Exclusive Interview - Malaysian Financial Planning Council
Transcription
Exclusive Interview - Malaysian Financial Planning Council
! ! ! "$! ! !! %# & ( &#*#) * ! ('&(* +% %& $ ( $ & -' "#' () $ #% #% & * - ,'#( The annual subscription is RM200 6 10 13 CONTENTS 06 Exclusive Interview 32 Money Management Minister of Higher Education Learn the Secret of the Rich: Create Your Wealth Mr. Tan Choon Kiang 10 A Moment with MFPC President RFP, MSc.FP, FChFP Crystal Strategic Planners Bhd 16 Special Interview Y.B.Dato’ Seri Mohamed Khaled Nordin Mr. Kee Wah Soong Y.Bhg. Dato’ Dr. Nik Ramlah Mahmood 34 Managing Director and Executive Director of Enforcement Securities Commission 20 RFP, FChFP, Master of Sciences in Financial Planning, DBA Professional Education for a Profession SK Samy Walk The Talk Creating Value-Added Services in Growing Financial Planning Practices (4Qs Thought) Mr. Lee Koh Yung 38 40 24 MFPC 1st Advisory Board Meeting Launching Ceremony - 21 August 2008 1-day Affiliate RFP Certification Programme for the Deans & Lecturers Shariah RFP & Affiliate Shariah RFP Programme New Edition of Course Material for RFP & Affiliate RFP Programme 27 Are You Ready to Charge a Fee? En. Nordin Manan Tax Planning 2009 Budget Commentary Mr. KK Chow RFP, CA(M), FCCA, FTII 44 MFPC Activities Estate Planning RFP, CFP, CA [M] RFP Oscar Wealth Advisory Sdn. Bhd. 24 26 28 The Impact of Rate of Return on Retirement Fund Dr. Chai Kon Lim MFPC Member’s Sharing RFP Deputy President, MFPC 22 Retirement Planning Investment Planning Online Unit Trust : Threat or Opportunity? En. Fadzli Anas CEO of Philip Mutual Bhd 48 49 30 MFPC Puzzle iFast Three Reasons for Investing in Malaysia Editor’s Note Dear Readers, Looking Forward to a Better Year How will 2008 be remembered for? The year of political tsunami? Financial market turmoil? Rising roti canai prices? The continuing oil price yo-yo? Hillside tragedies? For many, these will be most remembered and will set the background for 2009. But for MFPC there are no bad times in 2008. 2008 started on the upbeat. After the launching of the undergraduates workshop in December 2007, first half of 2008 is filled with workshop activities around the country. The political happenings and the increase in roti canai prices do not stop the cheery activities of MFPC. In May, MFPC Secretariat moved to new spacious office; in August the Affiliate RFP certification programme was offered to university deans and lecturers. At the same time MFPC celebrated the birth of Shariah RFP and Affiliate Shariah RFP new credentials for financial planners. Towards the end of the year new edition of RFP modules were made available. The global financial crisis that brews for a while started to show effect towards the end of 2008. With large financial institutions collapsing and governments had to come up with rescue packages, it gave a slight chill to the planners bones. With all the negative financial news dominating the headlines there are planners who are distracted and wait longer before going to the market. Our only advice is there is no better time to meet customers than now. Not only that not all sectors of the economy are directly affected by the financial meltdown, our own business has to move forward. Knowing also that market will be more pragmatic and cautious in their spending, getting started earlier in this new landscape provides us with upper advantage. The year 2008 is dedicated to education. The MFPC workshop on financial planning is a national program to increase awareness of the importance of financial planning as a culture and career choice. The Ministry of Higher Education has been in full support of the initiatives and in this issue we feature an exclusive interview with Y.B. DatoÊSeri Mohamed Khaled bin Nordin, Minister of Higher Education who shared his thoughts on developing the new generation of graduates equi pped with tools on financial planning. The Securities Commission (SC) has always of the view that financial planners play a complementary role in the capital market. Planners help broaden consumer awareness of the different products and strategic choices available to them. To learn more on this aspect, we have featured a special interview session with Y.Bhg. Dato Dr.Nik Ramlah Mahmood, Managing Director and Executive Director of Enforcement, Securities Commission. Finally, bad times are always remembered better but we should cherish our achievements. 2008 is a great year, but 2009 looks especially better if we have learnt. Perhaps, we can declare 2008 as a learning year. In the coming issues we will bring to you more perspectives on the year ahead with more thoughtprovoking articles and ideas. We wish you happy and healthy new year. Gong Xi Fa Cai! Financial 1st Editorial Board Members Editor-In-Chief Mr. Mohd. Taipor Suhadah Deputy Editor-In-Chief Mr. Lim Yuen Seong Board Members Mr. Joseph Anthony Illingworth Mr. Girish Kumar Ms. Ann Margaret Mr. KR Raju Mr. Terence Cheong Managing Editor Ms. Chung Kar Yin Deputy Editor Mr. Zekri Ghazali Production & Ms. K. Kogilavany Marketing Ms. Chee Pei Ling Design Adstream Design Sdn. Bhd. (270405-V) 18, Jalan 12/118B, Desa Tun Razak, Cheras, 56100 Kuala Lumpur, Malaysia. Publisher Malaysian Financial Planning Council (0402-04-5) Suite 7.01, 7th Floor, Menara Tun Razak Jalan Raja Laut, 50350 Kuala Lumpur T: 03-26931900 F: 03-26931700 E: [email protected] Printer Percetakan Yin Mun Sdn. Bhd. (81384-A) Feedback? We welcome your comments and views on our Financial 1st towards further improvisation and your feedback may be published in our future issues. Kindly forward your letter by email to [email protected] or postal as below address: Malaysian Financial Planning Council (0402-04-5) Editor-in-Chief Mohd Taipor Suhadah th Suite 7.01, 7 Floor, Menara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur. 06 Exclusive Interview Y. B. Dato’ Seri Mohamed Khaled Nordin Minister of Higher Education 1: First of all we would like to thank you for your acceptance to be one of the Committee Member of Malaysian Financial Planning Council (MFPC) Advisory Board. Perhaps you can share with the readers on how you feel and also the respond from the Ministry of Higher Education Malaysia towards Malaysian Financial Planning Council (MFPC)? Financial planning is now an emerging profession, and with this, the MOHE would certainly like to play a supportive role in helping MFPC achieve its objectives in respect of developing the profession. 2: As our Minister of Higher Education and also MFPC Advisory Board Member, what would be your main perspective towards the nature of MFPC mission and vision in achieving to be the umbrella in providing national professional financial planning designations? In all professions, there will always be a central body formed to champion their respective cause and to provide an interchange where the consumers, professionals and the regulators can use as a platform to exchange information, get feedback and to help the trade. Being a wholly Malaysian formed body, supported by some of the best financial Certainly, it would be our pride to promote the professionals in around, I am of the opinion that these local designations above all others, provided of combination of factors, make the MFPC the most suited course, the MFPC can prove to government that organization to play the role of an umbrella body to help all indeed its courses leading to these designations the stakeholders achieve their respective objectives, and in can match the standards of the similar imported the process fulfilling the mission and vision of MFPC. designations. After all, it is also the goal of the government to help the country excel in the area 3: MFPC is competitively promoting its professional of education and to help develop its local courses designations namely Affiliate RFP and RFP (Registered to match the best offered by the international Financial Planner). All designations from MFPC are community. nationally endorsed by Central Bank of Malaysia, Securities Commission and also by your respective 4: MFPC has started such efforts in getting the Ministry of Higher Education. How far do you think that attention of our local universities since last year our national professional designations and certifications and your respective Ministry of Higher Education in financial planning should be prioritized compared to has also endorsed our professional RFP Module foreign designations? 1 – Fundamentals of Financial Planning as Financial 1st January 2009 07 Exclusive Interview to be an elective paper in the universities. What would be your advices to our local universities in this respect? Help to provide research support in all areas concerning financial planning and to share any such developments and results with the professionals of MFPC. The whole idea is to achieve a harmonious and beneficial blend between the efforts of the academia and the practitioners for the benefit of the public. Ultimately, this will to help develop the country’s knowledge repository in the area of financial planning and bring to fruition the idea of financial planning as a fullfledge profession. 5. Graduates who have a degree qualification coupled with professional designation such as RFP are more marketable and have an advantage in employment opportunities. What is Dato’s opinion? AA degree will provide a graduate with broad knowledge of his field of study, but as the finance industry plays a critical part in the development of the nation, and for it to move in that direction, there will be a great need for further training in this area. The result of this demand for better man power trained in finance, will automatically mean there will be vast career opportunities for those who are professionally trained. It is in this context that I would strongly encourage those aspiring finance-based graduates to augment their degree with a professional designation such as the RFP. Shariah RFP Launching Ceremony on 21st August 2008 6: How would you describe the interest and support of Ministry of Higher Education in supporting the local universities to incorporating such professional programs for our undergraduates? In line with what was mentioned earlier, it is to the nation’s benefit that the MOHE promotes and encourage our graduates to enhance their knowledge and specialty through the process of earning a professional qualification as an additional to their degree. A Moment to Commemorate Financial 1st January 2009 08 Exclusive Interview 7: Is there any data of research indicated that Business Administration Management, Finance, Marketing and all other related courses are in high demand among the graduates? 8: What is your best advice to Malaysian Financial Planning Council (MFPC) and its members in promoting RFP designation as a preferred professional designation in Malaysia? In a developing country such as ours, it would be normal that Malaysia will require expertise in all areas concerning business. Even without the support of detailed statistics, it would not be far wrong to assume that education is the common denominator of all industrial developments. In fact, if you consider the backbone businesses of the economy are the SMEs, it is imperative that sufficient resources pump into the market to help develop cuttingedge expertise and competency to support the growth of these businesses for the future. Continue to work with all the government agencies, including the MOHE, to promote and develop your programmes and professional designations. A Moment with the Guest on 21st August 2008 Financial 1st January 2009 09 Exclusive Interview $aving Enjoy Tremendous for your investment in training with MII #1 Double-Tax Deduction* Increase your tax-deduction amount by sending your staff to MII programmes e.g. spend RM500 with MII and enjoy RM1,000 in tax deduction #2 Up to 80% Subsidy on Training Fee** Send your Bumiputera staff or agents for training at MII and get up to 80% subsidy from the Bumiputera Training Fund (BTF) #3 In-house Training For customised and in-house courses, you are still eligible for #1 and #2 above Call Us Now at 03 - 2087 8882 and speak to Pn. Sharifah (ext 511) for life staff and life agency training or En. Shawal (ext 257) for general staff and general agency training. You can also email to: [email protected] or [email protected] or log in to our website at www.insurance.com.my * for approved MII programmes under Double-Tax Deduction scheme and applicable only to companies (not individual) ** for BTF-approved programmes and applicable to bumiputera staff and agents of life companies only. The Malaysian Insurance Institute Professional Service Provider of the year 2007 A Moment with MFPC President 10 Mr. Kee Wah Soong, President, Malaysian Financial Planning Council (MFPC) Dr.Heazar bin Ismail Pegawai Khas Dato’ Seri in attendance for Y.B. Dato’ Seri Mohamed Khaled bin Nordin, Minister of Higher Education Mr.Lim Eng Leong Principal Private Secretary in attendance for Y.B. Dato’ Liow Tiong Lai, Minister of Health st MFPC has conducted its 1 Advisory Board Meeting on 21 August 2008. We appreciate if Mr. Kee could up-date us on strategic achievement of the meeting. MFPC has successfully conducted its first Advisory Board Meeting on 21 August 2008 at Securities Commissions. Our sincere appreciation to Y.B. Dato’ Mustapa bin Mohamed, Minister of Agriculture and AgroBased Industry for chairing the meeting. Indeed it was a solid one and half hour productive meeting. We are also extremely grateful to have the members of advisory board members and their senior representatives to join us in the Advisory Board meeting. Meeting participants included: Y.B. Dato’ Mustapa Bin, Mohamed – Meeting Chairman Minister of Agriculture and Agro-Based Industry Y.Bhg. Tan Sri Dato’ Hamad Kama Piah bin Che Othman President and Group Chief Executive Officer of Permodalan Nasional Berhad Y.Bhg. Dato’ Sri Abdul Hamidy bin Abdul Hafiz Chairman of the Association of Banks in Malaysia (ABM) Financial 1st January 2009 Mr.Goh Ching Yin Executive Director, Strategy & Development representing Y.Bhg.Dato’ Dr. Nik Ramlah binti Nik Mahmood, Managing Director and Executive Director, Enforcement of Securities Commission Datin Mokhzidah Mokhtar Deputy Director of Consumer & Market Conduct representing Y.Bhg.Dato’ Mohd Razif bin Abdul Kadir, Deputy Governor of Bank Negara Malaysia Ms.Carol Chew PA in attendance for Y.B. Dato’ Dr. Ng Yen Yen, Minister of Women, Family and Community Development. We are happy to report that the Advisory Board has deliberated thoroughly on two main issues.Firstly, the effective implementation of RFP and Shariah RFP to the universities; and secondly, the rational approach of the formation of SelfRegulatory organization for the financial planning industry in Malaysia. The Advisory Board has endorsed and encouraged the National Council’s continuous efforts in promoting Financial Planning education to all the undergraduates nationwide. With the Advisory’s encouragement and commitment to promote the financial planning education in Malaysia, we shall work rigorously to introducing our Module 1, Fundamentals in Financial Planning as an elective paper in the university programmes. Just as what you have read from Dato’ Seri Khaled’s interview message, it would be our pride to promote our local RFP programme above all others and for the MFPC to prove to the Ministry of Higher Education that the RFP progarmme can match the international standards! With this, obviously we are committed to play our role at MFPC, and we shall not hesitate to promote the RFP and Shariah RFP programmes as the preferred professional progarmmes among the undergraduates! In line with the development of e-learning channel as one of the mediums to gain extensive knowledge at the higher education institutions; we are keen to introduce the RFP modules as e-learning subjects at the university level. We welcome constructive feedback and further discussion on this area from our Members and interested universities. Apart from providing Financial Planning knowledge to our young generation such as the undergraduates, the National Council will ensure the financial planning education and trainings will also be provided for the practitioners in the industry such as bank officers, insurance agents and unit trust consultants etc. The Shariah RFP Programme will serve as an enhancement programme for all our RFPs and for those who are keen to develop and acquire new knowledge and skill in Shariah Financial Planning. 11 A Moment with MFPC President Faculty of INCEIF, and Datuk Ranjit Ajit Singh, Managing Director of Securities Commission for attending this memorable event and I would like thank all the MFPC Members, Deans, Professors and Lecturers from the 27 universities and polytechnics who had turned up for the launching ceremony. gather practical orientated feedbacks from the practitioners in the field. We have 28 participants in this Pilot Class. Please allow me to take this opportunity to express my sincere appreciation to the National Council Members and Board Members; all the Pilot Class participants for their enthusiasm and kind support in making this Pilot Class a success. I personally learn a lot from the lecturers as well as my peer in the class. As for the formation of a SRO for the Financial Planning industry, the Advisory Board has endorsed the National Council’s proposal to bring the related decision makers of the associations into formation of the SRO. It is noted that the SRO will serve an important purpose to coordinate the development of the financial planning activities in Malaysia. The National Council was entrusted to work together with the regulators and industry associations to ensure appropriate framework and funding issues shall be addressed. This exercise will require due diligence and cooperativeness from all parties involved. At MFPC structure, we have the unique situation where a few associations and institutions together with individual members have form the National Council. We shall therefore ensure consensus and agreement must be attained within the MFPC to facilitate productive meetings with other players in the financial planning industry in the future. Mr.Kee, we have attended the grand Launching Ceremony on 21 August 2008 and there were a few major events announced on that day. Could you please highlight these events to our readers? First of all, on behalf of the MFPC National Council, I would like to thank Y.B. Dato’ Seri Mohamed Khaled bin Nordin, Minister of Higher Education for gracing the Launching Ceremony of the three combo events on 21 August 2008 at Securities Commission. Y.B. Dato’ Seri Mohamed Khaled has launched: Shariah RFP & Affiliate Shariah RFP Programme New Edition of Course Material for RFP & Affiliate RFP Programme 1 - day Affiliate RFP Certification Programme for the Deans & Lecturers In conjuction with that, my sincere appreciation to Datuk Syed Othman Alhabshi, Chief Academic Officer/Dean of Shariah RFP Programme YB Dato’ Seri Mohamed Khaled Bin Nordin launched this new professional programme – Shariah RFP on 21 August 2008 at Securities Commissions. It is our hope that with this Launching Ceremony we have motivated all our Members and other new associates in the industry to pay attention to the Shariah based businesses and financial planning services. At the same time, we would like to encourage more non - Muslims to worm up and participate actively in the Shariah compliance Financial Planning business. MFPC has proactively developed a new practical professional programme to our targeted market; the Shariah RFP is for our practitioners to equip themselves with Takaful and Islamic financial planning principles and knowledge. To make it a successful class for all experienced CEOs and practitioners in the industry, the lecturers appointed must have been demonstrated tremendous knowledge and skills in these Shariah Finnacial Planning subject matters. My utmost appreciation goes to the committed professors and lectures as below: Datuk Dr. Syed Othman Alhabshi, Chief Academic Officer of INCEIF Assoc. Prof. Dr. Shafaai Bin Musa, Executive Director, International Islamic University Malaysia Dato Dr. Kamaruddin, UKM Dr. Zurina Shafii, Senior lecturer, USIM Pn. Adibah Abdul Wahab, Head of Department, Lembaga Zakat Selangor En. Nordin Manan, RFP En. Ezamshah Ismail, RFP Dear RFPs, We will invite your participation soon; we have tentatively scheduled the Shariah RFP classes to be opened to our RFPs by 1st quarter of 2009! New Edition of Course Material for RFP Programme Dear all Students, At this juncture, we are pleased to report that we have initiated the Shariah RFP Pilot Class on 22 Oct 2008. The Pilot Class will serve a very important purpose for the Certification & CPD Board and Examination Board to Indeed, I have a very good new to you. We would like to inform you that the new edition of the RFP text materials were ready for use! Financial 1st January 2009 A Moment with MFPC President We have taken initiatives to up-date, up-grade and enhance our RFP texts continuously. Over the last 12 months, we have focused on this revision exercise. We have a team of 11 writers and editors and Task Force Committees worked on this project. Now, we are happy to have completed a thorough revision exercise of all 6 modules of course material for the RFP programme. The texts were up-dated and revised to ensure professional and consistent approach from one module to another. Texts are now enhanced with samples and illustrations for easy reference and practice. With the expertise and skills in providing this new set of revised text materials, we hope more Students will be motivated to complete their RFP Programme promptly; and more new entrants will be nurtured to our financial planning industry! We have considered this action as our responsibility and duty to ensure that the RFP Programme is offered to the practitioners with high quality and professional standard. We are confidence and ambitious that RFP designation can and will be exported to the regional countries that will bring Malaysian proud in the near future! 1 - day Affiliate RFP Certification Programme for the Deans & Lecturers I am happy to inform that MFPC has make another miles stone to facilitate yet another quality certification programme for 120 enthusiastic learners, the Deans of Faculties, Head of Schools, Professors and Lecturers from the 27 universities and polytechnics in Malaysia. The 1- Day Certification Programme was a dynamic response of MFPC to blend the experience from the diverse needs of different types of professionals within the financial industry and the academic professionals who have been dedicate and will do more to propagate the financial planning education especially to the young generation in Malaysia. The universities and polytechnics are the two key areas which MFPC would like to work closely. Financial 1st January 2009 12 of Pheim Unit Trusts Berhad 2. Wan Zamri Wan Zain, Chief Executive Officer, AIA Takaful International Berhad 3. Kee Wah Soong, Executive Director of Premier Investment Management Sdn Bhd 4. Muhammad Fikri Bin Mohamad Rawi, Director of Business Development, CIMB Aviva Assurance Berhad 5. Clement Heng, General Manager, Agency Sales and Training, AmAssurance Berhad The Affiliate RFP designation serves as a mechanism to promote new entrants into the financial planning industry and they could well be up-graded to a fully qualified Registered Financial Planner (RFP) who can be granted a license to conduct financial planning advisory services to the public at large. Therefore MFPC been selective in gathering our participants for this Certification Programme. All the participants are nominated by the Vice Chancellors of the universities and they are at least with Master Degree qualification with two years of working experience. MFPC will be awarding the “Affiliate RFP” Designation for those lecturers have attended a full day programme , completed the MCQ assessment on the day itself and submitted their take home assignment (5 short questions) before 30 November 2008. Upon completion of the Certification Programme, we are certain that Deans and Lectures are given the insights of the financial planning profession and the industry; and later to apply some of the financial planning knowledge and skills specified in the RFP Module 1 - Fundamentals of Financial Planning and M6 - Retirement Planning. On behalf of the MFPC National Council, we applaud with lecturers’ commitment and diligence in continuous up-grading themselves with financial planning knowledge and skills. I must also mentioned here that we were very happy to have experienced practitioners and outstanding industry product providers who have formed as panel of speakers and presented their view points in their capacity as practice professions as well as service providers in the industry. There were: 1. Phua Lee Kerk, Chief Executive Officer Our sincere appreciation from MFPC! Shariah Financial Planning Awareness Programme In continuation with MFPC’s mission to promote financial planning to all Malaysians, we are excited to announce that this year MFPC is caring out another project with Polytechnics & Universities all over Malaysia. For that, we would like to take this opportunity to express our gratitude to Y.B.Dato’ Seri Mohamed Khaled bin Nordin and Ministry of Higher Education (MOHE) for approving our proposal on Shariah Financial Planning Awareness Programme for 10,000 undergraduates from the 20 polytechnics. We believe via this Shariah Financial Planning Awareness Programme we would be able to provide an understanding of the influence of Shariah in a business context i.e. Islamic Finance and Takaful (Islamic Insurance) industries and provide opportunities for the undergraduates to explore potential career in Islamic Financial Industry. As for our Members, I would like to take this opportunity to invite you for the Launching Ceremony of Shariah Financial Planning Awareness Programme which tentatively scheduled to be held on 7 March 2008, 9am at Auditorium Parcel E, Putrajaya (to be confirmed). With that note, I wish everyone a Happy New Year and our sincere appreciation to all our corporate and individual members for their continuous support in developing the financial planning industry to greater heights. MFPC Financial Planning Workshop for Public & Practitioners 13 27 - 28 August 2008 INTAN Workshop Workshop Updates Date 27-Aug-08 Wednesday 28-Aug-08 Thursday 30-Oct-08 Thursday Total Workshops = 42 Venue INTAN Bukit Kiara Part 1 Pax 55 INTAN Bukit Kiara Part 2 55 Ipoh Part 2 Total Participants = 2232 Language Bilingual Malay / English Lecturer Javern Lim Nordin Manan Bilingual Malay / English Phua Lee Kerk Kee Wah Soong 50 English Allan Yap Anuar Shuib Time Morning 9am-1pm Afternoon 2pm-5pm Morning 9am-1pm Afternoon 2pm-5pm Morning 9am-1pm Afternoon 2pm-5pm Chapter 1, 2 & 5 9, 10 & 11 6, 7 &8 3&4 6,7 & 8 9,10 & 11 * Certificate of Completion shall be presented to the participant * 6.5 CPD hours will be awarded to the participant This workshop series is an ongoing project. For future workshop schedule please call: LLL - Ms. Mavis Tan 03-2161 8044 MII - Ms. Puteri 03-2087 8882 MFPC - Ms. Kogila 03-2693 1900 NAMLIFA - Ms. Yati 03-3281 3167 PNB-MFPC 109 Financial Planning Seminar Sept 08 DATE 3-Sep-08 5-Sep-08 6-Sep-08 7-Sep-08 10-Sep-08 14-Sep-08 17-Sep-08 21-Sep-08 22-Sep-08 VENUE Putra Palace Kangar, Perlis Dewan Kolej Jururawat Masyarakat Tawau East Wood Valley Golf & Country Club, Miri Juita Premier Hotel, Kota Bharu Universiti Sains Malaysia Hotel Grand Continental, Kuala Terengganu Dewan Serbaguna Majlis Perbandaran Padawan Dayak Association Miri, Ruai Francis loke Kolej Komuniti Masjid Tanah LANGUAGE Malay Malay Bilingual Malay/ English Malay Malay Malay Malay Bilingual Malay/ English Malay Lectures (MFPC) Thum Keng Pong Poedjo Soesilotomo Ee Guan Teck Sunthara Segar Thum Keng Pong Sunthara Segar Ee Guan Teck Chong Kin Fatt Chu Jia Yau Oct 08 DATE 1 Oct 2008 2 Oct 2008 8 Oct 2008 12 Oct 2008 16 Oct 2008 21 Oct 2008 22 Oct 2008 24 Oct 2008 30 Oct 2008 31 Oct 2008 VENUE Dewan Serbaguna Senadin, Senadin Commercial Centre Park, Miri Dewan MEC, Bukit kanada, Lot 3, Blok MCLD, 98000 Miri Johor Bharu, Johor Dewan Wau 1, Grand Riverview Hotel, Kota Bharu, kelantan Butterworth, Penang Dewan bandaraya Kuching Utara Kangar, Perlis Numonyx Sdn Bhd Muar Shah Alam,Selangor Kota Kinabalu, Sabah LANGUAGE Bilingual Malay/ English Bilingual Malay/ English Bilingual Malay/ English Malay Malay Bilingual Malay/ English Malay Malay Bilingual Malay/ English Bilingual Malay/ English Lectures (MFPC) Chong Kin Fatt Chong Kin Fatt Ho Kim Fa Tee Pong Meng Thum Keng Pong Ee Guan Teck Lim Poh Ho Ho Kim Fa Nordin Manan Poedjo Soesilotomo Nov 08 DATE 4-Nov-08 5-Nov-08 10-Nov-08 14-Nov-08 18-Nov-08 19-Nov-08 21-Nov-08 22-Nov-08 24-Nov-08 25-Nov-08 26-Nov-08 VENUE Heritage Hotel, Ipoh, Perak Lawas, Sarawak Avillion Legacy Melaka Kangar, Perlis Kota Kinabalu, Sabah Shah Alam Sandakan, Sabah MS Garden Hotel, Kuantan Alor Setar, Kedah Seremban, Negeri Sembilan Sri Aman, Sarawak LANGUAGE Bilingual Malay/ English Bilingual Malay/ English Bilingual Malay/ English Malay Malay Malay Malay Malay Malay Bilingual Malay/ English Bilingual Malay/ English Lectures (MFPC) Saseetharan Chong Kin Fatt Chu Jia Yau Lim Poh Ho Poedjo Soesilotomo Roadzman Poedjo Soesilotomo Rejinald Yoganathan Lim Poh Ho Chu Jia Yau Ee Guan Teck Financial 1st January 2009 14 Financial Planning Workshop for Undergraduates 25 - 26 September 2008 Financial Planning Workshop for UTAR Undergraduates 18 - 19 October 2008 Financial Planning Workshop for Workshop Updates Date 25-Sep-08 Thursday 26-Sep-08 Friday 18-Oct-08 Saturday 19-Oct-08 Sunday Total Workshops = 24 Venue UTAR, PJ 13, Jln 13/6 46200 Petaling Jaya Part 1 Pax 110 UTAR, PJ 13, Jln 13/6 46200 Petaling Jaya Part 2 110 USIM Nilai Part 1 90 USIM Nilai Part 2 90 Financial 1st January 2009 USIM Undergraduates Total Participants = 2592 Language English English Lecturer Ho Tsok Shien Time Morning 9am-1pm Chapter 1,2 & 5 Lawrence Seow Afternoon 2pm-5pm 3&4 Teng Luen Foong Morning 9am-1pm Afternoon 2pm-5pm 6,7 & 8 Anuar Shuib English English 9,10 & 11 Ezamshah Ismail Morning 9am-1pm 1,2&5 Chu Jia Yau Afternoon 2pm-5pm 3&4 Sunthara Morning 9am-1pm Afternoon 2pm-5pm 6,7 & 8 Anuar Shuib 9,10 &11 16 Special Interview Y.Bhg. Dato’ Dr. Nik Ramlah Mahmood Managing Director and Executive Director of Enforcement Securities Commission 1. What has the SC done to promote financial planning in Malaysia in recent years? The Securities Commission (SC) has been active in the development and promotion of the financial planning industry since 2001, in line with recommendation 106 of the Capital Market Masterplan. As financial planning is an important segment of the capital market, the SC amended the Securities Industry Act 1983 in 2004 to require individuals who call themselves financial planners or offer financial planning services to be licensed as Investment Advisors. The importance of financial planning is further evidenced in the Capital Markets and Services Act 2007 (CMSA), where financial planning is now recognised as a distinct regulated activity and no longer a subset of the “investment advice” licence. The SC also worked together with the Federation of Malaysian Unit Trust Managers (FMUTM) and the financial planning associations to develop a platform where financial planners can distribute multiple unit trust products. FMUTM issued the Guidelines for Registration of Corporate Unit Trust Advisers for the Marketing and Distribution of Unit Trusts (CUTA Guidelines) on 11 October 2007. The SC also organised an industry consultation on the proposed mutual recognition framework for financial planners and financial advisers late last year. Feedback from this industry consultation was helpful in developing a practical mutual recognition framework with Bank Negara Malaysia (BNM) which is capable of meeting the industry’s Financial 1st January 2009 needs. As you may be aware, the licensing requirements for SClicensed financial planners and BNM-licensed financial advisers were streamlined late last year. This year, the SC has continued with our efforts to promote the financial planning industry and encourage greater participation in the industry. These efforts include monitoring the take-up rate of the initiative to allow financial planners to broaden their activities through acting as Corporate Unit Trust Advisers (CUTA), and collaborating with BNM to streamline operational and regulatory issues for financial planners and financial advisers to minimise if not eliminate, gaps or overlaps in the exercise of our respective regulatory functions. In our developmental efforts, the SC will continue to ensure that measures are put in place to enhance the skills, professionalism and quality of service of financial planners. With open channels of communication between the SC and other regulators as well as the industry associations, we will be able to work together to minimise regulatory burden and compliance costs for the industry, and enhance the professionalism and image of the industry. 2. Following the coming into force of the Capital Markets and Services Act 2007 (CMSA) late last year, how will this Act benefit financial planners specifically and what impact will it have towards Malaysians? In addition to consolidating the securities, futures and fundraising laws into a single legislation, the CMSA introduced new concepts like the single licensing regime and framework for recognition and oversight of self-regulatory organisations, whilst strengthening the investor protection framework. As mentioned previously, the CMSA now recognises financial planning as a distinct regulated activity, and practitioners will be given a Capital Markets Services licence for the regulated activity of financial planning. The CMSA also set the legal basis for financial planners to deal in unit trust products. Prior to this, financial planners could not become a CUTA as the financial planning licence only permits advisory services. Under the CMSA’s single licensing regime, licensed financial planners who intend to distribute unit trust products, may apply to add the regulated activity of dealing in unit trust products or “restricted” dealing to the regulated activity of financial planning under a single licence. Financial planners interested in distributing unit trust products must incorporate their business as a company with a paid up capital and shareholders fund of RM100,000. These financial planners must also obtain professional indemnity insurance of at least RM200,000, appoint a head of regulated activity for dealing and have at least two representatives, inclusive of one director, who are licensed to carry out financial planning activities and registered with FMUTM. The financial planning company must also register with FMUTM pursuant to the CUTA Guidelines. 17 Special Interview Previously, investors would have to deal with several parties to obtain financial planning advice and invest in various unit trust products. With the introduction of the new licensing regime and CUTA, investors now only need to deal with a financial planner to obtain financial planning advice and purchase suitable unit trust products from a variety of unit trust providers pursuant to their financial plan. 3. Effective 11 October 2007, financial planners with the CMS Licence are eligible to apply to register with the Federation of Malaysian Unit Trust Managers (FMUTM) as Corporate Unit Trust Advisors (CUTA). (i) We would appreciate if Dato’ could further brief us on the rational behind this new category of service? Consumers generally prefer to obtain advice and financial products from a single source, whether they are purchasing equities, unit trust products or insurance products. However, due to the limitations in the licence, financial planners were unable to fulfil consumer demand to provide their clients with a financial plan as well as financial products. To put it in financial planning terms – they weren’t able to assist their clients in implementing their financial plans. The SC has found that even in jurisdictions where the financial planning industry is more established, for example Australia, business models include those that sell financial products with or without receiving commissions from the product manufacturer. Recognising this, the SC worked closely with FMUTM to develop a platform where financial planners can provide both a financial plan and sell unit trust products that are within the purview of the plan. To ensure that the quality of advice is not compromised, financial planners must be licensed by the SC and registered with FMUTM, be able to provide choice of products to their clients, and have sufficient resources, expertise and policies to market unit trust products and prevent conflicts of interests from arising. (ii) How will CUTA tie in with the licensing requirement of SC? As mentioned earlier, the CMSA has set the licensing regime that provides financial planners with the legal basis for dealing in unit trust products, which is supplemented by registration with FMUTM as a CUTA. The activity of dealing differs from advisory services with different risks ascribed to the former. As such, additional investor protection safeguards have been imposed on financial planners dealing in unit trust products in the form of higher entry requirements as described earlier and registration with FMUTM. In addition, the SC has ensured that the entry requirements for a financial planner and “restricted dealer” under the CMSA and CUTA Guidelines are similar. As part of the SC’s plans to promote industry regulation where appropriate, FMUTM has been entrusted with the oversight of persons marketing and distributing unit trust products, which includes the activities of CUTAs in marketing and distributing unit trust products. The SC is confident that the high professional standards of financial planners will continue to be maintained with the requirements set out in the FMUTM guidelines, FMUTM’s monitoring of compliance with its guidelines, and monitoring by the respective financial planning associations with respect to compliance with their code of ethics. With all these safeguards in place, it is expected that financial planners would not deviate from their main business of providing clients with a comprehensive financial plan. (iii) How would CUTA consumers and investors? benefit As explained earlier, with the introduction of CUTA, clients now only need to deal with one trusted advisor to obtain financial planning advice and purchase suitable unit trust products from a variety of unit trust providers. Furthermore, under section 92 of the CMSA as well as other SC and FMUTM guidelines, financial planners are responsible for ensuring that the products offered to their clients are consistent with the financial plan that they’ve created for their clients. The SC hopes that enabling financial planners to provide their clients with a one-stop service will translate into more professional, transparent and cost-effective advice. 4. There’s been remarkable progress in the Malaysian Islamic Capital Market (ICM) r ecently. (i) Can you describe on its status and what is the impact on financial planning? Malaysia today has one of the largest and comprehensive Islamic capital markets in the world. The vast majority of our listed companies, about 85%, and 38% of outstanding bonds are shariah-compliant. This is complemented with an array of innovative shariah-compliant products such as unit trust funds, ETFs, REITS, structured products and derivatives. To maintain Malaysia’s competitive edge, the SC facilitates the development of a comprehensive Islamic capital market that co-exists with the conventional system to ensure that all participants receive the same degree of clarity, certainty and protection. The SC expects that consumer awareness of and demands for Shariah compliant products and services will grow in tandem with the growth of the Islamic capital market. With enhanced awareness Financial 1st January 2009 18 Special Interview of Islamic principles, products and services, greater demand for Shariah compliance in all aspects of the capital market can be expected, including in the area of financial planning. The challenge for financial planners will be to understand Shariah concepts and principles and equip themselves with knowledge on Shariah compliant products in order to provide a financial plan that is Shariah compliant. Financial planners should start preparing themselves with the requisite knowledge and understanding of the Islamic capital market now. It is not be enough to label a product as Shariah compliant, the planner must know and be able to explain to investors why the product is Shariah-compliant. Financial planners who do not have a comprehensive understanding of both the conventional and Islamic capital market will find themselves at a disadvantage in the future. (ii) How does the ICM help boost employment among financial planners? The Islamic capital market offers opportunities for financial planners who are qualified to offer Islamic financial planning advice to widen their client base. Provided that financial planners maintain high professional and ethical standards in ensuring that their advice is suitable and services and products offered are true-to-label, they will be able to tap an underserved market that require end-to-end Islamic products and advice. 5. In your opinion, besides abiding by the Code of Ethics and completing the CPD requirement, how are financial planners able to enhance their professional knowledge to benefit the public at large? Abiding by the Code of Ethics and Practise Standards and meeting the SC’s Continuing Professional Education requirements is the Financial 1st January 2009 minimum mandated for financial planners to enhance their knowledge and maintain their professional standing. To be a truly professional financial planner capable of delivering excellent services, the individual would have to update himself on the latest developments in the market as well as conduct himself in a highly ethical and honest manner, in order to maintain confidence in the quality of his services. He must monitor and understand not just local market trends but global ones too, and keep pace with their clients’ changing investment appetite for capital market products. Where it is not possible to avoid a conflict of interest with his clients, he must provide clear and adequate disclosure of his interest and place his clients’ interest first. The financial planner must also tailor their clients’ individual financial plan according to their clients’ needs, goals and risk appetite. The financial planner can enhance his professional knowledge through reading relevant materials and attending relevant courses. To provide clients with highly professional service, the financial planning principal should also be responsible for enhancing their representatives’ professional knowledge by establishing good training and competency enhancement programmes to identify and close gaps in their representatives’ knowledge. The principal must also manage potential conflicts of interest by developing robust conflict management policies to be adhered to by its representatives. 6. Last but not least, is there anything you would like to add and advise our readers? The SC recognises the strong need for a highly professional and efficient financial planning industry as financial planners are a vital link between product providers and retail investors as they help investors navigate through the plethora of financial products and information. The SC has always been open to industry feedback whether on a formal or informal basis, and it has been through such feedback that the SC has embarked on many of our initiatives for the financial planning industry. The ability of the financial planning industry to move to the next level would depend upon the collective action of financial planners. As a financial plan is very personal to the client, to be successful the financial planner must maintain a close rapport with clients and show through his track record the value added from the advice provided. It is very easy to destroy the personal relationship and trust of clients, thus financial planners must strive to maintain high standards of professional and ethical conduct at all times. The financial planning associations must also play their part in enhancing financial planning standards and practices, as well as in monitoring compliance with their code of ethics and professional standards. As mentioned earlier, the SC believes that there is tremendous growth potential for the financial planning industry. As the nation progresses and more Malaysians move towards being informed investors, they will demand and be willing to pay for quality products and services. BNM Article Bermula daripada keluaran ini, kami akan memaparkan artikel berkaitan pelbagai jenis penipuan kewangan yang perlu anda hindari. Tumpuan artikel kali ini adalah tentang pengambilan deposit secara haram. Keluaran yang akan datang pula PENGAMBILAN DEPOSIT SECARA HARAM (SKIM CEPAT KAYA) disusuli dengan artikel berkenaan penipuan secara elektronik, skim pelaburan melalui Internet serta skim dagangan haram mata wang asing. Pengambilan deposit secara haram atau skim cepat kaya menjanjikan faedah atau keuntungan yang tinggi ke atas deposit di bawah skim ini. Pengendali sebegini tidak mempunyai lesen yang sah untuk mengambil deposit. Anda mungkin menerima pulangan yang dijanjikan pada permulaannya, kerana pengendali skim ini membayar wang yang dikumpul daripada pendeposit lain kepada anda. Walau bagaimanapun, tiada jaminan yang pengendali ini mampu Bagaimana anda boleh membantu mencegah skim sebegini daripada terus beroperasi? untuk terus membayar kadar pulangan yang tinggi, menyebabkan skim ini akhirnya gagal dan pendeposit kehilangan wang mereka. Apakah risiko sekiranya terlibat dengan skim cepat kaya? Skim sebegini akan terus beroperasi selagi masyarakat menyertai skim ini. Sebagai pengguna yang bijak, anda bertanggungjawab untuk melindungi wang anda. Jangan mudah terpedaya dengan skim-skim sebegini kerana akhirnya anda boleh kehilangan semuanya jika tidak berhati-hati. Sekiranya anda mempunyai sebarang pertanyaan mengenai skim cepat kaya, anda boleh menghantar pertanyaan anda kepada: BNM TELELINK Jabatan Komunikasi Korporat Bank Negara Malaysia P.O. Box 10922 50929 Kuala Lumpur Tel: 1-300-88-LINK atau 1-300-88-5465 Faks: 03 – 2174 1515 E-mel: [email protected] Anda boleh didakwa kerana menjalankan aktiviti skim cepat kaya mengikut Akta Bank dan Institusi-Institusi Kewangan 1989. Anda akan membebankan diri sendiri serta keluarga sekiranya anda menggunakan wang simpanan anda. Terdapat mangsa yang mengeluarkan kesemua wang simpanan atau mengambil pinjaman daripada institusi perbankan hanya untuk menyertai skim ini. Bagaimana untuk mengenalpasti pengendali skim cepat kaya? Pengendali skim cepat kaya mungkin beroperasi secara individu, perkongsian mahupun melalui syarikat dengan pendaftaran yang sah. Walau bagaimanapun, mereka masih tidak mempunyai lesen yang sah untuk mengambil sebarang jenis deposit daripada orang ramai. Berikut adalah di antara ciri-ciri skim cepat kaya yang harus anda ketahui untuk mengelakkan diri anda daripada menjadi mangsa: Pengendali tidak mempunyai lesen yang sah di bawah Akta Bank dan InstitusiInstitusi Kewangan 1989 untuk mengambil deposit. Pengendali berjanji membayar pulangan yang tinggi atau keuntungan di dalam tempoh masa yang pendek, lazimnya lebih tinggi daripada apa yang ditawarkan oleh institusi perbankan berlesen. Pengendali menawarkan cara bayaran selain daripada secara tunai. Contohnya, sebahagian daripada pulangan mungkin dibayar dengan kupon, barang kemas atau barangan elektrik. Financial 1st January 2009 MFPC Member’s Sharing 20 SK Samy RFP Deputy President, MFPC Customers have sophisticated demands these days. They are no longer satisfied with simple investments. Rather than dealing with normal agents, they prefer to seek professional financial planners who not only manage their wealth but also grow it while maintaining or improving their lifestyle through proper financial planning. An educated professional financial planners not only teaches consumers financial planning, but also creates excitement for the consumers in the process. Gone are the days where high school certificate and some basic selling skills were enough for a career as an insurance agent. To become an agent today and stay competitive, you need the power and the confidence by being well informed. Customers prefer to work with such professionals who can bring added value to them. Financial 1st January 2009 Professional Education for a Profession Many life insurance agents have established their profession through excellent standards of professional conduct, customer service and need based selling without any formal professional qualifications or certifications. In today’s world, agents who are having professional education, certification and membership from professional bodies are perceived as competent, ones that follow best practices and uphold the ethical standards of professionals. Life agency market has become fiercely competitive now. Since 1996, there has been a radical change in the life industry. Today, many professionals like chartered accountants and management graduates are being attracted to the financial advisory profession and are raising the standards of the profession. As such, it is time for the existing agency force to undertake professional education courses like RFP and acquire the skills needed to excel in this profession in the face of expansion and competition. On top of that, new distribution channels like banks, and other corporate agents, brokers, multi-level and network marketing entities are also emerging as strong competitors. With the sophistication of IT system, insurance selling is now also available via the internet and through automated teller machines (ATMs). Now, since the customers are spoilt with choices in buying insurance, they will definitely prefer the better informed, better equipped and professionallyconduct agents to deal with. With this growing awareness among the consumers, it is important that an agent is able to demonstrate to clients that he is competent, ethical and trustworthy by adhering to a code of ethics and practice standards which is at par with the global best practices. The question is whether the old – fashioned, individual agent will be able to survive the onslaught. The answer is, it depends. It depends on whether he is willing and able to upgrade himself with professional courses and training, keep continually informed about developments in their field and keep his skills continuously polished up. It helps them move from pure sales to sales management and perhaps even higher corporate responsibilities, Is this possible? Certainly, more & more sales managers like me who started their careers as agents have acquired professional skills and qualification that prepared us with technical, commercial and practical skills to make a transit to a corporate career. “Why should an insurance agent do a professional course?” 21 “Greatness lies, not in doing extraordinary things, but in doing ordinary things extraordinarily well” The primary aim of a person, when he becomes an agent, is to earn a living. Then he/she too aspires to fulfilling his hierarchy of needs as per Maslow’s theory. This goes all the way from thirst, food and shelter to selfactualization as well as respectability in society. He asks himself why he was born. He would like to be respected as a true professional by society like any other profession. The question is – “How today’s agent commanded that respect?” Many MDRT Producers earn much more than a software engineer, or similar professions, but are they respected? Self-respect is everyone’s requirement and this can be earned through professional education. Professional education to agents is important to the insurance company. The CEO, or the Chairman of insurance companies do not sell insurance and face the prospect / customers. The brand is represented by the face of their agents. If their agents are unprofessional, then the customers form negative opinion about the company based on these fundamental perceptions. Through experience, we keep learning more. Reading books will give the knowledge in theory. Having both knowledge and experience will improve the agents. Hence, Professional Education for a Profession continuous education will inevitably produce better quality professionals. Finally, with the knowledge and skills, having attached to professional bodies with codes of conduct and ethics, will produce a well-rounded professional agent, who will has tremendous faith and belief that what he is doing is right. equipped with sound knowledge in investment, tax and Estate Planning, which is essential tool to help pension planning which is important to our clients for retirement. All the 7 modules in RFP have enhanced and increased my understanding of financial planning. The Malaysian Financial Planning Agency development managers have to play bigger role in motivating his agency force to take up professional development course. He can explain to his agency force how they, through professional development, can create more business opportunity, hence create more income in a longer run. In my opinion, many agents will buy this idea. Agents who choose to invest their time and money to upgrade themselves, can bridge the gap between being good and great. Council Having gone through fundamental of financial planning as a Senior Group Sales Manager and a RFP graduate, I am now able to understand risk management & Insurance Planning on a broader scale. My team and I are that an 18 years old person with a is professional a Malaysian based organization for insurance and financial services industry. The Registered Financial Planners (RFP) programmes conducted by MFPC signifies the twin pillars of professionalism in financial planning i.e. Professional Education and Practice Excellence. Finally, education is a continuous process. Age should not be a hindering factor to study. Research has shown professional education like RFP; will change his whole approach towards financial service delivery in a positive manner. Change………and Take Charge. Financial 1st January 2009 Walk The Talk 22 Sean Lee RFP CEO, Oscar Wealth Advisory Sdn Bhd Creating Value-Added Services in Growing Financial Planning Practices (4Qs Thought) Financial planning is a BIG PUZZLE Scientific Word for normal man on the street. Everyone knows the important of financial planning but not many follow through due to lack of knowledge, skill and execution power. Many types of professionals in the financial services industry such as insurance agents, unit trust consultants, accountants or bankers are claiming to be “financial planner” or “financial advisor” to polish up their image eventhough the use of these titles are restricted under the regulated framework by Securities Commission and Bank Negara Malaysia. The financial services industry has undergone major changes over the last few decades. The types of firms includes investment banking, asset management, trust institutional, insurance, commercial banks, takaful, securities broker, mortgage brokers etc. Financial planning is a new, exciting and growing industry in Malaysia as Finance is an important aspect of our life. You work so hard to earn money and therefore we are dutybound to manage our hard-earned money well. We can manage our finances through proper financial planning process . This process is called wealth management and it involves utilizing various financial instruments of insurance, unit trust, stock, real estate, personal banking, asset management, estate planning, offshore planning legal resources and others investment resources to achieve our desired financial objectives. Financial services industry is a very competitive. As a financial service provider, what does creating value mean to us in our business? How do we deliver values to our client? How can we be the best in our practice? To enable us to grow our business, we have to distinguish ourselves from our competitors. This differentiation is commonly known as our Blue Ocean Strategy in our practices. So what make us so different? Why are we so special? We design life plans based on the needs of our customers. Eventually we create relationship and trust. We share with our customers our experience and knowledge. We understand the little stuff that makes the difference. We are able to communicate clearly without confusing them. We integrate the big picture and accomplish this without losing sight of our objectives. We light up other live. Time is money. Each of us are very valuable economic enterprise. We are in an era where creative ideas and energy flow globally at the speed of light. How do we compete in this new and faster market place? We compete by taking responsibility for our professional lives. How do we take responsibility? There are 4 questions of thought (4 Qs) that we as advisors have to address: Financial 1st January 2009 1. 2. 3. 4. Who are you? What do you do? Whom do you serve? How do you deliver value? Who are you? “Who are you?” as a common tagline in Jacky Chan movie. You define who you are daily. Why do you work every day? Why are you in this business? What do you want to be? What are your strengths and weaknesses? Are you superior in financial planning knowledge? Take a look inside you and find out who you really are. Are you the person you always dreamed of becoming? It all starts with how we face challenges and opportunities on a daily basis. You must have purpose, focus, dedication and empathy in order to grow. Even with a great attitude, we will still face challenges. Remove the word “can’t, “, “wont’” and “should” from your vocabulary. This will ensure you are in positive position to take action. Success only happens when you take action. What action do you take? You know and understand your clients’ hopes, dreams and fears. You take time to understand them. What makes you different from other advisors? You are uniquely positioned to start where other advisors stop, to ask difficult questions and listen. You must fully understand clients’ need instead of what you need. Successful businesses are those that clearly understand their client’s needs and address them. Businesses have to understand that their most valuable asset is their existing clientele and make sure that they maintain a good, and lasting relationship with them. When the needs of the clients are understood accurately, appropriate changes may be done to the business such that clients or customers will be satisfied that they got what they needed. Whatever dream that you wish to pursue, remember that you will bring your personality to your adventure. Your habits, your views on life, and your attitude are the luggage you will carry with you. Before starting out-take some time to find out who you are. What do you do? Clients usually do not take their time to be accountable for their master plan. Why? They need a coach and preferably a wealthy one. You help clients to map out their financial goals and objectives. Clients have objectives. We can starts in the fact finder where you discover dreams. What they really want, not what they need. In short, the financial planning service includes Wealth Creation, Wealth Protection, Wealth Accumulation, Wealth 23 Preservation and Wealth Distribution. - They implement your strategies - They get your opinion before other people do - They take personal responsibility for their actions - They refer you to others This selection of client process will definitely help you in establishing a solid and profitable business. You only meet with and keep those clients who want to go to the next level and will need your coaching services. How do you deliver value? (is this your model / theory? If not, you must reference) Generally, Wealth Creation is to create sustainable wealth or more. Wealth Protection is to protect against the unforeseen losses Wealth Accumulation is to accumulate lasting wealth through proper structures system. Wealth Preservation is to preserve wealth and keep it private. Wealth Distribution is to distribute wealth as the person wishes. So, you may have many business opportunities if you are competent as a wealth coach for their entire planning. One of the opportunities you have as a wealth coach is to advise your clients against making mistakes common to human behavior particularly mistakes relating to finances such as the following: - Failure to recognize the impact of inflation - Lack of tax planning strategies Procrastination resulting in the cost of waiting - Ignorance of the Time Value of Money - Inadequate protection against unforeseen losses - lack of understand distribution act - Failure to use professional advisors Having worked in the financial services for over 16 years, I am well aware that there are critical areas that cause clients to worry and other areas that create opportunities. You may Ask yourself the following 4 questions: - What do clients get from my company? - What do clients get from my company that is value add? - What do clients get from my company that they want? - What do clients get from my company that they do not want? A person buys a product or service due to many motivating factors. For example, it may be due to a desire to own something, fear of losing something, security and protection, comfort and convenience, pride of ownership and to satisfy their needs. When we understand these factors and know how to induce a need, our products or services will definitely be successful. Ability to Present the products or services to motivate the client to purchase them is therefore very important. Understanding your client needs will be easier if you see from the clients’ perspective. Make sure that you provide products of quality and lasting so that the customers will keep coming back to you for repeat purchases. Keep in touch with your customers by sending them permission-based e-mails, reminding them about your products or services so that they will select your products when there is a need.. Change the quality, features of the products to the needs of the clients will ensure that customers or clients are satisfied. After sales service will also go a long way in helping retain customers, make sure that the customer is treated well and returns home happy. Word of mouth is the best publicity to boost your sales as well as to increase your credibility. Whom do you serve? Financial planning service is an ongoing and challenging process due to human behavior and economic change. In order to ensure a profitable margin, you must do client selection process and knowing your client well. As establishing “Right Fit Client” is crucial to generate good profits and quality referral to you in future. In describing right fit clients: A variety of forces shape the professional services industry – from fierce competition and globalization to the modularization of business processes and technology. Clients want professional financial planning firms to deliver cost-effective services at value pricing value , but at the same time want to retain high expectation on your services as needed. So, how to deliver value add service is crucial. First is to understand what is it the most important and priority to them. Second is to understand why is important to them. Third is to understand how would you feel and client feel when all tasks are executed. To succeed in this environment, professional financial planning firms must continually improve their service delivery methods to increase client value and profitability and lower costs. This involves implementing more efficient resourcing and partnering processes, creatively packaging services, and co- creating value with clients. However, for any of these endeavors to work, a firm must have a foundation of hand-delivering a totally integrated solution and a comprehensive plan for wealth management. For the firms that succeed, the rewards are great. They can differentiate themselves in a crowded marketplace, lock in loyal clients, use internal and external resources more profitably, and improve time to market. In conclusion, getting through this process in not easy but it will bring more fruitful financial result in a longer term. As financial planner, you must be passionate in your career path and always put your customer as your first priority to create long term relationship resulting in profitability. - They trust you - They are willing to pay you Financial 1st January 2009 24 MFPC Activities 26 to 28 August 2008 NAMLIFA 30 th Mega Convention at Genting Highland Convention Centre 13 September 2008 SME Financial Solutions 2008 organised by Money Compass at Wisma Chinese Chamber, Jalan Ampang 18 September 2008 FA Seminar organized by Bank Negara Malaysia at Lanai Kijang, Kuala Lumpur Financial 1st January 2009 25 MFPC Activities 16 October 2008 MFPC Deeparaya Luncheon 24 – 26 October 2008 Minggu Kesedaran Kewangan 2008 at International Convention Centre, Persada Johor, Johor Bharu. 25 October 2008 - 9 November 2008 Module 7 Class at MFPC Financial 1st January 2009 Money Management 32 Mr. Tan Choon Kiang RFP, MSc.FP, FChFP Crystal Strategic Planners Bhd Learn the Secret of the Rich: Create Your Wealth on the other hand, insinuate the idea of creating your own wealth. By building your wealth, you will be able to gain profit only by maintaining your We all work to maintain our lifestyle. Many, in fact, earn enough to be able to sustain a reasonably well-appointed life. But above all, we are financially dependant on the work we do to determine how much income we are able to generate. For instance, many financial planners, insurance and unit trust agents earned millions of Ringgit in commission but they never achieve financial freedom. I would like to define financial freedom as a well-planned lifestyle where one is no longer required to work for income to cover their expenses. Financial freedom is attainable by having enough passive investment income to cover one’s expenses, and/or a large enough “nest egg” that can be liquidated over time to cover one’s expenses. In short, the key to achieving financial freedom is to have your money working for you. Don’t Just Earn, Build There is a huge distinction between earning a living and building wealth. First of all, the word earn itself suggests that you are compensated for your service, meaning that you will receive only as much as you do. Concisely, if you do nothing you will receive nothing. Build, Financial 1st January 2009 financial assets. The diagram below explains a perfect progression towards financial success. The lifestyle of success progression Based on this diagram, the progress towards financial success is categorized into three stages – learning years, earning years and yearning years. The diagram simplifies that in the first 10 to 15 years of our career line, we mostly gain much more from our earned income than we do from passive income. During the next stage, however, a slight increase can be observed in earned income and a significant increase can be seen in passive income. It is only during the third stage, the yearning years, that most of us finally reap the reward of our investments and achieve financial success by constantly generating sufficient passive investment income to cover our expenses. To further emphasise the difference between earning a living and building wealth, I would like to highlight here that building wealth is more about managing money than about making money. As a matter of fact, wealth is not measured by what you own - it is measured by the degree to which what you own can enrich your life. For example, you may be the owner of lavish sport cars but if that sport cars does not give you the freedom to achieve what you want in life, then you are not wealthy. From my perspective, I see wealth as an income stream for which you don’t have to work. To be wealthy is to have enough reliable income to maintain your lifestyle without having to work at all! To come to the point, bestselling author and businessman Robert Kiyosaki determines wealth by “the number of days you can survive forward if you stop working tomorrow”. This is the true measure of wealth – how long one can sustain a lavish lifestyle if he/she is suddenly unable to work to earn any income. Unfortunately, many people spent everything they made as they went through life and in death they left their families in debts even their insurance policies cannot cover. Take the case of Lee*, a 36 years old insurance agent for example. His job was to sell life insurance and he earned good commission from it. Thanks to his outstanding personality and salesmanship, he was very successful 33 and earned enough to afford a lavish lifestyle. He bought a luxurious doublestorey bungalow in Kuala Lumpur and changed his car almost every year, trying to impress his friends, peers and others – even people he didn’t know – with his successful career. Lee spent everything he had on luxury items from his commission, bought some term insurance but regrettably, never had enough to save or invest. Worse, he lapsed some of his insurance policies as his expenses grew more than he can cope. Lee made an irreversible mistake when he didn’t plan his lifestyle well. In 2003, tragedy struck and he died in a car accident, leaving his wife, a housewife, to cover his debts amounting more than RM220,000 even after making death claims of the remaining life insurance policies. Certainly, any of us are careful enough not to fall under the same trap but Lee’s case is a good reminder for us all to spend wisely and be fully prepared of what might happen in the future. The Lifestyle of Success The Lifestyle of Success vs. the Lifestyle of Failure The Lifestyle of Failure The diagrams below illustrate the two lifestyles – the lifestyle of success and the lifestyle of failure. In the lifestyle of success, the key is to have a standard of living lower than our earned income and invest the rest to earn unearned or passive income, and once the unearned income is equal or more than the earned income, we can have an option to retire, and even if we choose to work it is because we want to, not because we have to. Conversely, the lifestyle of failure is indicated by having our standard of living higher than our earned income. In time, our accumulated debt will reach the point of bankruptcy where we owe more than we can possibly earn. Hence, we need to carefully manage our finance from now on so that we will be able to harvest the reward in the future and avoid bankruptcy beforehand. Good Debts, Bad Debts Theoretically, debts can be seen in two ways: destructive debts and constructive debts. Destructive debt is best exemplified by credit cards used to buy things you don’t really need. For example, it’s destructive to charge a dinner for RM300 on your credit card and pay 18% interest on that dinner for months after you have digested the meal. On the other hand, if you use your credit card to buy a washing machine for RM300 and can save RM15 a week in laundry bills for the next five years, you have used credit constructively. Same credit card charge, different outcomes. Most people spend enough money on finance charges to become millionaires over a lifetime. The key is not what you buy but when you buy it. Planning for big purchases in advance helps us avoid accumulating mounts of destructive consumer debts. Therefore, it is largely important for us all to understand where our money goes by tracking our money and developing a personal budget. If you wish to get software that can help you track your money and develop a personal budget, Tan Choon Kiang can be contacted at tanck98@pd. jaring.my. One of the courses that I created and conduct titled “Rich Agent, Poor Agent” that was attended by hundreds of sales professionals further elaborates on this subject of creating wealth. Throughout this course, I elucidate in comprehensive detail what distinguish a financially successful practitioner from an average one and provide guidance to lead participants to a flourishing career. We spend our entire life working and trying to earn as much money as we can but building wealth is what matters the most as it guarantees us a better and brighter future and at the same time makes life easier for us in the long run. The opportunity to learn and take charge of your own life is in your hand. Learn the secret of the rich - don’t just earn, start creating your wealth today and be prepared for a promising tomorrow. For details of the “Rich Agent, Poor Agent” seminar and how you can attend it for FREE, please log on to www.RichAgentPoorAgent.net. Financial 1st January 2009 Retirement Planning 34 Dr. Chai Kon Lim RFP, FChFP, Master of Sciences in Financial Planning, DBA The Impact of Rate of Return on Retirement Fund Table A below shows the utilization of retirement fund based on 3.5% return and 3.5% inflation rate as follows: This paper provides a brief discussion on the impact of the rate of return in retirement account for retirement funds. I will start the discussion with a crucial question, “If the rate of return increases marginally, does it mean that the retirement fund will only have a corresponding marginal improvement?” In answering this question, I will demonstrate why we need to constantly re-examine our retirement portfolio in respect of the rate of return. For example, if it is really the case where a marginal increase in the rate of return will only produce a slight improvement in the retirement fund, there is really little incentive to make changes to the retirement portfolio since to get a higher return generally involved taking on investment with a higher risk. However, if the improvement to the fund size is very significant with a mere marginal change in rate, then, it would make sense to constantly re-examine our retirement portfolio to seek ways to increase the rate. Take this case. Allen who has just retired, places RM1 million in an account earning 3.5% per annum. He intends to utilize the retirement fund based on capital liquidation approach over a 20-year period. Assuming inflation is also at 3.5%, Allen will start with annual retirement fund of RM50,000 per annum, increasing at 3.5% per annum subsequently. Financial 1st January 2009 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Beg. Capital $1,000,000 $983,250 $964,103 $942,410 $918,018 $890,765 $860,479 $826,982 $790,085 $749,594 $705,299 $656,986 $604,427 $547,385 $485,608 $418,837 $346,797 $269,201 $185,749 $96,125 Annual Fund $50,000 $51,750 $53,561 $55,436 $57,376 $59,384 $61,463 $63,614 $65,840 $68,145 $70,530 $72,998 $75,553 $78,198 $80,935 $83,767 $86,699 $89,734 $92,874 $96,125 What does that table tells us? Let me start with some preliminary explanations on how the tabulation works. Look at Year 1 where the original retirement capital was $1,000,000 as listed in the second column. At the beginning of Year 1, an amount of $50,000 was withdrawn as annual retirement income as shown in the 3rd column. In the 4th column, the amount after withdrawal of $50,000 will be $950,000 (value in column 2 – value in column3). At 3.5% as the rate of return, this will provide a return of $33,250 (950,000 x 0.035%). The last column shows the ending balance which is also the sum total of $950,000 and $33,250 (value in column 2 – value in column 3 + value in column 4). The ending balance is then carried forward to the second year for utilization. The process of withdrawal and income generation is repeated in the second year and subsequent years until retirement capital of $1 million is Return $33,250 $32,603 $31,869 $31,044 $30,122 $29,098 $27,966 $26,718 $25,349 $23,851 $22,217 $20,440 $18,511 $16,422 $14,164 $11,727 $9,103 $6,281 $3,251 $0 End. Capital $983,250 $964,103 $942,410 $918,018 $890,765 $860,479 $826,982 $790,085 $749,594 $705,299 $656,986 $604,427 $547,385 $485,608 $418,837 $346,797 $269,201 $185,749 $96,125 $0 fully utilized or liquidated at the end of 20 years. One should also note that the amount of annual withdrawal in column 3 is increasing at 3.5% per annum in order to keep pace with inflation. For instance, the second year withdrawal of $51,750 is 3.5% higher than the first year withdrawal of $50,000. Having understood the mechanics of Table A, we shall move on to the question I posed in the beginning regarding the impact on the retirement fund with a slight change in rate. Say, if the rate of return is increased by 1%, will it mean that the annual retirement fund will only increase by 1%, i.e. to RM50,500 per year or will it be some other amount for the entire retirement phase of 20 years? To answer the question, I have provided the computation in Table B below: 35 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Beg. Capital $1,000,000 $987,840 $973,133 $955,693 $935,325 $911,822 $884,966 $854,526 $820,257 $781,900 $739,182 $691,816 $639,496 $581,901 $518,691 $449,508 $373,974 $291,688 $202,231 $105,158 Annual Fund $54,698 $56,613 $58,594 $60,645 $62,768 $64,964 $67,238 $69,592 $72,027 $74,548 $77,157 $79,858 $82,653 $85,546 $88,540 $91,639 $94,846 $98,166 $101,602 $105,158 From the table, you can see that while the original retirement capital of $1 million remains unchanged, the annual retirement fund now starts at $54,698 in the first year. The ‘improved’ initial figure increases at 3.5% in every subsequent year. What is the impact to the annual retirement fund in the first year? It is close to 9.4%! If you look at the two tables, you will note that the figures in Table B provides an increase of 9.4% in annual retirement fund over those figures stated in Table A for the whole 20-year period. Another difference between Table A and Table B is the rate of return which is 4.5% in the calculation of values in the 4th column of table B. In this example, we have shown that 1% increase in the rate of return in the retirement account has provided a significant increase in the annual retirement income for Allen. Having demonstrated the impact a slight marginal increase in rate can have a significant positive impact on the annual retirement income of the investor, we shall now take a look at the corresponding risk to be taken if an attempt is made to improve the rate. In general, a higher rate of return Return $42,539 $41,905 $41,154 $40,277 $39,265 $38,109 $36,798 $35,322 $33,670 $31,831 $29,791 $27,538 $25,058 $22,336 $19,357 $16,104 $12,561 $8,709 $4,528 $0 whether there are investment vehicles that can provide this slight increase in rate while ensuring that the increased risk is within the tolerance of the retiree. Let us start with the bank deposits, which is the most common and safest vehicle a retiree can put their money in. Currently, most of the bank fixed deposits generate about 3.5% in interest income. So, are there any comparatively safe instruments to bank deposits that a retiree can invest in to get a higher rate of 1% to 1.5% per annum? As noted in the comparison we have made earlier, identifying such safe instruments that can provide a higher return will be very beneficial to the retirees who wish to have a better standard of living. This is especially helpful when the current inflation rate is at an all-time high! End. Capital $987,840 $973,133 $955,693 $935,325 $911,822 $884,966 $854,526 $820,257 $781,900 $739,182 $691,816 $639,496 $581,901 $518,691 $449,508 $373,974 $291,688 $202,231 $105,158 $0 in investment usually involves higher risk. This is the main reason why most retirees choose to place their retirement funds in low return accounts. With the finding that even a 1% increase in the rate of return can generate so much more annual retirement income for the retiree, it is now worthwhile to explore While there is no intention to promote sales for any government or financial institutions, I thought it would be valuable to provide some examples of such low risk but higher return products to the readers. In this light, some of the products with low risks in Malaysia are as follows: Financial Products Current return/ rate Provider Remarks Merdeka bond 5% p.a. Malaysia Bank Negara Syariah compliance bond. Maximum amount of RM50k per retiree. Profit payment is payable quarterly. Exclusive 5s 5% p.a. Building Society Malaysia A subsidiary of EPF. Interest is payable halfyearly. EPF contributions 5.80% p.a. EPF (Year 2007) Dividends may vary from year to year Financial 1st January 2009 36 Preservation Key to Wealth Management Mr. Alvin Yap RFP, B. Eng M.ScFP(NZ) ChLP FChFP Principal Consultant & Managing Director of A. D. Capital Alvin Yap, the principal consultant and managing director of A. D. Capital gave FMPC an inside look of what he has almost single handedly directed his passion on getting people to preserve and protect their hard earned wealth. Alvin was an engineer by profession before embarking into the life insurance business. After 13 years in the life insurance business, he started to refine his practice and moved into financial planning. The following are excerpts from the interview he had recently on what A. D. Capital does to move ahead on the FP platform. As a financial planning practitioner, what do you see are some of the obstacles hindering the industry? We have been talking to the regulatory issues for the past five years and we are still talking about it today as you might have heard that participants were still voicing out their concern on the just concluded forum organized by Bank Negara, 18th Oct 2008. The constraints and practical aspect of running a firm are still a big challenge amongst the practitioners. We, as practitioners are subjected to numerous uncommon and unreasonable situations to deal with. Despite all this constraints, A. D. Capital have decided to look ahead, pursue, persevere and work within the framework as an independent licensed financial planner and adviser specializing in asset protection and preservation for high complex wealth individuals. We are very optimistic that things will change as we have notice in other part of the region. In your opinion, what is the main thing that needs to be done for the whole FP industry to move forward? Despite all the constraints the FP have been facing, the main thing that I feel strongly about is for the current Financial Planners to get together and not be a fence sitter. They must reach out to engaged with the industry. The current FP practice model can be quite confusing to aspiring financial planners. At the moment, its definitions and practices differ significantly from one firm to another. Aspiring financial planners must ask themselves what they are looking for in an FP firm before joining them. So, what do you think an aspiring financial planners should do? If they are starting out as interns, they must be sure the financial planning firm they join is offering them the right practice model. For example, are they looking for a fee based model, commission based model, a combination of both or even a tied structure model? There really is no right or wrong answer here. Financial planning has been misconstrued in the marketplace as merely the “sale of Financial 1st January 2009 financial products” before. But we know it’s more than financial products. So aspiring financial planners need to decide from the onset which practice model they want to use or practice in. They should not be just looking at the form, but more importantly, the substance of these financial planning firms. In what areas of FP work is A. D. Capital involved in specifically? We in A. D. Capital do a lot of work in wealth preservation for our clients. It is an area we know very well, and we have helped many of our clients to preserve their hard earned wealth for many generations. We have helped clients who have more than one family, who don’t have a clue in legally protecting their assets, who have squandering heirs and family feuds, who have many offshore assets, who have business succession issues, who have nominees in other companies but do not know what will be the best arrangement to preserve their interests, who have Muslim partners and do not understand the implications of the Syariah laws on their business upon the death of their partner, who are worried about their heirs’ competence in managing wealth, and those who have special children and need to know how best to provide for them. How do you, as an independent FP intend to participate in the emerging financial planning industry in Malaysia.. in terms of positioning your services? We are constantly reaching out to the high net worth individuals who have complex financial needs to educate them and increase their awareness of the implications of not planning for their wealth succession and distribution. We also have an internship programme for aspiring financial planners. To date, we have 43 interns, and half of them are licensed by the Securities Commission. Through our internship programme, we pass down our knowledge and experience we have acquired over the years to them. We share a proven practice model – P. A. D. Model – with the Financial Planners designees. The P. A. D. Model basically emphasizes wealth preservation above wealth accumulation and distribution. ‘P’ stands for Preservation, ‘A’ for Accumulation and ‘D’ for Distribution; in that order. Our goal for this internship programme is to produce at least 100 passionate fee based financial planners by end of the year. In addition to the internship programme, we also have our Professional Firm Alliance (PFA) involving account firms, Legal firms and Secretarial firms. These firms have clients who fall within our target market, and we want to work closely with them to provide this set of clients with additional value added services. What do you think needs to be done to educate prospective FP practitioners on financial planning from the standpoint of industry development as well as from the standpoint of transiting their careers as merely product pushers to financial planners? When we talk about product pushers, we are generally referring to the insurance and unit trust industries. They are the intermediaries. They are tied to a single product manufacturer. And the tied system has been around for many years. You can say it is deeply rooted. They have been in the market for more than 40 years. Change is, therefore, quite difficult. As a result, most stay where they are. Many have even got their professional certifications but are ‘sitting on the fence’ for fear of moving out of their comfort zone. But my advice to those fence sitter is to not be complacent and lose sight on the growth of the financial practice. What they can do during their transition is to balance between products sales and being client centric and always plan according to their clients’ financial goals and objectives. It’s not going to be easy. That much I know. There will be times where you will be confronted with conflicting interests. Since there are so many products in the marketplace, the FP practitioner must have the right sense of ethics as well. Always remember to put your clients interest first before commission. You must be transparent at all times with your clients. Estate Planning 38 En. Nordin Manan RFP, CFP, CA [M] Are You Ready to Charge a Fee? With the Securities Commission of Malaysia now accrediting the RFP designation as a recognized qualification for providing financial planning advice, the time is right for those who wish to consider the transition to fee based advisory services. On Your Marks, Get Set ………..Go! - Certainly the biggest challenge of the day will not only be the current debate of “is the market ready for it?” or coming to terms with defeatist statements like “Malaysians are not willing to pay fees for financial advice!” but rather have we, as the financial planning community, primed ourselves to face the task of educating our clients that advisory work simply means a fee is due somewhere in the equation? [Synopsis: the writer articulates that advisory fees are inevitable if the financial planning industry is to advance to the next level and the faster the practioner educates the client on this fact the faster the industry can progress. He also expounds the usefulness of “The Letter of Engagement” as a tool to help bridge the gap between the “fee versus commissions” conundrums and shows how a well drafted and presented “Letter of Engagement” may help dissipate a client’s objections to paying an advisory fee. The writer also attempts to provide a few tips to the intrepid financial planner on making the transition from commissions to fees]. To Fee or Not to Fee, that is the Question? So you have been in the financial planning industry, in some form or other, for the last fifteen [15] years, got your Registered Financial Planner [RFP] certificate in your back pocket, now wondering what’s all the fuss about charging a fee. If questions like “is it possible for me to earn an income by spending some time giving advisory based services to my existing clients and prospects?” are on your mind, then welcome to the world of fee based financial planning advisory services. Two things, firstly, it’s entirely your call. Nobody is telling you things are going to be easy. If you feel you have the maturity, talent and above all the ability to look at the big picture and empathize not only with the financials but also the emotional mind set of the prospect, then making the switch to fee based financial planning may be the thing for you. Secondly, if you don’t give it a go, you will never know, right? Not all of us are made from the same mold or have the same abilities. It may not work for all, but then again, you will never know until you give it a try! Financial 1st January 2009 If we ourselves are not ready, unsure, and not pushing hard for fee compensation for time and resources spent on advisory services, then who will? Do you see the marketplace on its hands and knees, with cheque in hand, saying “advice me, advise me please, o’ wise one”? Surely not! Fees versus Commissions The recommended Six-Step Process in constructing any written financial plan for the client, be it in the discipline of estate planning, retirement, investment, children’s education, insurance and risk management planning, etc, invariably demands that planner devotes a great amount of time and resources in crafting the financial plan for his client. planning assignments, if any, to the financial planner are meager and fall woefully short in compensating him for the time he spends in data collection, working out strategies, report writing, research, sourcing the third party solution providers and, of course, the inevitable endless tweaking of solutions to meet client’s constantly changing demands. So, when we talk about what is adequate compensation a lot depends on the balance between the product content, and therefore commissions, and the advisory content of any particular case or assignment. Estate planning advisory services may be viewed as being at one end of the scale [fee heavy] due to its concentration on the wide multitude of possible strategies, options and tools and instruments that may be employed, and the fact that each estate planning assignment is unique and requires unique responses. For sure no two estate planning cases are exactly the same! Depending on which particular cornerstone of the financial planning discipline you practice, be it wealth accumulation, allocation, protection or distribution, be aware that one shoe does not fit all, and feel free to experiment. Costing yourself? Not sure how much you are worth for an hour spent on advisory or consultation work? Try the economic cum accounting approach and do some basic costing to work out what you are worth. This endless debate over fees versus commissions does more harm than good in that it confuses not only the players in the industry but worse still, the very clients we depend on to have a clear view of the industry and its machinations. Two approaches here. One is to approach it from the revenue angle working backwards from your after-tax income expectations [take home pay], add your expected expenses and overheads [taxes, staff, office, travel, entertainment, etc, etc] then divide that by the hours you expect to work a month and that will give you your ballpark man-hour fee charge to quote clients. This would be appropriate for the better established financial planner with his own branding and positioning in the market place. Commissions, is it enough? You may consider this your “upper” benchmark! So what’s the relevance of this obvious statement to the particular discipline of estate planning, one may ask? We now move to the perennial debate of fees versus commissions as a means of compensating the financial planner. Now run your mind through the Six-Step Process and think Step 5 implementation, the tools and instruments to make your plan work! The other approach let the market cost you! Trial and error, also known as experience, will provide the financial planner with a reliable benchmark as to how far he can push his own valuation to the market. This would be more for the novice financial planning advisor feeling his way around an unknown market place. Some even start giving free advisory services just to get the experience of the entire six-step process. It’s not a bad way to get the hang of things either. The time and resources that the financial planning practioner dedicates to this end needs to be adequately compensated for as the old cliché goes “time is money”! In the estate planning context for example, Wills, trusts, business continuity agreements, valuation reports, inter-vivos gifting, and for the Muslim clients Wasiats, Harta Sepencarian Declarations and so on, all come to mind as the requisite products and instruments the estate planner would utilize to implement the estate plan. But these are the purview of the lawyers, the accountants and trustee companies, or the so called product providers, who earn the bulk of compensation. Commissions and payouts in estate You may consider this your “lower” benchmark! Using “The Letter of Engagement [LOE]” The LOE is the principal contractual document that binds the financial planner’s relationship with his client. In practice the LOE usually makes its appearance after an initial [first] meeting with the client or after conducting a Preliminary Review [refer below]. 39 Besides setting out the standard Terms and Conditions and Scope of Works of your assignment, the LOE can be utilized as useful tool in negotiating a fee for your services. a comprehensive financial plan complete with alternative strategies and solutions is only done once the prospect sign on the dotted line and an advance fee has been paid. The LOE is traditionally presented to the client at the second meeting and is an attempt to close the assignment by getting the client to sign on the dotted line. When reviewing the LOE with the prospect take the opportunity to cover the following: Here the objective is two-fold. One is to hot-button the client into realizing a more comprehensive review is necessary, for a fee and two, by charging a small fee the planner can gauge the client’s willingness to pay fees for decent honest advisory work. Highlight your credentials – use this opportunity to say a few words on your qualifications, on the various licenses your firm may possess and briefly mention cases you may have handled without compromising the confidentiality ethics to which the profession so treasures. If the client is unwilling to even commit to such a minor outlay in terms of fees just drop it and walk away! Use the Six-Step Process – attach the Six–Step Process as a standard attachment to the LOE and emphasize the standard of care, diligence and time you allocate to ensuring that the clients interests are attended to at all times. Attach a Time-table of Activities to the LOE – providing a best estimate of timings of expected activities via a time-table or work-flow analysis will give the client a further overview of the quantum of effort put into preparing his financial plans. Show the various constraints and complexities that go to determine the progress of the Client’s case. Learn To Say No! Probably one of the first skills the advisory based financial planner need to learn is to say no to a client or prospect. The art of negotiating is a difficult skill to acquire and negotiating an advisory or consulting fee is probably doubly hard because you are attempting to value yourself. Your value judgment and self esteem are at stake here and if rejection is your Achilles heel be prepared for some bruises. When “push” comes to “shove” there is a bottom line in the fees that will compensate you with what you perceive you are worth to the market. Experience in negotiating a fee only comes through experience in negotiating a fee, there is no short-cut! Show Man-Hours Budgeted for his Case – break down each activity into specific man-hours and justify the charges for your fees. Reinforce and cross reference this to the time-table of activities above. You will never find out how much you are worth unless you take off your shoes and socks and test those waters. When negotiations start to get into the ridiculous zone, learn to say “no” and walk away. You may be surprised at the new respect and light your client or prospect may view you in. There are many other activities, issues and items in the LOE that you may use to justify your fees. The ultimate objective of course is to impress the client that your time and resources spent on his assignment are well worth his money. And do not be too surprised either if that prospect, which you said “no” to, gives you a call a few years down the road or invites you to a chat to catch up with old times. A cold case comes alive again! However, be careful not to clutter your LOE with too many details. This may be achieved by relegating as much detail as possible as attachments to the main body of the LOE. Note too that the LOE is a complex document containing much more detail and data and the author only highlights here a suggested approach to justify charging of a fee. Take Baby Steps via a Preliminary Review Another useful approach is would be to encourage a prospect to commit to a Preliminary Review for a small fee. Here the planner undertakes to provide a summary overview or a snap-shot of a client’s financial situation where shortfalls or areas of concern to the planner may be brought to the client’s attention. Basically a hot-buttoning exercise, data for the Preliminary Review is collected using an abridged or shortened Fact-Finding Questionnaire and should take no more than a couple of hours to produce the Preliminary Review. The Preliminary Review technique is designed to raise questions and concerns but not to provide strategies or solutions to a client’s particular situation. Providing Rome Wasn’t Built in a Day! Don’t expect miracles. Be prepared for a fair dose of disappointments rather a roaring successful transition from commissions to fee based income. There will be more “nays” than “ayes” until you are able to hone your presentation and negotiation skills to the requisite level of professionalism. There are only three possible responses you can receive from a prospective fee based client “yes”, “no” and “maybe”. Do not give up on the “no” and “maybe” prospects. From the estate planning experience, nobody believes they are going to die tomorrow, in fact most people think they are going to live forever, so sitting down and committing to an estate planning exercise becomes a “postponable” activity. However, one fine day something will trigger that prospect’s desire to discuss what happens to his estate upon his exit from the material world. Then he will think of you. This same expectation must be applied to all prospective financial planning advisory work. It may be a failed investment, the death or disability of a close relative, or some other event that triggers the prospect to decide that it’s about time he gets some sensible advice on whatever bothers him and pay for it. Staying Within the Law The Capital Market Services Act, 2007 is a comprehensive act primarily aimed at regulating the securities industry and includes financial planning under its ambit. Malaysia has the distinction of being the first country in the world to define and regulate, by an Act of Parliament, the financial planning profession. Schedule 2 of the Act defines financial planning as a “regulated activity”: “Financial planning” means analyzing the financial circumstances of another person and providing a plan to meet that other person’s financial needs and objectives, including any investment plan insecurities, whether or not a fee is charged in relation thereto. This definition is all encompassing and leaves little room for misinterpretation. Financial planning requires a license and any contravention is an offence and shall, on conviction, be liable to a fine not exceeding 10 million Ringgit or to imprisonment for a term not exceeding 10 years or to both. If you feel so inclined to move towards a fee based revenue, then get your firm licensed or if you prefer practicing as an individual then affiliate yourself to a licensed firm. There are a few fully licensed firms out there with comprehensive affiliation schemes who are always on the look out for aspiring financial planners willing to take the plunge into fee based financial planning activities. Regulation whilst creating barriers can also present opportunities; it’s a matter of attitude! In Conclusion Hopefully this article clarifies some misconceptions that the industry may have about charging a fee and at the same time opens the boundaries and exposes the reader to the possibilities within the realm of financial planning to make the transition from commissions to fees. Above all, the writer hopes to impress the reader that fees and commissions are not mutually exclusive but rather a balance would have to be attained between the two. By charging a fee you are implying you have the knowledge and expertise to provide advice and with professional advice comes liability, so be protected! Notice we have not broached the subject of independent financial advice. That concept will be the next level for the industry and a long, long way off for now. Fee base financial planning is so new that there are literally no rules, regulations or benchmarks for success and you are in the privileged position of making the rules of the game as you go along. For the traditional product dependant financial planner heavily strapped in the confines of the commissionbased environment, do not fear there is a blue ocean out there, so get prepared! Some final words of wisdom, do not throw away your product [commissions] hat in exchange for your advisory [fees] hat but rather decide which hat to wear for the occasion, dress well and the blue ocean is yours to explore! Financial 1st January 2009 Tax Planning 40 Mr. KK Chow RFP, CA(M), FCCA, FTII 2009 Budget Commentary ranging between 0% and 28% and Chargeable income not exceeding RM35,000 is given a tax rebate of RM350. Non-resident individual A non-resident individual is taxed at a fixed rate of 28%. PROPOSED At 4 pm, 29 August 2008, our Prime Minister and Minister of Finance Yab Dato’ Seri Abdullah Bin Hj Ahmad Badawi started his 2009 Budget speech by telling us that the Malaysian economy will continue to remain stable with a GDP growth of 5.7% this year. A caring-government 2009 Budget will focus on 3 specific strategies: First Ensuring the Well Being of Malaysians - to reduce the impact of increased living costs Second Developing Quality Human Capital - to implement various programmes with the objective of creating a highly trained and competitive work force Third Strengthening the Nation’s Resilience - to remain resilient and provide significant opportunities for growth in selected sectors of the Malaysian economy With the above 3 specific strategies in mind, presented below is the 2009 Budget Commentary in detail. Resident individual Tax rebate for chargeable income group up to RM35,000 be increased from RM350 to RM400. Tax rate for chargeable income group exceeding RM35,000 to RM50,000 be reduced from 13% to 12%, and Tax rate for chargeable income group exceeding RM250,000 be reduced from 28% to 27%. Non-resident individual The fixed tax rate be reduced from 28% to 27%. Effective: Assessment Year 2009 TAX EXEMPTION ON INTEREST FROM DEPOSITS PRESENT 1 Medical and dental care; 2 Childcare benefits in childcare centres provided by employers; 3 The value of employer’s own products or services received by employees of up to RM200 a year; 4 Mobile phones and telephone bills exceeding RM300; 5 Broadband subscription fee; 6 Free transport from certain pick-up points or from between the home and work place; 7 Meals and drinks provided free of charge; 8 Group insurance premiums to cover workers in the event of an accident; and 9 Leave passage including food and accommodation in Malaysia not exceeding 3 times in a calendar year or leave passage outside Malaysia once in a calendar year not exceeding RM3,000. Interest income received from monies deposited in approved institution is taxed at 5%. However, interest income received from the following deposits is exempted from Tax: Savings account in Lembaga Tabung Haji and Bank Simpanan Nasional. The above benefits provided by the employers are allowable as full deduction if such benefits are required to be given to the employees in accordance with the contract of service. Fixed deposit account up to RM100,000 in all banking and financial institutions approved under the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Bank Pertanian Malaysia Berhad, Bank Kerjasama Rakyat Malaysia Berhad, Bank Simpanan Nasional, Borneo Housing Mortgage Finance Berhad and Malaysia Building Society Berhad; and Employees are tax exempted on allowances, benefits in kind and perquisites received from employers as follows: Fixed deposit account exceeding 12 months in institutions in paragraph (ii) above. PROPOSED Interest income received by individuals from monies deposited in all approved institutions is fully exempted. EFFECTIVE: 30 August 2008. REVIEW OF INDIVIDUAL INCOME TAX PRESENT TAX TREATMENT ON ALLOWANCES, BENEFITS IN KIND AND PERQUISITES PRESENT Resident individual Income tax rates are progressive Allowances, benefits in kind and perquisites received by employees are taxable. Financial 1st January 2009 However, perquisites in the form of excellent service, safety and long service awards are exempted up to RM1,000 annually.The following benefits in kind are tax exempted: PROPOSED 1 Petrol card or petrol allowance or travel allowance between the home and work place up to RM2,400 a year; 2 Petrol card or petrol allowance or travel allowance and toll card for official duties up to RM6,000 a year; 3 Allowance or fees for parking; 4 Meal allowance; 5 Allowance or subsidies for childcare of up to RM2,400 a year; 6 Telephone and mobile phone, telephone bills, pager, personal data assistant (PDA) and internet subscription; 7 Employers’ own goods provided free of charge or at discounted value where the value of the discount does not exceed RM1,000 a year; 8 Employers’ own services provided free or at discount provided such benefits are not transferable; 9 Subsidies on interest on loan totalling up to RM300,000 for housing, passenger motor vehicles and education. The exemption be given to existing and new loans; 10 Medical benefits exempted from tax be extended to include expenses on maternity and traditional medicines such as ayurvedic and acupuncture; 11 Existing perquisites be extended to awards related to innovation, productivity and efficiency such as the Six Sigma Award and the exemption be increased from RM1,000 to RM2,000 a year. The above exemptions are not extended to directors of controlled companies, sole proprietors and partnerships. Expenses on allowance, benefits in kind and perquisites provided by employers are given full deduction even though such benefits are not stipulated in the service contract of the employee. EFFECTIVE: Assessment year 2008 and above except proposal (i) which is effective from assessment year 2008 to 2010. COMMENTS: It is of the opinion that the amounts of item 3 allowance or fees for parking and item 4 meal allowance should be reasonable and not excessive or it may be questioned by the Inland Revenue Board as to its allow ability. INCREASING THE LIMIT FOR DEDUCTION ON CONTRIBUTIONS PRESENT TAX Contributions made by companies are given deductions for the purpose of tax computations up to 7% of aggregate income as follows: i) Contributions made in the form of cash to approved institutions, organisations or funds for charitable purposes under S 44(6); ii) Contributions made in the form of cash or the cost of contributions in the form of goods for sports activities approved by the Minister of Finance or Sports Commissioner under S 44(11B); and iii) Contributions made in the form of cash or the cost of contributions in the form of goods for projects of national interest approved by the Minister of Finance under S 44(11C). PROPOSED The limitation for tax deduction be increased from 7% to 10% of aggregate income. The proposal is not extended to companies under the Petroleum (Income Tax) Act 1967. EFFECTIVE: Assessment year 2009. STAMP DUTY EXEMPTION ON LOAN AGREEMENTS FOR RESIDENTIAL PROPERTIES PRESENT Purchasers of residential properties are given stamp duty exemption on the following instruments: 1 All instruments including loan agreements for the purchase of low cost houses are given full exemption; and 2 Instruments of transfer for residential properties priced up to RM250,000 are given 50% exemption. The exemption is given to sales and purchases agreements executed beginning 8 September 2007 to 31 December 2010 and given only to one residential property for each individual. PROPOSAL The loan agreement instruments executed for the purchase of residential properties priced up to RM250,000 be given 50% stamp duty exemption. The exemption is given to individual Malaysian citizen and limited to the purchase of one residential property only. EFFECTIVE: 30 August 2008 to 31 December 2010. COMMENTS: Please note that unlike as in the period from 8/9/2007 to 29/8/2008, the proposal is applicable, as from 30/8/2008 to Malaysian citizen only. The full stamp duty exemption on transfer of properties between husband and wife on the basis of love and affection remains unchanged. DEDUCTION ON EXPENSES RECRUITMENT OF WORKERS PRESENT FOR Cost of recruitment of workers is allowed for the tax deduction provided such expenses are incurred after the companies have commenced business. PROPOSED The recruitment cost incurred before the commencement of business like expenses on participation in job fairs, payment to employment agencies and head-hunters are now tax allowable. EFFECTIVE: Assessment year 2009. ENHANCING GROUP RELIEF PRESENT Group relief is a tax treatment which allows losses of a company to be set-off against the income of another company within the same group. Currently, this treatment is limited to 50% of current year unabsorbed losses to be set-off against the income of another company in the same group. PROPOSED The rate of current year losses allowed to be set-off against the income of another 41 company within the same group is increased to 70%. EFFECTIVE: Assessment year 2009. ACA TAX INCENTIVE TO ENHANCE THE USE OF ICT PRESENT Accelerated Capital Allowance given on information and communication technology (ICT) equipment including computer and software can be claimed within 2 years with an initial allowance of 20% and an annual allowance of 40%. PROPOSAL The period for claiming Accelerated Capital Allowance be accelerated from 2 years to 1 year. EFFECTIVE:Assessment year 2009 to 2013. CAPITAL ALLOWANCE FOR SMALL AND MEDIUM ENTERPRISES PRESENT Small asset valued less than RM1,000 can be claimed within 1 year but total claim is limited to RM10,000. Expenses on certain assets eligible for Accelerated Capital Allowance such as security control equipment and ICT equipment, the capital allowance claimed depends on the accelerated period specified. SME is defined as a company resident in Malaysia with an authorized ordinary share capital of RM 2.5 million or less at the beginning of the basis period of a year of assessment. SMEs are subject to income tax rate of 20% on the first RM 500,000 chargeable income and 26% (AY 2008) on the remaining chargeable income. PROPOSAL i) SMEs are given Accelerated Capital Allowance on expenses incurred on plant and machinery acquired in the years of assessment 2009 and 2010.The allowance is to be claimed within 1 year, that is, in the year assessment the asset is fully acquired, and ii) SMEs are not subject to the maximum limit of RM10,000 for capital allowance on small value assets. For the purpose of income tax, the definition of SMEs is reviewed as a company resident in Malaysia with an authorized ordinary share capital of RM 2.5 million or less at the beginning of the basis period of a year of assessment WHEREBY such company does not control or is controlled directly or indirectly by another company which has an authorized ordinary share capital of more than RM 2.5 million. Financial 1st January 2009 42 EFFECTIVE: Proposal (i) is effective for years of assessment 2009 and 2010 and proposal (ii) is effective from year of assessment 2009. TAX TREATMENT ON COSTS OF DISMANTLING AND REMOVING ASSETS AS WELL AS RESTORING THE SITE PRESENT Currently, “costs of dismantling and removing assets including plant and machinery as well as restoring the site where the asset was locate” do not qualify for allowance under Schedule 3, Income Tax Act 1967. However, FRS 116 states that the cost of as asset includes the estimated costs incurred relating to the obligation to dismantle and remove the asset and to restore the site on which the asset was located. PROPOSED Special provision is introduced to provide for balancing allowance on the cost of dismantling and removing plant and machinery as well as restoring the site where the asset was located subject to the following conditions: - The eligibility for such tax treatment only applies where the obligation to carry out works on dismantling and removing the plant and machinery as well as restoring the site is provided for under any written law or agreement; and - Such plant and machinery is not allowed to be used by that person in another business or used in the business of another person. The total balancing allowance is determined by adding “the cost of dismantling and removing the plant and machinery as well as restoring the site” to the balance of expenditure on plant and machinery at the time of the disposal. EFFECTIVE: Year of assessment 2009 REINVESTMENT ALLOWANCE PRESENT (a) Reinvestment Allowance (RA) is given to companies engaged in manufacturing, processing and selected agricultural activities that reinvest for the purpose of expansion, automation, modernisation or diversification for companies that have been in operation for at least 12 months. (b) Can be claimed for 15 consecutive years from the year of assessment the company makes the first claim. (c) Given at 60% of the qualifying capital expenditure incurred in a year of Financial 1st January 2009 assessment and is allowed to be set-off against up to 70% of statutory income. Companies that achieve a certain level of productivity based on a process efficiency ratio and companies located in promoted areas (Eastern Corridor of Peninsular Malaysia, Perlis, Sabah and Sarawak) are allowed to offset against 100% of statutory income. (d) Where an asset is disposed off at any time within 2 years from the date of acquisition of the asset, the RA given shall be withdrawn in the year of disposal. (e) There are no legal provisions to prevent companies within the same group from claiming RA on the same asset that has been given RA. Companies may also dispose off an asset which has been given RA after 2 years from the date of purchase without any penalty imposed even though the RA on that asset has been fully set-off. need to be revised, 18 MONTHS and 3 YEARS are considered more reasonable and realistic. TAX TREATMENT DIRECTORS’ FEES PRESENT ON BONUS AND Income tax on bonus and directors’ fees is based on the year such income are receivable and tax payer will declare the bonus and directors’ fees in the year such incomes are received which will involve a review of income tax for previous year of assessment. PROPOSED Bonus and directors’ fees be taxed in the year such incomes are received. EFFECTIVE DATE: Year of assessment 2009. 2009 ECONOMIC PROSPECTS (a) Manufacturing activity be given a more specific and clear definition under schedule 7A, Income Tax Act 1967. The Malaysian economy is projected to grow by 5.4% in 2009. Growth is expected to be broad-based with positive contributions from all economic sectors and spearheaded by the services sector, which is projected to grow by 6.9%. External trade will remain buoyant with exports growing at 4.6%. (b) The condition that the company must be in operation for at least 12 months to be eligible to claim RA be extended to at least 36 months. Per capita income is estimated to increase by 8.1% to RM27,900 or in purchasing power parity terms, equivalent to USD17,600. PROPOSED The criteria and conditions of these incentives be amended as follows: (c) A company purchasing an asset from a related company within the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset. (d) The provision to claw back RA for assets disposed off within a period of 2 years from the date of purchase of the asset be extended to 5 years. EFFECTIVE: Year of assessment 2009 COMMENTS: 1 The condition that the company must be in operation for at least 12 months to be eligible to claim RA in 2009 budget proposals be extended to at least 36 MONTHS. 2 The provision to claw back RA for assets disposed off within a period of 2 years from the date of purchase of the asset in 2009 budget proposals be extended to 5 years. The ‘36 MONTHS’ and ‘5 YEARS’ conditions are considered too restrictive and unrealistic. If the original ‘12 MONTHS’ and ‘2 YEARS’ conditions CONCLUSION In closing his 2009 Budget Speech, the Prime Minister and Minister of Finance, YAB DATO’ SERI ABDULLAH BIN HJ. AHMAD BADAW said: “The tabling of the 2009 Budget demonstrates yet again that the Government is responsive to the concerns of the ‘rakyat‘ and has taken measures to lighten the burden of all Malaysians, particularly the lower income group. The approach taken is focused towards support and assistance, which not only improves the quality of life but also enables all Malaysians to enhance their productivity. This Budget is in line with the medium term plan as articulated in the National Mission and the Ninth Malaysia Plan to further develop the nation towards Vision 2020.” Investment Planning 44 En. Fadzli Anas CEO of Philip Mutual Bhd Online Unit Trust : Threat or Opportunity? anywhere at their convenience. For example, an investor can be in New York and yet still be able to keep close track of his investments despite the 12 hours time difference. Likewise, online unit trust facilities also give investors the freedom to easily conduct transactions like buying, switching or redeeming their unit trust investments at their own time, whether it be late at night or first thing in the morning. savings in the sales charge might look minimal but I think everyone can agree that over a long period of time, say 10 years, it would have a tremendous compounding effect. Furthermore since the lower sales charge is offered all year round, investors now need not wait for promotions by banks and UTMCs to get the best price for their unit trust investment. 4) Research and fund updates The Internet has changed the way we lead our everyday lives. Almost everything is now available through a few clicks of the mouse at our own comfort and convenience. The Internet has made our lives much easier: we can buy things online, book hotels, restaurants and flight tickets, trade shares and now invest in unit trust online. While online unit trust is relatively new in Malaysia, the concept has grown quite popular in other countries since its introduction several years ago. We need not go far to study the impact and development of online unit trusts; in Singapore, this platform is now on par with other more conventional distribution channels. In fact, the online platform is PhillipCapital’s main distribution channel in Singapore and contributes around 50% to our revenue. So, what are the factors which gave rise to the online unit trust platform’s popularity among investors today? Benefits of online unit trust 1) Ease of transaction With online unit trust, investors can do their transaction anytime, Financial 1st January 2009 Another huge benefit of trading on a multi-unit trust online platform is the reduction of paperwork. With just one Master Account, investors can transact units in various unit trust funds managed by different unit trust management companies (UTMCs). Monitoring the investments is also easy with the provision of one consolidated statement that details all the various investment holdings at different UTMCs. As part of investor education and also to assist investors to make an investment call, online unit trust providers normally value add their service by providing reports and articles. These reports and articles, written by analysts, fund managers and professionals, provide relevant and up to date information on a wide range of topics. As an approved Institutional Unit Trust Adviser (IUTA), Phillip Mutual currently partners with at least 20 UTMCs and will offer more than 200 funds covering various economic sectors, industries and region – arguably the widest selection of unit trust funds available on a single transaction platform. Once our e-unit trust platform is launched in November, investors can shop for their preferred unit trust investment among these more than 200 funds - all on the same e-unit trust website. At Phillip Mutual, we provide investors with market outlook and strategies from different UTMCs on a periodic basis. Via our in-house Phillip Funds Focus publication, investors will be professionally guided in selecting their investment as the publication highlights current issues on local and global markets, economic review and unit trust recommendations based on the prevailing market outlook and investment strategies. Better still, these reports will also be made available in investors’ mailbox, i.e. it will be delivered directly to the client’s email as soon as it is published online. 3) Lower Cost 5) Portfolio monitoring Operating from an online platform, unit trust providers are able to offer investors substantial discounts in sales charge as it does not have to maintain physical branches across the country. This lowers the operating expenses substantially and the cost reduction can be passed back to the investors in the form of lower sales charge. For example, a three percent One of the common issues faced by unit trust investors is that they are unaware of the performance of their investment. With online unit trust, investors now have the facility to view the current portfolio value anytime they want or need to. Moreover, the portfolio will be made transparent and will not have any element of “sugar-coating”, such as eliminating 2) Wider Choice and Variety 45 products, as earlier mentioned, will allow financial planners to add on the appropriate premium for their valueadded, personalised services. the sales-charge and showing the gross performance in order to display “higher returns performance”. To further make it more convenient for investors who invest via our onestop e-unit trust platform, we provide one consolidated statement of all their investments in different unit trusts managed by the different UTMCs. This eliminates the need for investors to organize the different statements they receive for each of their unit trust investment managed by different UTMCs. Now, there won’t be any need for them to maintain different ring folders for each UTMCs that they invest with, we will consolidate all the different statements for them and give them just one single statement detailing all their investments. We’ve now covered the key benefits of online unit trust platform for investors. What about the financial planners? How can financial planners use the online platform to their advantage, and turn a perceived threat into an opportunity? Advantage of online unit trust platform for financial planners The issuance of the Federation of Malaysian Unit Trust Managers’ (FMUTM) Guidelines for the Registration of Corporate Unit Trust Advisers in October last year paved the way for financial planners who are registered with FMUTM to market and distribute unit trust products. This bodes well for the development of the Malaysian financial planning industry as financial planners can now offer investors a more extensive range of unit trust products appropriate to their needs. As our economy develops and investors become more educated, there is a genuine and growing need among Malaysian investors for high quality financial advice. I believe that nothing can compete with the interactive, human factor, therefore online unit trust can never replace the advisory and servicing Conclusion role of a financial planner completely. To complement our B2C online unit trust platform which provides a wealth of benefits for investors as mentioned above, we provide B2B facilities which financial planners can leverage on to reach out further to their clients. Our B2B proprietary platform enables financial planners to assess, source and monitor their clients’ investments all from a single platform. It allows financial planners greater flexibility to keep track of their clients’ investments anytime of the day, anywhere in the world. Additionally, financial planners can outsource the back-office aspects of their operation to our unique B2B platform’s advanced facility, freeing them up to fully focus on servicing their clients’ needs while minimizing their resources. Furthermore, the reduction in distribution costs of the various financial Today’s technological evolution has made it inevitable for Malaysia to adopt this new distribution channel. As with anything new, there will be resistance from some skeptics. However critics may want to remember that in the past, objections have always greeted each new innovation and more often than not, the critics too eventually benefitted from those innovations. Moving forward, Phillip Mutual will be working hand in hand with financial planners to reach out and promote our unit trust platform, for the benefit of both investors and financial planners. We strongly believe that the online unit trust platform offers a myriad of benefits and advantages in terms of convenience, time and cost savings to both investors and financial planners alike. Therefore, instead of being a threat, we believe the presence of online unit trust is indeed an opportunity for everyone. Launch of Phillip Mutual Berhad’s Online Unit Trust Platform 19 NOVEMBER 2008 at Mandarin Oriental Financial 1st January 2009 Invitation Financial 1 st advertisement FINANCIAL 1ST ADVERTISEMENT BOOKING FORM YES! We wish to advertise in Financial 1st Please tick ( ) where applicable * 10% Special Discount to MFPC Corporate Members Back Full-colour, glossy RM5,000 Inside Front Cover Full-colour, glossy RM4,500 Inside Back Cover Full-colour, glossy RM4,000 Full Page Full-colour RM3,000 Your Particulars Name Designation Company Name Address Tel Fax Date of Submission Please call Ms. Kogila of the Malaysian Financial Planning Council (MFPC) at 03-2693 1900 for inquiries. Malaysian Financial Planning Council Suite 7.01, 7th Floor, Menara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur. Tel: 03-2693 1900 Fax: 03-2693 1700 Financial Quotes “Resolve not to be poor: whatever you have, spend less. Poverty is a great enemy to human happiness; it certainly destroys liberty, and it makes some virtues impracticable, and others extremely difficult”. Samuel Johnson “Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing”. Warren Buffet PUZZLES #SǑ̢5FǚҕȪST (Υ5ɚӂ:ΝӅSҕȢ͝G"OȠ4UǑOȠ"$IǑODȺ5Υ8̢&YD̢ҿ̢OH(̢̐T &ͩҿ҅Jɚ.Ӆґӂ"ҍ̢WȺ#Zyyyyyyy "͝͡1̴҅[ɚ"SȺ/е5SǑͩTGȪSǑȒMȺźȺ-VD͕Z8̢ͩOȪST8̢͝͡ #Ⱥ"ͩOΝӅODFȠ*źȺ/ˊ '̢OǑODJǑ͡ґӂ1ӅȒ̨͝DǑҿJΝźȺ +VE̔ȺT%ɂ̨ґJΝ*T'̢OǑ͡ 1. A snail creeps 5 ft up a wall during the daytime. After all the labor it does throughout the day, it stops to rest a while but falls asleep!! The next morning it wakes up and discovers that it has slipped down 3 ft while sleeping. If this happens every day, how many days will the snail take to reach the top of a wall 33 ft in height? 2. It was semester break, and so I decided to visit my friend Chua’s condominium. Chua and I had a splendid time. In the mornings, we both would go for a jog. We spent the evenings in the swimming pool. Tiring as these activities were, we could manage only one per day, i.e., either we went for a jog or swim in the pool each day. There were days when we felt lazy and stayed home all day long. Now, there were 10 mornings when we did nothing, 14 evenings when we stayed at home, and a total of 16 days when we jogged or swam. For how many days did I stay at Chua’s condominium? 4. Bala takes the LRT to work and uses an escalator at the LRT station. If Bala runs up 8 steps of the escalator, then it takes him 40 seconds to reach the top of the escalator. If he runs up 14 steps of the escalator, then it takes him only 25 seconds to reach the top. How many seconds would it take Bala to reach the top if he did not run up any steps of the escalator at all? 5. “Dad, where had you been?” asked Ali. “I had been to the store room, Ali,” replied Dad. “And do you know what I saw there? There was a big web with 23 spiders and flies on it.” “How many spiders were there?” asked Ali with curiosity. “Well, there were a total of 154 legs on the web,” answered Dad with a smile. “Now you can find out how many spiders were there by yourself. Can’t you?” Can you help Ali find out how many spiders were on the web in the store room? 3. Annie: “When I add 3 times my age 3 years from now to 4 times my age 4 years from now, I get 8 times my current age. How old will I be 3 years from now?” Entry form – Your particulars 1. Name : ………………………………………………………………… 2. Gender : ………………………………………………………………… 3. I.C. No. : ………………………………………………………………… Please indicate your answer in the table below Question 4. Company name : ………………………………………………………………… 1 5. Address : ………………………………………………………………… 2 6. Tel / H/P No. : ………………………………………………………………… 3 7. Fax No. : ………………………………………………………………… 4 8. Email add. : ………………………………………………………………… 5 Answer Complete the following slogan in less than 20 words: Financial Planning is for everyone today because ………...………………………………….……………………………… ………………………………………………………………………………………………………………………………………… Submit your answers by 1 April 2009 via fax or email to: 48 Ms Kogilavany Malaysian Financial Planning Council Suite 7.01, 7th Floor, Manara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur, Malaysia. Tel: 03- 2693 1900 Fax: 03- 2693 1700 Email: [email protected] iFast Three Reasons for Investing in Malaysia It is an irony that to support our position that there are good reasons to invest in Malaysia now, we need to start with a piece of bad news – ‘recession’ may be just around the corner. It is almost common knowledge that there is a likelihood that Malaysia will enter a technical recession in the first two quarters of 2009. The word ‘recession’ often creates anxiety amongst investors so it warrants a closer look. A technical recession occurs when a country goes through two consecutive quarters of negative growth. The country’s construction sector, mining and plantation sector have a bearish outlook and this makes it very likely for Malaysia to experience low or negative growth in the coming months. The construction sector has been in the doldrums since the government postponed some of the major projects in the Ninth Malaysian Plan. Meanwhile, both mining (crude oil and related products) and agriculture (palm oil plantations) the backbone of strong economic growth for the country have seen sharp falls in its price. The plantation sector suffered from a decline from falling crude palm oil prices. As at 26 Nov 2008, CPO was trading at US$410 per metric tonne a sharp fall from its high of US$1319.4 per metric tonne in March 2008. Both crude oil and palm oil prices dropped significantly by 66% and 69% from their respective highs (Refer to chart 1). Chart 1: Crude Oil and Palm Oil Price Movements So, why should investors invest in Malaysia? It boils down to three points: valuations, government support and increasing political stability. 1. Yes, It Is Cheap! The KLCI market is a bargain! Year-to-date, the KLCI has dropped by 39%, wiping out its gain of 31% made throughout 2007. The KLCI market is currently trading at a low priceearning (PE) ratio of 9.9X as at 18 November 2008. This PE level was last seen during the Asian Financial Crisis. The priceto-book (PB) ratio is also low at 1.3X in November 2008. The country’s 5-year average PB ratio is 1.87X. Chart 2 shows the performance of the KLCI and its PE and PB Ratio. 49 Chart 2: KLCI and its PE & PB Fortunately, Malaysia has not been directly impacted by the financial crisis. This is due to relatively tighter government’s investment rules. Malaysian financial institutions did not invest subprime-related investments. And after several mergers and consolidations in the financial sector, Malaysian financial institutions are in much better shape to withstand this financial storm as compared to the Asian Financial Crisis. According to the Fitch Rating’s, the Malaysian banking system is relatively healthy, with its Tier 1 capital ratio and capital adequacy ratio (CAR) at 10% and 13% which higher than the minimum required ratio of 4% and 8%. Tier 1 capital measures the banks’ financial strength fro m a regulator’s point of view (CAR measures the capacity of the bank to meet its liabilities and incorporates other risk such as credit risk, operational risk, etc). Non-financial Malaysian companies are also fairly healthy as compared to American companies. By comparing the ability of the top 25 listed companies on the KLCI and Dow Jones, ranked by market capitalization, to serve their short term and long term debt obligations, it appears that Malaysian companies are fundamentals of Malaysian companies are far better than their US counterparts in meeting the debt obligations.’ Malaysian companies generally have higher current ratios, with an average of 2.1X as compared to US companies’ 1.2X (at 19 November). The higher the ratio, the more likely that these companies can meet their short term debts. However, comparing the total debt to equity, we find that Malaysian companies tend have a slightly higher debt-to-equity ratio than US companies. This could mean that Malaysian companies have slightly been more aggressive in financing its growth via debt. Financial 1st January 2009 50 iFast Three Reasons for Investing in Malaysia Table 1: Comparisons between the top 25 companies on the KLCI & Dow Jones 3 Reasons for Investing in Malaysia Source: iFAST Compilations, Bloomberg 2. Government support The Malaysian government is working hard to boost the economy. A RM7 billion stimulus package was launched last November which is equivalent to about 1% of Malaysia’s gross domestic product (GDP), looks set to be the additional ammunition needed to fire up the economy, apart from the Budget 2009. The stimulus package is focusing on industry sectors that will be able to benefit most Malaysians, including infrastructure and educational funding by the government This includes RM500 million of construction on roads, RM200 million on education, RM400 billion on high-speed broadband infrastructure, RM500 million on public transport, RM1.5 billion for an investment fund and RM1.2 billion for low cost housing. However, the effect from the pump-priming might not be seen immediately. We expect to see the impact in the second half of 2009, which is also when we expect the economy to start to recover from the economic downturn. 3. Stabilising Political Landscape After the 8 March election, the political landscape seems to have stabilised after much upheaval. The probability of an earlier change of federal government in the election aftermath, which may be a potential destabilizing factor to the economy if it does happen, seems to have cooled down somewhat. In any case, regardless of which party will dominate the country’s political landscape, we believe that the ruling Financial 1st January 2009 party will try to prove its ability. The best way to do this is through stimulating the economy during this turbulent period. Political uncertainty is always short-term noise. Forward Looking Stock Market The stock market is forward-looking, moving about 6 to 9 months ahead than the real economy. We are seeing economic indicators such as slower exports, softer manufacturing sales and lower industrial production and will likely be hearing more bad news in the coming months. However, the KLCI start to recover by early next year. Our earnings growth rate of 4.4% and 3.1% for 2008 and 2009 has already factoredin the lower expected corporate earnings growth due to the global downturn. But its lower PE levels of 10 .5X and 10. 2X for 2008 and 2009 (as at 2 8 November 2008) makes Malaysia an attractive investing buy. .....CONTINUE Ê* Ê Ê9"1ÊÊ*,/Ê Ê9"1ÊÊ*,/Ê Chapter 4 : Tax Matters Time for another the teh-tarik stall session among the 3 friends… this time the discussion is on tax matters Krishnan Sigh! It is that time of the year again… Karim Yeah, filling up the forms are so laborious. That’s why I’ve appointed a tax agent to do the tax submissions on my behalf. Keong So, how are people in business taxed differently from us employees? Karim People in business will have to prepare the accounts for the business first, and then we prepare the tax assessments from whatever we earn from our business. Krishnan Why pay a tax agent to do your tax? The tax officers at the IRB (Inland Revenue Board) to review our tax returns, and they will advise us if we have not made any deductions or we make mistakes in our computations, wouldn’t they?mistakes in our computations, wouldn’t they? Karim I’m not sure about that, but at least, I’m free from all liabilities if they are the ones who make a bad mistake. Let’s examine and clarify some the statements made by our three friends: Karim People in business will have to prepare the accounts for the business first, and then we prepare the tax assessments from whatever we earn from our business. Businesses earn profits, whereas employees earn a salary. Profits of a business may differ from month to month, but employees’ monthly salaries seldom differ. In order to arrive at profits, which are what businesses really earn, all expenses which are “wholly and exclusively” incurred for generating revenue are allowed to be deducted from the revenue. For tax purposes, the net profits (revenues less operating expenses) need to be adjusted before arriving at the statutory income for the business. Generally, disallowable expenses such as depreciation (a method of writing off the cost of a business asset over time) are added back to the net profits. Instead, capital allowances, which are the tax equivalent of depreciation, are deducted to arrive at the statutory income. Just like for employees, the self-employed, after arriving at the statutory income, can deduct the same personal reliefs (and rebates, where applicable) for specific personal expenses incurred, for example, life insurance premiums and full medical examination costs. Krishnan Why pay a tax agent to do your tax? The tax officers at the IRB (Inland Revenue Board) to review our tax returns, and they will advise us if we have not made any deductions or we make mistakes in our computations, wouldn’t they?mistakes in our computations, wouldn’t they? Under the self-assessment system (SAS), the taxpayer must fill in his own tax assessments and compute his tax payable. The tax officers at the Inland Revenue Board will only check for under-declaration of tax. They are in no way obligated to inform the taxpayer that certain deductible allowances have been missed out. Karim I’m not sure about that, but at least, I’m free from all liabilities if they are the ones who make a bad mistake. The onus of correctly and accurately declaring one’s taxes is on the taxpayer himself. Just because he appoints a tax agent to assist him in preparing the tax returns, it does not mean that he can absolve his responsibilities on his own tax assessments. He is still ultimately responsible for his own taxes. xÓ We need not view taxes as being mere financial burdens. In fact, we should be thankful that we have taxes to pay, because this means that we are capable of earning an income. Just follow these simple tips and it can help you to keep your taxes low or even reduce your taxes: • Ensure that all tax reliefs and/or rebates are claimed. Keep abreast of new reliefs or increases / decreases in reliefs proposed in the annual Budgets. Reliefs such as the cost of full medical examinations of self, spouse or children up to RM500 have just been introduced in recent times. • Pay your taxes on time. Penalties are automatically imposed for late payments as it does not make sense for a person to declare but not pay his/her taxes. Expectedly, penalties will increase your tax payable and therefore result in higher cash outflows. • Have a personal filing system to keep all receipts and relevant documents in a proper manner. The IRB estimates that it can perform an audit on 20% of all taxpayers every year. That means, every single taxpaying individual, business or company can expect to be visited by the IRB once in every 5 years for an audit. The lack of supporting documents could lead to increased tax liabilities with interests. • Make little adjustments to your family’s lifestyle to maximize on tax benefits. For example, since Budget 2007 has proposed an increase in the relief for purchases of books up to RM1,000, spend less money on recreations such as computer games and DVDs and more on interesting books for children. • If you are charitable and wish to make contributions for the betterment of our community, ensure that they are made to approved organizations whereby all donations are deductible from the aggregate income. Ê* Ê9"1ÊÊ*,/Ê Ê Ê9"1ÊÊ*,/Ê Chapter 5 : Managing Personal Risks The financial risks we have to face daily are discussed by the three friends in this meeting…. Karim Hey Krishnan, so how’s Chris doing? Is his dad still in coma? Krishnan Are their advice objective? How different are they from those who only push products? Krishnan Well, his dad has been in that state for two months now. He’s still in the hospital. I didn’t know that a fall off the roof could be that bad. Karim Oh! There should be some good ones like mine. He did a very thorough analysis of my risk situation before advising me. Very professional … you may want to contact him, so here is his contact. Keong So how about the hospital bills? Does his dad have any medical insurance? Krishnan No. That’s the tricky part. Their family savings are running low, so Chris is thinking of talking to his relatives, asking if they could help. Sad case, really…. Keong Well, that’s the problem if we are uninsured. Has he not consulted a financial planner on such matters before? I understand there are quite a lot of them around. Karim True, but they can only give advice. But how many of us took their advice? It’s too late now for Chris…can only get insurance when you don’t need it. Keong Errr… I’m provided with a group term life, a group PA and H & S benefits which is also extended to my family. Isn’t that sufficient to cover my risks? Krishnan Me, too! I have an endowment plan with a few medical riders attached to it. It will give me back some money when I reach 50, but I find that the returns are not so attractive. Wonder what your planner has to say. Karim It’s no harm getting a review from a professional if you are unsure of your coverage adequacy. Here is the number …tell him its my recommendation … xÎ Let’s discuss some of the matters that were mentioned by our 3 friends: Krishnan “How would we know that they are giving us the best advice?” The standard of advice on insurance matters from financial planners and insurance intermediaries has greatly improved over the years. The regulators are ensuring this trend continues. Here are some industry developments that support this view: • Financial planners and insurance intermediaries are now required by Bank Negara’s guidelines to perform a fact-find on the client and analyse his/her situation thoroughly before they can recommend any insurance plan. • Continuous professional development of a certain number of credit hours per year is now a compulsory requirement for practitioners in the financial planning and insurance industry. • Increasingly, more of those practitioners in the Insurance industry are obtaining qualifications such as Registered Financial Planner (RFP) to improve their ability and standard of service to their clients. Keong “...I’m provided with a group term life, a group PA and H & S benefits which is also extended to my family. Isn’t that sufficient to cover my risks?” Group insurance schemes usually give a very basic cover to employees. It is important to consider the following issues even if you are already covered by such schemes: Are you going to stay employed in the organization for your entire working live? Remember that you lose the coverage the moment your leave! What about after your retirement and for some reasons you still need coverage? There are modern insurance plan that cover your retirement needs which you should consider. Will the next company you work for provide the same kind of insurance schemes to cover you? What if there are no such schemes at all? The safest route to personal risk management is to cover yourself adequately. If you happen to lose the group schemes coverage and still need insurance protection, will you be insurable then? The best time to insure is when you have no immediate need for insurance .... as that is the only time you can get it! Is there any limit of coverage on the group insurance, for example, a limit of RM20,000 for hospitalization coverage per annum? It is essential to get a financial planner apt at insurance matters to analyse your insurance needs and help you determine if the group scheme coverage is adequate. Krishnan “…I have an endowment plan with a few medical riders attached to it. It will give me back some money when I reach 50, but I find that the returns are not so attractive. Wonder what your planner has to say... ” The principal purpose of an insurance plan, including an endowment plan, is protection. Hence, it should not be compared to other forms of investment vehicles, with no protection feature. Traditional endowment policies provide for both savings and protection. Compared to other plans like whole life plans, there is a stronger emphasis on the saving aspects for endowment plans. The trade-off is lower protection-value. There are also pure protection plans, called term insurance, where there is no cash value feature. Riders, which may include critical illness or hospitalization and surgical coverage, etc. are attachments to a basic life policy, to give a broader coverage of risks. They usually ends with the basic policy term or over a fixed term that last no longer than the basic policy term. Over the years, a broader spectrum of insurance riders are been introduced to meet the mercurial needs of the public and these should be explored to match your needs. x{ !!! !! ! # % *#) * "$! ( &# & % ! ('&(* + %& $ ! ! ! %# ( &# & ! ('&(* +% %& ! !! "$! * *#) !!! !! #! % ( &#*#) * & ! ('&(* +% %& "$! $ ( $ & ' "#' () $ $ #% ( &#% * $ & -' ,'#( "#' () $ #% &#% * #( ,'