at all and only 16 percent invest once every one or two years.
The survey demonstrates that Malaysian millennials are more driven towards saving than using their money for investment.
And as the world transitions into digitalisation, many industries are seen to adopt new technologies to continuously improve their services. Financial Technology (Fintech), provides automated and improved financial services with software and other modern technologies.
Among such developments is Wealthtech (wealth and technology), the growing segment of Fintech. Wealthtech involves cutting-edge technologies such as artificial intelligence and Big Data, to provide an alternative to traditional wealth management firms.
Wealth management in terms of investments has been around for decades and is constantly diversifying over the years. Shares and properties have always been mainstream investment ideas.
Nevertheless, Malaysia, the first ASEAN country to regulate the peer-to-peer (P2P) and equity crowdfunding (ECF) financing industry, has seen a great extent of improvement in the P2P and ECF activities since the establishment in 2016.
Fintech News Malaysia and Kenanga Group recently organised a webinar to discuss the growth of Wealthtech in Malaysia. The discussion was held among Sam Shafie, CEO and Co-Founder of pitchIN, Kah Meng Wong, CEO and Co-Founder of Funding Societies Malaysia, Chan Ken Yew, Kenanga’s Head of Quant and Artificial Intelligence Trading Solutions and Aaron Tang, Country Manager of Luno.
With the current pandemic situation, many industries have seen a downturn. The same goes for investors, as there is uncertainty and pullback in stock markets. Fortunately, the speakers shared that the situation has almost recovered to pre-Covid levels.
In fact, moderator Vincent Fong, Chief Editor of Fintech News, says “If anyone went into a coma in February 2020 and regained consciousness now, they would be so lost looking at the fast-tracked digital adoption”.
Aaron also expresses that it was an interesting year for cryptocurrency as people gained a clearer understanding of cryptocurrency as an investment class, despite the hike in equity market shares and crash of cryptocurrency in mid-March this year.
Although investment has been around for ages, the way people invest now is much different compared to generations before. “Now, it is more of a new-age style of investment as it is technology-driven. We now have AI-based advisors and multiple markets/products to invest on,” Chan explains.
Sam on the other end says that it brings a negative connotation to people when ECF is categorised as a secondary market or as ‘the last resort’. Nevertheless, quality companies are coming on board, which will surely make it mainstream, he adds.
Kah Meng supports Sam by pointing out the Security Commission’s initiative, Invest Smart, that addressed ECF as part of an investment is a good effort to increase visibility and awareness, as majority of investors fall under the age of mid-30s.
Aaron adds that investments that allow automated forms or scanning of QR codes would be an advancement of technology which makes it easier for customers. “If you can convince your parents to use it, then it is a bigger degree of success,” he said.
In terms of educating the public, Chan says that they are continuously educating the mass public despite having a lot of product launches, for example, Kenanga’s Telegram channel that allows people to get information on products before launch and get real-life trading experience, especially on alternate ways of trading, like systematic trading.
“It is not easy for startups like pitchIN to concentrate on both product and educating customers, especially during this pandemic situation. Before Covid-19, we personally meet the public and talk. Now, although we virtually meet more people, the engagement is lesser,” he mentions.
“We are all trying to balance profitability and educating, therefore, the goal is to produce products that will teach. When they invest, the interest is automatically there,” he adds.
Kah Meng emphasises that the key is to get things transparent, easy with limited fees, or commitment. He said that the investment process should be short and made fully online for more people to invest. He believes that 2021 will be more certain as more players will know how to position their investment strategy.
The speakers also believe that offering more products will enable people to invest in multiple markets and there should be different classes of products to better target the investors. He also emphasises that systematic trading is more efficient to enhance winning, especially next year onwards.
“There should be more collaboration between industry players to educate the public instead of competing among each other,” Aaron stresses. He says that there were programs like Invest Smart in different cities around Malaysia proposed by the government regulators themselves but Covid-19 put everything on hold.
With PayPal’s recent venture into accepting Bitcoin and other cryptocurrencies, Aaron foresees a large traditional financial institution in Malaysia that will allow investment in cryptocurrencies next year.