Assalamualaikum dan selamat sejahtera.
Bulan April lepas, adalah hari bersejarah untuk sesiapa yang telah menghabiskan Shariah RFP tahun sebelumnya. Paling bermakna adalah ucapan seorang Assistant Governer BNM (Bank Negara Malaysia) memperihalkan isu Financial Planner & Financial Advisor pada masa akan datang.
Key Note Address by Assistant Governor Jessice Chew Cheng Lian
7th Malaysian Financial Planning Council Graduation Ceremony and Dinner
Putra World Trade Center, Kuala Lumpur
8.15 PM. Saturday, 15 April 2017
Yang berusaha Encik Md. Adnan Md. Zain
President, Malaysian Financial Planning Council
Mr. Victor Kho Chui Ing
To the successful 7th MFPC graduates and the proud families here today.
Ladies and gentleman.
A very good evening.
It is my privilege to join you this evening on this happy occasion of the 7th MFPC graduation. The real guests of honour today are the graduates who have acquired the Registered Financial Planner and Shariah Registered Financial Planner qualifications. My hearties congratulations go to you all.
I must say, I was gratified to receive the invitation to this event for a few reasons. Of course, graduation are always special occasion because they inspire us to reflect on opportunities to reach higher and do more to change our world for the better. But mostly, it was because I believe that financial planning plays a key role in helping us deal with the economic and financial challenges that we face today – as a nation and as individuals. This role is not sufficiently well-understood or appreciated, possibly even among financial planners and advisers themselves.
A significant challenge for the financial planning community has always been that most people do not seek out, or think that they need, professional financial advice.
Those who have been in this industry for a while know only too well that it is not easy convincing Malaysians of the merits of financial advice, particularly advice that you might have to pay for. Based on insurance data, we estimate that less than two in a thousand working adults in Malaysia really understand what financial adviser does or use them.
When we put that together with rising household debt to worrying levels, people living longer after retirement and not saving enough for retirement, higher incidents of natural and medical calamities, and more diverse and differentiated financial – this is a concern.
It is clearly, however, also an opportunity to educate the public on how good financial planning can help them avoid financial catastrophe, including through budgeting, debt management, insurance and smart investments.
Good financial planners understand this and know that there is a world of difference between financial advice and product sales. Some financial advisers who I know personally tell me that they spend easily half of their tie educating people on what comprehensive financial planning and investment management entails. This process hasn’t even started to get into product recommendations to meet a client’s needs. Indeed, sometimes, the best advice may not involve any product recommendations.
These are financial planners and advisers who are building trust not only with their clients; they are creating a trusted brand and image for the financial planning industry as a whole. And if there is trust in the industry, there will be trust in its services.
A further challenge has been that even if more people valued professional financial advice, they may not know how or where to look for it, or more importantly, how to evaluate a good financial planner or adviser. Financial advice may also be unaffordable for many people. There are issues that the industry itself can and must do more to address.
Bank Negara Malaysia has had a long association with RFP programme which was first introduced 15 years ago through the joint efforts of the Life Insurance Association of Malaysia (LIAM), the Malaysian Insurance Institute (MII) and the National Association of Malaysian Life Insurance Agents and Financial Advisors (NAMLIFA). It was an important turning point in the development of financial advisory industry at the time as were lifting educational standards evolving financial advisers into a full pledge profession in Malaysia. As you know, both the RFP and Shariah RFP qualification are recognised by Bank Negara Malaysia dan the Securities Commission Malaysia for financial advice and financial planning activities.
One of the best pieces of advice that we can give to those embarking on new careers is to ‘love what you do, and get good at it’. The RFP qualifications provide a solid foundation for financial planners and advisers to be competent at their roles. But providing sound financial planning and advice is much more than that. It calls for values that are aligned with the role and expectations of financial planners, strong inter-personal skills, and great empathy with clients served.
Financial planners and advisers generally assist individuals and households set their broader financial management strategies to grow their savings, manage risk and meet specific financial goals. But if we think about it, by supporting sound financial management, financial planners are effectively liberating individuals to achieve their full potential and contribute to society in immeasurable ways; individuals who might not otherwise have been able to do so due to financial constraints.
This is much higher call, and one that demands patience, a discipline of life-long learning, and a clear sense of purpose that is firmly grounded in strong ethical and professional standards.
On this note, I am generally more optimistic on prospects for the financial planning industry to attract new talent into the profession. This is because the new generation of millennial workers place a higher emphasis on careers that help improve society, create jobs and generate progress.
These millennial values are, or at least they should be, closely aligned with the values of the financial planning profession. It is up to those in this industry to embrace and reflects these values in the professional mission and conduct.
For young financial advisers, the uncomfortable shift from academic knowledge to real life experiences will bring some challenges, including the lack of life experience that clients might expect before trusting any advice given. It is therefore critical for professional bodies like the MFPC, to support and encourage experienced financial advisers to acts as peers and mentors to younger and new financial advisers.
We are, however, also living in a unique period in time where the blend of old and new in the financial planning industry is possibly at an optimal level. New generation planners and advisers have a much higher level of digital fluency that will open up new, fresh and simplified ways to bring financial planning services to society. This will become more important as the industry grapples with mega trends that are shaking up the industry, including the advent of big data, telematics and robo-advice.
If financial planning and advisory firms are going to take advantage of these opportunities to attract younger clients, these firms would likely need younger professional on board. Moreover, the entry of more young professional into the industry contributes to socio-economic development by creating productive youth employment opportunities.
The financial planning and advisory industry in Malaysia definitely has much room to grow further. To date, Bank Negara Malaysia has registered over 550 financial adviser’s representative. This number leaves us woefully short when compared to with over 120,000 tied agents who act on behalf insurance and takaful companies as of 2016. Increasing the number of qualified independent financial adviser is therefore an important priority for the Bank, to broaden the avenues available for individuals to obtain unbiased investment and insurance advice that will put their interests first.
Looking ahead, condition are likely to remain challenging for consumer savings and investor returns, despite signs of a more entrenched global economic recovery. Yet, prudent and responsible financial management remains lacking among too many Malaysians.
Between 2013 and 2016, more than 82,000 Malaysians were declared bankrupt. Of this number, almost 2 in 3 bankrupts were ages between 25 and 44 years old. This is an alarming proportion, with far-reaching implications for our progress towards becoming a developed nation. With rising costs of living, we could see a larger number of young Malaysians face financial hardships. In a nation-wide survey commissioned by Bank Negara Malaysia in 2015, 76% respondents admitted that they would have difficulty raising just RM1,000 to meet emergency needs.
In the same survey, 92% said that they have concerns about their financial health in old age. The number of Malaysians over 60 years of age is projected to increase to 15% or 5.6 million of the total population. Based on statistics from the EPF as of 2015, two thirds of members aged 54 have RM50,000 or less in their accounts, and this amount is likely to be depleted within five years of retirement. Most people will live up to 20 years longer after retirement. We also have a large protection gap as more than 40% of the Malaysian population still do not have any form of insurance, and a large proportion of those who do are likely to be grossly underinsured.
The low level of financial literacy among Malaysians further compounds the problem.
These challenges underscore the key role of financial planners and advisers in reducing vulnerabilities in Malaysia’s household sector – including through financial education, retirement planning and insurance protection.
Evidence from markets around the world, including our own, has shown that trust is a significant factor that contributes to the low take-up of financial services. After the Global Financial Crisis, trust in financial planning many developed economies fell to an all-time low due to mis-selling of mortgages, structured products and insurance which cost investors – mostly retirees – billion of dollars. We must act together to prevent his for our citizens and consumers.
As part of efforts to better align incentive with the intended role and purpose of financial advice, Bank Negara Malaysia has introduced a balanced scorecard for commision-based incentives which is aimed at incentivising agents and financial advisers to build enduring relationship with clients. This is currently being piloted and will come into full effect in 2018. Mandatory sales illustrations have also been improved to help consumers understand and evaluate different types of insurance and takaful products. In addition, intermediaries are now required to provide a service to consumers which informs consumers of the service level and conduct that they should expect to receive from intermediaries, including financial advisers.
There are however, limits to what formal regulation alone can achieve.
Attaining a professional qualification has therefore also been a important way to shape behaviour, culture and values, especially when it is tied to membership in a professional body that establishes clear standards of professional and ethical conduct for its members, and holds members to account for meeting those standards.
I am encouraged by the initiatives that have been taken by MFPC to promote a code of ethics for its members that emphasises the professional obligations of financial planners to perform their roles in a manner that is transparent, fair and in the best interest of clients. This is a step in the right direction.
Sustaining a strong culture of conduct will however require two elements to be further developed.
The first is the ability to support members to meet and exceed those standards through a broad suite of high quality continuing education programmes that are continuously renewed and updated.
The second is a consistent demonstration of clear consequences for members that fail to observe the standards set. Failure to do this will undermines confidences in the profession and attract stronger regulatory interventions which are likely to be less efficient for the financial advice market. Conversely, a strong professional body can significantly boost consumer confidence in financial planners and advisers and create a virtuous cycle in which members, eager to protect their hard-earned reputations, exert a strong positive peer influence over each other.
I have every confidence that MFPC will rise to these challenges and continue to achieve new heights in its advocacy of the financial planning profession.
As its heart, financial advice is about educating people on their choices. Not just financial choices between one financial product and another, but life choices. It is about equipping our society with the knowledge that we need to live fulfilling and productive lives. This is so important, and will reap profound social and economic dividends for our country.
We should aspire to make such education accessible to all, not just those who can afford to pay for financial advice. This is a goal that Bank Negara Malaysia has been firmly committed to over many years – through the Debt Management and Counselling Agency (or AKPK) which helped over 2 million people make better financial decisions; through our public outreach and individual assistance that we proved at our help centres; and by working with the Government to introduce financial education as part of the formal curriculum in our schools. Our efforts complement your role as financial planners and advisers.
On that note, to all proud graduated present this evening, I wish you the very best in this new chapter of your professional and personal journeys.
Before I conclude, let me leave you with a quote from Sandra Day O’Connor who was a former associate justice of the Supreme Court of the United States, and the first woman to ever hold this position. She said this,
“Be aware that even before you have reached your ultimate professional destination, if you always strive for excellence, you can and should have substantial impact on the world in which you live.”
Thank you very much.