Wealth Management in Malaysia: Change is coming

This August will be my 15-year anniversary in the wealth management industry. I started my career as a unit trust consultant - selling investment funds to retail clients. From there, I diversified my services to offer insurance and takaful products to my clients. As they get older, some begin to ask whether I could offer will writing and wasiat services.

Over the years, my clients needs have grown. As their families grow bigger and their careers advances, their financial needs also changed. New prospect clients are also higher educated, more discerning and demanding. At the same time, the wealth management industry is also undergoing a slow transformation - tighter regulations, big banks offering products beyond loans and savings, margin compression, and of course, the coming fintech revolution. Next year, something new will transform the investment landscape in Malaysia.

Sometime in 2007, I attended a launching in which Dato’ Seri Nazir Razak was the guest of honor. I remembered clearly what he said in his speech, which was “It’s not that hard doing business in Malaysia. We’re a few years behind the advanced countries of the world. Just look at one of their successful business model and copy it.” How are countries like the US, UK, Singapore, Australia doing it?

In my mind, to be a sustainable, growing and profitable wealth advisor, meant changing the current way of doing things. Changing from product pushing to providing the right solutions, from selling to advising clients, from earning purely on commissions to earning more on advisory fees. The right business model will allow the smart wealth advisor to navigate the current treacherous path, allow them to grow the business and provide their services to their clients and their families well into the future.

The change is coming. Is it today? Tomorrow? A few years from now?

You know what they say, early bird gets the worm.

IDHAM IDRIS is the chief marketing officer of Wealth Vantage Advisory, a financial firm licensed by Securities Commission (CMSL), Bank Negara Malaysia (FA), and Federation of Investment Managers Malaysia (CUTA & CPRA). Their vision is to be the firm of choice by clients and financial advisors, leading the change in the industry by focusing on the right way of doing things. Visit wealthvantage.com.my to find out more.

Interested in a career as a financial planner? Contact us at hi@wealthvantage.com.my

What can you do with a CERTIFIED FINANCIAL PLANNER® certification in Malaysia?

“According to the EPF, as reported by The Star in October 2017, more than two-thirds (68%) of EPF members aged 54 have less than RM50,000 in EPF savings. With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. 70% of members who withdraw their funds at age 55 used up their savings in less than a decade after retirement.” – Source: FINANCIAL CAPABILITY & UTILIZATION OF FINANCIAL ADVISORY SERVICES IN MALAYSIA, Report of National Findings 2018

“In an April 29 news report, Bukit Aman Commercial Crime Investigation Department said the number of cases of investment scams in Malaysia have grown to an “alarming” RM379.1 million lost nationwide from 1,883 scams from 2015 until April 2017. The police data showed 408 recorded cases with RM70.1 million in losses in 2015, 1,151 cases reflecting RM210.3 million in losses in 2016 and 324 cases with a total of RM98.7 million losses in the first four months of this year alone.” – Source: The Malay Mail, 15 May 2017

“Debt remained a serious problem with 175,336 Malaysians having applied to join [AKPK] Debt Management Programme (DMP) from its inception in 2007 until February 28, 2017. About fourty-eight percent of Malaysians ended up in the DMP programme largely due to poor financial planning.” – Source: Agensi Kaunseling dan Pengurusan Kredit

As can be seen above, more and more people are in dire need of sound financial advice. As it is in Malaysia, there are over 77,000 insurance agents and over 60,000 unit trust agents, but there are only 2,590 certified financial planners. Financial planning as a career is something that is still new.

For those that are planning to make a career move into financial planning here in Malaysia, one of the available routes is to take a CERTIFIED FINANCIAL PLANNER® certification. However, the question that is in most people’s mind before undertaking the certification, is what can I do with a CFP® certification in Malaysia?

The following are the modules and requirements that a candidate needs to complete before they can receive the CFP® certification:

• Module 1 (M1) – Foundation in Financial Planning and Tax Planning

• Module 2 (M2) – Insurance Planning and Estate Planning

• Module 3 (M3) – Investment Planning and Retirement Planning

• Module 4 (M4) – Financial Plan Construction and Professional Responsibilities

Those with certain qualifications and/or professional credentials, as well as several years of experience in the financial services industry, can apply for an accelerated challenge status certification.

Do you have to complete all the modules?

Contrary to popular belief, you don’t have to wait until you complete all your modules before you can start practicing what you have learned in the program.

For this article, we will be highlighting what you can do with a CFP® certification (1) while you’re still undergoing study of any of the modules (partially certified) and (2) once you’ve completed all modules and be fully certified.

What Can You Do With a CFP? Infographic

Whether you are partially certified or fully certified, to start practicing, you must register to a firm that holds the Capital Markets Services Licence (CMSL) from Securities Commission Malaysia, a Corporate Unit Trust Adviser (CUTA) license from the Federation of Investment Managers Malaysia, and/or a Financial Adviser (FA) license from Bank Negara Malaysia. As of 12 May 2018, there are 20 firms that holds a CMSL, 16 firms that holds a CUTA license, and 29 firms that holds a FA license. Some firms do hold multiple licenses. It’s best to choose a firm that holds all three licenses, as you will be able to utilize the full range of your CFP® certification.

For those who are partially certified, you have three different options to kick start your career in financial planning.

1. Industry Internship: If you’ve passed M1 and M3, a candidate can apply for the Securities Commission industry internship programme for licensed financial planners through a SC-licensed CMSL financial firm.

2. Financial Adviser Representative: If you’ve passed the M1, M2 and M3, you can register yourself as a Financial Adviser Representative (FAR) under a BNM-licensed FA firm. Please take note that to provide takaful related services, you will also need to have the Islamic Financial Planner (IFP®) certification.

3. Capital Market Services Representative License: If you’ve passed the M1, M2, M3 and just completed the study for M4 without taking the exam, you will be able to register as a Capital Market Services Representative License (CMSRL) holder for Financial Planning, Unit Trust and Private Retirement Schemes (PRS), even before receiving your full CFP® certification through a SC-licensed CMSL financial firm.

All three options will allow you to start practicing and earn an income for yourself.

I have passed all my exams! What’s next?

For those that are fully certified, you have a diverse set of choices available for you. Like the above, if you decide to join a licensed firm, you can be an independent financial planner holding either CMSRL or FAR or both licenses. This will allow you to charge your clients for advice provided and for financial plans prepared. You can also decide to practice and charge your clients based on commission received from sales of financial products such as unit trust, insurance and takaful. Some planner’s even do both.

Another career option for a CFP® practitioner in a licensed firm are as salaried paraplanners. Paraplanners are CFP® practitioners who do not prefer to do face to face advisory meeting clients, but rather work in a back office to prepare the statement of advice documents, personal financial modelling and other financial planning documents to support other advisors/planners. Generally, paraplanners are salaried employees of the licensed firms. This is a good option for CFP® practitioner who do not have enough experience or client base to kick start their journey as a financial planner here in Malaysia.

Besides joining an independent licensed firm, a CERTIFIED FINANCIAL PLANNER® also have the option to join financial institutions either as financial planners, or agents. A CERTIFIED FINANCIAL PLANNER® that choose to go down this path can still choose to provide fee-based advice or receive commission for sales submitted to their respective financial institutions. The only difference between this option and the independent licensed firm is that the product / services available will be limited to those provided by the financial institution.

Certain financial institutions, such as the Employee Provident Fund (EPF) and Permodalan Nasional Berhad (PNB) hire certified professionals or encourage their employees to take higher level certifications to help them provide specific financial related advice to their members.

The final option available for a CFP® professional, is to set up your own independent licensed firm. However, before taking this option, it is recommended that the CFP® professional read and understand first the requirements of setting up and managing your own firm. It will take considerable resources, and effort to set up your own independent firm. We will be sharing in more details about this in our next article.

RAFIQ HIDAYAT is the managing director of Wealth Vantage Advisory, a financial firm licensed by Securities Commission (CMSL), Bank Negara Malaysia (FA), and Federation of Investment Managers Malaysia (CUTA & CPRA). Their vision is to be the firm of choice by clients and financial advisors, leading the change in the industry by focusing on the right way of doing things. Visit wealthvantage.com.my to find out more.

Interested in a career as a financial planner? Contact us at hi@wealthvantage.com.my