Malaysia’s Financial Planning is in Murky Water

When I got my first job as a marketing executive with a local general insurance company, the financial planning industry is already in murky water but I fail to see how serious it was until I started the certified financial planner course in 2018 (13 years apart).

I believe agents, practitioners, products provider, and authorities from the financial industry will jump on me demanding an explanation for using a controversial title on a sensitive centric industry.

Before you jump on me, allow me to clarify what does it means in my context.

The word “murky” itself carries the meaning of not clear. Yes! That is exactly what I wanted you to feel, so you can fit into my shoe and see it from my perspective. What I am trying to do here is to induce you to look into this industry from a different lens or perhaps clear up your existing lens so you will be able to see things clearer.

Are you sure and where is the proof? 

Yes, I am very sure and the proof is in the market itself.

The general public is confused!

They are confused with the various products offered through bankers, agents, and intermediaries, and to make matters worse, they don’t even know how does the industry actually works.

To paint a better picture for you, below are 4 murky areas examples:

Murky Area #1
Each product created by the respective provider has its own specific segment market however some agents tend to generalize it and sell them to any tom, dick and harry like selling bubble tea to the mass market, or worst forcing it on the client.

Behind the Scene
Possibly for a higher commission paid out or because there is an ongoing sales campaign for agents to earn more. Hence, the motivation is more for the agents’ benefits and not on the clients’ needs.

Murky Area #2
If you are the agent and you only represent one company. In terms of financial planning, what would you advise your client to do when you know your competitor has a better offer than you? Are you going to let it go or are you going to use emotional selling to convince your client to buy from you? (Knowing that you need to close the sales to hit the monthly target)

Behind the Scene
Generally, agents have a set of a target to hit or else their agency contract will be terminated by the principal if they fail to fulfill the quota within a time frame. Therefore, the agents will have a tendency to make the client feel guilty for not buying from them rather than looking at the clients’ needs.

Murky Area #3
The general public doesn’t know the difference between an agent, a licensed financial planner* and a financial adviser representative*.

Behind the Scene
Bankers, unit trust agents, insurance agents’ business cards are provided by their respective providers which carry similar meaning to a financial planner or a financial adviser representative coupled with the general public doesn’t know that the licensed financial planner* and financial adviser representative* is a regulated profession hence, the public has treated it as similar across the board.

Murky Area #4
The market has acknowledged agents or intermediaries are the only channels that are selling financial products that come with a commission.

Behind the Scene
Do you know that these products of similar nature are also being offered by the same financial provider represented by the agents or intermediaries which carry zero commission? (You can save up to 25% per month) Unless that is not the product you are looking for.

Now that you know some of the murky areas that are happening in the market. What should you do next?

The general public is already confused about how to effectively use these products because there is too much information on the internet which further confuses the clients (you) on how to decide (information overload).

Hence, the general public will usually resolve an easy way out and that is to rely on the recommendation given by their families, friends, agents or intermediaries of these respective financial providers, or just get a product that they themselves too not sure it is suitable or not.

Therefore, a mismatch will likely happen because the products sold are generally not holistic enough to meet the client’s real intention.

On top of that, the terms “financial planning” have also been misused by many for years and it has come to a point where the general public’s impression has accepted that “financial planning”= buy more life insurance or “financial planning” = invest in unit trust investment fund.

The sequential question:

  1. Is buying more products equal to having proper financial planning? – Answer: No
  2. Then, is there a better way? Answer: Yes, engage the professional.
  3. Who are they? Answer: The Licensed Financial Planner* or the Financial Adviser Representative*.

Introduction to Financial Planning

Before we go in-depth, let us have an eagle view of what is Financial Planning means.

According to the Financial Planning Standards Board, financial planning is actually a “process of developing strategies to help people manage their financial affairs to meet life goals.”

Some of the example life goals are:

  1. Children’s education,
  2. Setting up a Retirement Fund,
  3. Paying off study loan
  4. Purchasing the first house,
  5. Business succession, and
  6. Distribution of wealth after death

To help you visualize better, I will be using the google map application as an example to explain how does the financial planning works.

This is a Google Map’s interface showing 3 different routes & times required to reach the destination. This example is from KLIA to KL Sentral.

Below is a structured table format for your ease of understanding:

Google TermsEquals to
Google MapThe financial plan
Identify the destinationIdentify the financial goal
Identify the current locationIdentify the current financial situation
Identify the route(s)Identify the gap(s)
Identify the mode of transportIdentify the tools to use/close the gap(s)

As we journey along the route using the google map, we will bound to see different shops, buildings, people and get distracted by it. Some of you may even pit stop at a certain point before continuing the journey and eventually delay in reaching the destination. It is not wrong but is that what you want?

Likewise, as we implement the financial plan we tend to encounter new investment, new business opportunities, agents who will introduce new plans to buy or new unit trust funds for us to invest and then we get distracted from the original plan which will eventually delay in achieving our financial goal(s).

So, the crucial question is how do you avoid yourself from getting distracted?

The answer is to get ourselves educated on these topics or get ourselves a licensed financial planner* or a financial adviser representative* who is not biased but is objective in their work to ensure that your plan is not diverted due to the various distraction. Pretty much like having a personal coach guiding you towards attaining your goal.

I believe many of you, after reading the above info will say…

  1. I am not rich, only rich people need a financial planner / financial adviser representative.
  2. Why do I need one? I am single, nothing to manage.
  3. The fee is expensive because it is a professional job, I don’t think I can afford to pay.
  4. I know how to manage my own finance well, why do I still need one?
  5. I can’t even meet end needs, how can they help me?
  6. I am a business owner, I have an accountant and a financial controller. I don’t need it.

All these are valid and real concerns, I will be addressing it in my next post. But before you go…

If you find this article could benefit your family or friends, please share it around. So, they will get a clearer picture of what is financial planning all about especially in Malaysia.

If you have comments about this article or suggestions on future topics, please do drop me an email at AskShaneHo [at] Gmail dot com.

The title financial planner and financial adviser representative is a regulated profession by the Securities Commission Malaysia and Central Bank of Malaysia respectively.