The Malaysian must broaden their offerings to meet investors’ preference for SRI, invest in technology for more personalised services, and build a skilled talent pipeline for the future.
Securities Commission Malaysia (SC) Chairman Dato’ Seri Dr. Awang Adek Hussin emphasised the importance of the financial planning industry to keep up with changing market conditions and investor demands.
Speaking at the FPAM Annual Signature Financial Planning Symposium 2023, Awang Adek raised pertinent points which relates to the industry, among them being the Malaysian economy has continued its recovery path post Covid-19 pandemic with an expansion of 4.2% year-on-year GDP growth in the first half of 2023. Compared to pre-pandemic levels, the Malaysian economy is currently more than 6.0% above 2019 real GDP levels and is expected to remain on a steady growth path of between 4-5% in 2023.
At the conference held under the theme of ‘Financial Planning Evolution’ Awang Adek added over the past few years, the financial planning industry has grown considerably and played an increasingly pivotal role in the financial well-being of many Malaysians. Between 2015 and 2022, the number of financial planning firms increased by 42%, from 31 to 44 firms (as at end 2022).
Meanwhile the number of licensed representatives grew by 145% over the same period to 1,455 as at end 2022, he said, adding this growth has been facilitated partly by initiatives championed by FPAM as part of the financial planning industry’s 3-year Joint Action Plan.
Moving forward, regional and local wealth trends indicate that investors are seeking holistic investment strategies that consider their entire portfolio, rather than focusing on individual products. The evolving service model and access demanded by clients is led by increased demand for personalised advice with deeper investor engagement over the long-term.
Awang Adek said towards this end, the SC seeks to facilitate and empower firms and consultants to move towards more comprehensive wealth management offering across the capital market and financial sectors in a bid to meet Malaysians’ evolving needs.
An increasingly important aspect of the services provided has to do with considering investors’ Sustainable and Responsible Investment (SRI) preferences. Investors, especially younger ones, are becoming increasingly interested in ensuring that the capital they deploy is used for good causes such as transition towards clean energy, which may for example involve investment in a renewable energy SRI fund. In this respect, they may rely on the financial planner to guide them on the different types of SRI funds to meet their sustainability goal as well as their other financial goals.
To ensure that financial planners are equipped with the right information, the SC will be conducting consultations with industry associations and firms next year to understand challenges in incorporating sustainability considerations, and providing guidance to industry on incorporating sustainability considerations into suitability assessments, thereafter.
While bigger capital market players tend to have better digitisation capabilities, smaller players in contrast still lack the capacity to invest in technology that will allow them to transform digitally in a meaningful way. Cognisant of this, the SC in partnership with the Capital Market Development Fund (“CMDF”) introduced the Digital Innovation Fund or DIGID in 2022.
The objective is to co-fund innovative projects that demonstrate the use of technology to enable new and competitive proposition to the Malaysian capital market. Two financial planning firms have been selected to receive the DIGID awards.
One involves an AI-enabled app that offers free personalised financial planning services to the broader population. The app helps Malaysians to gain clarity and be in control in pursuit of their financial wellness journey.
The other solution seeks to develop a data-driven customer relationship management (“CRM”) system to enable optimum and tailored financial planning services to its clients. It aims to take financial planning services to the next level by leveraging data-analytics to manage and anticipate clients’ needs.
Through the DIGID fund, the SC envisions all capital market intermediaries, including financial planners, to digitalise services in order to improve the investor experience and provide greater access for financial planning services.
To attract more talent, the SC will be hosting a Financial Planning Day in October 2023 to showcase financial planning industry and firms to university students. This initiative along with the internship programme has received funding from CMDF for three years. It is envisaged that the event, to be held at the SC premises, will be attended by up to 800 university students.
These students will have the chance to interact with licensed financial planners and learn more about the industry. Hence, this is a great opportunity for financial planners to recruit talent and increase awareness of not just financial planning as a career, but also, the importance of investing by young people, and being aware of scams taking place around them.
Awang Adek said on the recent announcement made by the Prime Minister pertaining to the Ministry of Finance (MoF) and SC are looking at policies to facilitate and attract the setting up of family offices in Malaysia. The aim is to attract larger pool of investors to support financing for SMEs and the new economy.
This would mean that these family offices will require specialist advice in a broad range of investments and services from traditional investments to tax and estate planning to name a few where licenced financial planners are uniquely placed to capitalise on this invaluable opportunity.
