Progress and problems of the financial planning sector
By FINTAN NG
fintan@thestar.com.my
ALTHOUGH financial planning has been around in the local financial services landscape for years, most people are not aware of the industry and what its practitioners, who call themselves wealth planners or financial planners, do.
The situation becomes even more confusing to the average person with little or no knowledge of what financial planning is as there are now products that are bundled with insurance plans.
There are financial planners who are independent of any bank or product supplier and then there are tied agents of these players. Much of the industry is regulated by the Securities Commission and Bank Negara.
The question arises – are insurance agents financial planners too, in the broadest sense of the term, since they too help clients plan their finances by making sure their clients do not get into debt when they fall sick?
Readers should not forget that health plans have the investment-linked option and these options are often touted as a way to save. But an observer say insurance health plans, even if it comes with the investment-linked option, should not be seen as a savings plan at all.
Financial Planning Association of Malaysia (FPAM) president Wong Boon Choy says the debate is still raging as to what constitutes financial planning.
The FPAM has 10,000 individual members and 44 corporate members.
“There are purists on the one hand who insists that financial planning involves pure advisory work and all else is a sham. On the other hand, there are those who strive to seek a better way to serve their clients in their provision of financial products and services and seek to utilise the financial planning approach to ensure that they recommend the appropriate products and services,” Wong points out.
“At the end of all these discussions, the key, we feel, is still for consumers to be well educated and have a personal interest in their finances, and for finance professionals, no matter in which sector they are in, to be in possession of the necessary knowledge and competencies and that in all communication between them, appropriate disclosures and transparency prevail,” Wong says.
A Penang-based practitioner, Lion Wealth Advisors Sdn Bhd director K.P. Thum sums up the issues of the industry into four areas – human resource, markets, regulations and limited choices in products.
He says there are not many CFP, RFP or ChFC holders in the country. “People are not interested to take it up full time because there’s no track record of success,” Thum says.
He believes the public awareness of the benefits of financial planning or engaging a financial planner is lacking because there is a lack of concerted action on the part of players such as practitioners, suppliers, authorities, associations and other related parties to educate the public.
“There may also be confusion and lack of trust as there have been instances of fraud by non-licensed practitioners claiming themselves to be financial planners,” Thum says, adding that the concept of paying fees to write a financial plan is still very new.
He points out that one example of the low level of “financial intelligence” of the general public is the way most are attracted by high returns without knowing the risks.
“Most are interested in the features of a product such as the investment return but are not interested to find out whether the product is helping them meet their financial goals or whether it’s necessary or duplicates what they already have,” Thum says.
He says the authorities may also be unsure on how to regulate the industry especially for independent financial planners not attached to a bank or supplier and who imposed high requirements and conditions for practitioners.
“Major financial product providers do not open their products to independent financial planners because of how it may affect existing channels such as tied agents and banks,” Thum says.
Standard Financial Planner Sdn Bhd chief executive officer Alfred Sek says the situation is confusing for the public as financial institutions such as banks, insurance and unit trust companies are offering financial planning services through their agents and relationship managers.
He says financial planners need to be licensed (as they are by the Securities Commission and Bank Negara) but often the ones in banks are not.
“The problem is people chose to ignore it as there are no enforcement and not enough publicity to inform the people. If this is allowed to go on, the growth of the local financial planning industry will be greatly affected,” Sek says.
He says one option is to review the licensing entry requirement to allow more practitioners from the insurance and unit trust industries to be licensed as practised in Singapore and other developed countries.
“To promote and create value for the licensed firms, all stakeholders in the financial services industry must work together to address the obstacles and challenges faced by the practitioners,” Sek says.
ALTHOUGH financial planning has been around in the local financial services landscape for years, most people are not aware of the industry and what its practitioners, who call themselves wealth planners or financial planners, do.
The situation becomes even more confusing to the average person with little or no knowledge of what financial planning is as there are now products that are bundled with insurance plans.
There are financial planners who are independent of any bank or product supplier and then there are tied agents of these players. Much of the industry is regulated by the Securities Commission and Bank Negara.
The question arises – are insurance agents financial planners too, in the broadest sense of the term, since they too help clients plan their finances by making sure their clients do not get into debt when they fall sick?
Readers should not forget that health plans have the investment-linked option and these options are often touted as a way to save. But an observer say insurance health plans, even if it comes with the investment-linked option, should not be seen as a savings plan at all.
Financial Planning Association of Malaysia (FPAM) president Wong Boon Choy says the debate is still raging as to what constitutes financial planning.
The FPAM has 10,000 individual members and 44 corporate members.
“There are purists on the one hand who insists that financial planning involves pure advisory work and all else is a sham. On the other hand, there are those who strive to seek a better way to serve their clients in their provision of financial products and services and seek to utilise the financial planning approach to ensure that they recommend the appropriate products and services,” Wong points out.
“At the end of all these discussions, the key, we feel, is still for consumers to be well educated and have a personal interest in their finances, and for finance professionals, no matter in which sector they are in, to be in possession of the necessary knowledge and competencies and that in all communication between them, appropriate disclosures and transparency prevail,” Wong says.
A Penang-based practitioner, Lion Wealth Advisors Sdn Bhd director K.P. Thum sums up the issues of the industry into four areas – human resource, markets, regulations and limited choices in products.
He says there are not many CFP, RFP or ChFC holders in the country. “People are not interested to take it up full time because there’s no track record of success,” Thum says.
He believes the public awareness of the benefits of financial planning or engaging a financial planner is lacking because there is a lack of concerted action on the part of players such as practitioners, suppliers, authorities, associations and other related parties to educate the public.
“There may also be confusion and lack of trust as there have been instances of fraud by non-licensed practitioners claiming themselves to be financial planners,” Thum says, adding that the concept of paying fees to write a financial plan is still very new.
He points out that one example of the low level of “financial intelligence” of the general public is the way most are attracted by high returns without knowing the risks.
“Most are interested in the features of a product such as the investment return but are not interested to find out whether the product is helping them meet their financial goals or whether it’s necessary or duplicates what they already have,” Thum says.
He says the authorities may also be unsure on how to regulate the industry especially for independent financial planners not attached to a bank or supplier and who imposed high requirements and conditions for practitioners.
“Major financial product providers do not open their products to independent financial planners because of how it may affect existing channels such as tied agents and banks,” Thum says.
Standard Financial Planner Sdn Bhd chief executive officer Alfred Sek says the situation is confusing for the public as financial institutions such as banks, insurance and unit trust companies are offering financial planning services through their agents and relationship managers.
He says financial planners need to be licensed (as they are by the Securities Commission and Bank Negara) but often the ones in banks are not.
“The problem is people chose to ignore it as there are no enforcement and not enough publicity to inform the people. If this is allowed to go on, the growth of the local financial planning industry will be greatly affected,” Sek says.
He says one option is to review the licensing entry requirement to allow more practitioners from the insurance and unit trust industries to be licensed as practised in Singapore and other developed countries.
“To promote and create value for the licensed firms, all stakeholders in the financial services industry must work together to address the obstacles and challenges faced by the practitioners,” Sek says.
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