Malaysia Context: Financial Planner’s Fee Structure
If you have been meeting more than one Licensed Financial Planner in Malaysia, you may find yourself confused with the various fee structure charged by the respective financial planning companies. Unlike the Medical and the legal sector, the financial planning firm fee structure is not regulated (yet).
Do not sweat because you are not alone.
I have asked the same question before I settle down with my current firm. So, I went around the country talking to planners, marketers, and their directors of another financial planning firm to understand why they do what they do (their value) and their expectations between all stakeholders involved.
All the financial planning firms I talked to are fee-based except one – fee-only. Most of these fee-based firm operates similarly like how an agency would as the total sales commission received from their principal is the same.
You may ask if all the sales commission is the same, how come the fee structure is not the same? Like any profit-taking company, they are affected by various factors.
For a fee-only financial planning firm, their operation is similar to how an accounting firm would. Their only income is the fee collected from the client and no other form of compensation (direct/indirect) from other financial product providers. Hence, the value and work required from the client will determine the fee charged.
How Financial Firm Charge their Clients?
Now that you know how the two types of financial planning firms operate in Malaysia. You will want to know how they charge you as a client and how it could affect your cost in engaging a Licensed Financial Planner.
To paint a better picture. Let me give you a matrix on fees collected by Fee-Based Planner versus Fee-Only Planner to ease your reading experience:
Typical Fee Structure for a Fee-Based Planner
| Service / Product | Advisory Fee | Annual Wrap / Management Fee | Up Front Fee / Commission |
|---|---|---|---|
| Comprehensive Financial Planning | Yes | ||
| Investment | Yes | Yes | Yes |
| Will Writing | Yes | Yes | |
| Trust Set Up | Yes | Yes | |
| Insurance | Yes | Yes | |
| Other Financial Advisory | Yes | Depends |
Do take note. Some fee-based planners may omit the advisory fee charged because they can compensate it by recommending financial products to you and get paid through commissions or incentives.
Since compensation can vary, therefore the tendency of being bias might occur or a situation where the tendency a conflict of interest could happen. Therefore, ask for details and clarify it before you sign the dotted line.
Typical Fee Structure for Fee-Only Planner
| Service / Product | Advisory Fee | Annual Wrap / Management Fee | Up Front Fee / Commission |
|---|---|---|---|
| Comprehensive Financial Planning | Yes | ||
| Investment | Yes | Yes | |
| Will Writing | Yes | ||
| Trust Set Up | Yes | ||
| Insurance | Yes | ||
| Other Financial Advisory | Yes |
As you noticed, I have been focusing all my write up on how the financial planning industry works. I have readers asking why I do not write something that directly impacts the customers? Like which investment to make or which financial products would be beneficial to them. I smiled. Thank you for reaching out.
I will be covering financial planning products in the future. Do not worry. Nevertheless, I am not in a hurry to do that because most of these financial products are well-explained by existing financial bloggers, licensed financial planners that write, or perhaps Financial YouTube Celebrities.
Next article, I will share with you my thought process on why I choose to focus my writing on the industry. I look forward to clearing the air with everyone before I continue walking the path less taken.
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Thanks for the insight.
Can you perhaps write how to get into the financial planning industry part-time? I’m taking CFP and completed module 1 and 2 already, but have zero idea how to actually turn that into a useful qualification in the future. Any insight would be much appreciated.
Hi Ian,
Thank you for reading and commenting on my write-up.
I noticed you are also into writing and financial matters. Thank you for reaching out, now that I know fiholic.com exist. I have another website to explore and to learn.
On your question of from part-time to full-time, this is not a straightforward answer. I will try my best to share.
In Malaysia, we have two licensing bodies. The license for:
Financial Adviser Representative (FAR) by BNM
Licensed Financial Planner (LFP) by SC
More info on these two: https://www.shaneho.com/licensed-financial-planner-vs-financial-adviser-representative/
For FAR, the requirement is to be full-time to be licensed.
For LFP, to have at least three years of financial industry experience.
You can talk to a few financial planning firms to check out what avenue they provide for your conditions. If you need more input on this topic, you may write to me at askshaneho [at] gmail [dot] com and we explore what other platforms you can try.