KDN NO: PP 14412 / 10 / 2008 (020393)mfpc.org.my/wp-content/uploads/images/magazine/2010/MAy/mag2010-05.pdf · Well, the 10th Malaysia Plan announced recently by the Prime Minister

Issue May 2010

KDN NO: PP 14412 / 10 / 2008 (020393)

Exclusive InterviewY.Bhg Dato’ Yusli Mohamed YusoffCEO, Bursa Malaysia

MFPC 3rd GraduationCeremony & Dinner

16 Jan 2010

Forum on Islamic CapitalMarket & Retirement Planning

24 Feb 2010

www.mfpc.org.my

Malaysian Financial Planning Council(Reg. No.: 0402-04-5)

Suite 7.01, 7th Floor, Menara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur.Tel: 03-2694 5899 Fax: 03-2694 6899

Launch of New Programme:Shariah RFP

Capstone Programme“A Swift Path Forward to

Shariah Financial Planning”24 June 2010

Royal Selangor ClubKuala Lumpur

financial 1st May 2010 Issue

Remarks1) Exempted Shariah RFP modules are not eligible for scholarship2) Student is allowed to re-sit an examination only for any one cycle 3) Scholarship disbursement is on first come first served basis 4) MFPC reserves the right to amend the term’s and condition of the scholarship 5) Students who have obtained other scholarships will be awarded the remaining free amount (self-study or class) incurred

Please download scholarship application form at www.mfpc.org.my or call Stephen Lim or Frankie Chiong at 03-2694 5899.

Completing the remaining Shariah RFP Modules

CYCLE 1

Affiliate Shariah RFP

Step 1Shariah RFP Module 1:

Entitled for scholarship worth RM300

Step 2Shariah RFP Module 6 or any

Shariah RFP Modules :Entitled for scholarship worth

RM600

CYCLE 2



Step 2Any other Shariah RFP Modules : Entitled for

scholarship worthRM600

RM300,000 MFPC Scholarship for

Shariah RFP


Shariah RFP


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pg 10

pg 16

pg 18

pg 20

pg 30

pg 32

pg 34

pg 38

pg 44

pg 46

pg 23

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Exclusive InterviewY.Bhg. Dato’ Yusli Mohamed YusoffCEO, Bursa Malaysia

A Moment with the MFPC PresidentKee Wah SoongPresident, MFPC

MFPC Member’s Sharing - ‘Worry About Your Retirement $?’Anizah Teo RFP, ChFP, FChFP, ChLP, CIAM , CMSRL, FAR

Walk the Talk -Be a Trusted Financial PlannerMuhamad Umar Swift CEO, MAA Assurance

Providing The Total Insurance Solution for Business People Henry TanRFP, MMKTG, BABA Training ManagerFinancial Services Academy

MFPC Chinese New Year Get Together 24 February 2010Securities Commission Malaysia Bukit Kiara

Forum on Islamic Capital Market & Retirement Planning24 Feb 2010Securities Commission MalaysiaBukit Kiara

Financial Education Seminar “Building a Strong Foundation Today, for Tomorrow”3 April 2010MS Garden Hotel, Kuantan

Providing Our Youth Financial Planning EducationProf Madya Dr Mohamed Dahlan IbrahimDean, Faculty of Entrepreneurship and Business, Universiti Kelantan Malaysia

Besides Wealth Management, What Else to be Managed?Anthony AngRFPAVP, Business DevelopmentOSK-UOB Islamic Fund Management Berhad

MFPC Financial Planning CartoonBookletChapter 8: So Where Else Can I Put My Money?

Advertorial - ‘Making The Transition to an Independent Financial Adviser’.Javern LimRFP, Shariah RFP, CIM, AMTC, MBA, CFP

Seminar on Islamic Finance & Shariah Financial Planning16 January 2010PWTC, Kuala Lumpur

MOU Signing Ceremony with Majlis Peperiksaan Malaysia (MPM) 16 January 2010PWTC, Kuala Lumpur

3rd MFPC Graduation Ceremony & Dinner16 January 2010PWTC, Kuala Lumpur

contents




CYCLE 1






RM600

CYCLE 2






Shariah RFP


Shariah RFP

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F e e d b a c k ?We welcome your comments and views in our Financial 1st for future improvements and your feedback may published in our future issues. Please forward your letter by email to [email protected] or by post to:

Malaysian Financial Planning CouncilSuite 7.01, 7th Floor Menara Tun Razak

Jalan Raja Laut50350 Kuala Lumpur

Editor’s Note

FINANCIAL 1ST EDITORIAL BOARD MEMBERSEditor-in-Chief

Deputy Editor-in-Chief

Board Members

Managing Editor

Deputy Managing Editor

Production & Marketing

Design

Publisher

Printer

Mr Phang Kar Yew

Ms Aziza Mukhtar Ahmad

Mr Mohd Taipor bin SuhadahMs Ann MargaretMr Alan Chew Cheong YewMr Girish Kumar VoraMr Kesavan a/l Ragavan

Ms Chung Kar Yin

Ms K. Kogilavany

Ms Chee Pei Ling

Masa Graphic (001748740-K)

No. 42B-2, Jalan SM 3 Sunway Batu Caves68100 Batu Caves, Selangor

Malaysian Financial Planning Council (0402-04-5)

Suite 7.01, 7th Floor Menara Tun RazakJalan Raja Laut 50350 Kuala Lumpur

Maju Tulis Sdn Bhd (82881-T)

No. 5 Jalan TIB 1/7 Taman Industri Bolton68100 Batu Caves, Selangor

I hope this issue finds all our members and readers in good health and high spirits.

Well, the 10th Malaysia Plan announced recently by the Prime Minister will complement the New Economic Model announced earlier. The New Economic Model talked about high income, sustainability and inclusiveness. In the 10th Malaysia Plan, one of the strategic thrusts is creating a conducive environment for unleashing economic growth. The Plan also identified 12 National Key Economic Areas (NKEA) which have the potential to generate high income and one of them is financial services. This indeed bodes well for the financial services sector in particular. So, we look forward to economic growth for the country and increased prosperity for all.

In this issue we are very pleased to feature an exclusive interview with Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia. In addition to other issues, he spoke to us on Bursa Malaysia’s strengths in the conventional and Islamic markets, Bursa’s efforts in making the market more attractive to investors and being seen as a safe haven, and developments in Islamic finance.

One notable event was the 3rd MFPC Graduation and Dinner. Our warmest congratulations to all the graduates. The event was indeed memorable as we graduated our first group of Shariah RFPs and it was also MFPC’s first conferment of MFPC Fellow Member status on five of our members. Our congratulations to them too. In remembrance of the event, a write-up and photographs of the event are also featured in this issue.

As announced in our article A Moment with the MFPC President, a significant recent development is the 6-day Shariah RFP Capstone Programme. This fast-track programme to obtaining the Shariah RFP designation will be launched very soon. We hope that our members will take this opportunity to enhance and grow their business. Further, there is a discount for members who register for the programme!

On a sad note, we regret the passing of our National Council member, Patabisitharam a/l S.P. Thavasunaidu. He passed away after a heart attack at the age of 50. We will miss working with him.

Finally, do send us your suggestions and feedback so that we can make the financial 1st even better.

Thank you.

Phang Kar YewEditor-in-Chief

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Exclusive Interview

Y.Bhg. Dato’ Yusli Mohamed YusoffCEO, Bursa Malaysia

In an interview with financial 1st, Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia, gave his views regarding

Bursa’s strengths in the conventional and Islamic markets, Bursa’s efforts in making the market more attractive to investors and being seen as a safe haven, and developments in the Islamic finance. He also spoke on how Bursa is meeting the challenge of drawing more investors, particularly the younger generation into the domestic retail market.

Also present at the interview was Raja Teh Maimunah Raja Abdul Aziz, Global Head, Islamic Markets.

Dato’, could you give us your views on Bursa’s strengths in the market and elaborate on Bursa’s efforts to make our market more attractive for investors and to be seen as a safe haven?

Dato’ Yusli: Firstly, we should acknowledge that Malaysia has a relatively well-developed capital market. This has come about because of policies developed by the authorities, Bank Negara on the financial side and the Securities Commission on the capital market side, all under the umbrella of the Ministry of Finance.

Over the years we have developed a well-functioning and efficient capital market which includes equities, fixed income and, increasingly, derivatives. If we look at the region, we can say we have a framework that is well-recognised and well-established.

Given the diversity of our Malaysian economy, not surprisingly, we find a diverse choice of companies or issuers in our market. By and large, you will find companies representing all the different economic sectors represented in our market and we have close to 1,000 companies listed on Bursa Malaysia today. If you look at our bond market, I believe it is the third largest bond market in Asia.

So, we are certainly doing much better than some of our peers in Asia, considering the relative size of our economy.

The good thing about what we have set up is not just the quantity but we are also looking at the quality aspects. So we put a lot of focus on issues like governance, disclosure, performance and transparency. Working together with the Securities Commission, we intend to improve on these areas even further.

When we look at a market like ours, we need to differentiate ourselves from our competition. I think Malaysia has a lot of strong economic fundamentals and this has helped to create a lot of the good quality companies now listed on our market.

What we want to do is to ensure that the companies that we have practise the highest standards in terms of disclosure and governance.

This is something that we want to aspire to as a market. We want our market to be known as a quality market.

Recently, we had our Invest Malaysia Conference to showcase the companies that have done very well in Malaysia and are now venturing into the region. So their business models and their management teams

are doing a good job. But to make our market even more attractive to investors, we want to tell people that our companies operate in an environment where we place a lot of emphasis on quality reporting, high disclosure standards and very high governance practices.

So we believe the opportunity now is very good for companies that are in Malaysia if they are seen to be operating in this quality environment with very high standards. Further, they are also operating in a region which is expected to grow significantly over the coming years.

I think we can offer investors the best of both worlds. We can have good relatively high growth companies which are very well-run because the standards of governance and practice are going to be very good. The expectation is of high governance standards being practised.

So, we get quality on two fronts: we get well-run companies and companies that are growing quite fast. These are the things that investors look out for.

As a market operator, we want to offer a platform that these companies can operate in which is comparable to any other platform in the world. This means that if they come to Malaysia, it is easy for them to raise money and the rules and framework they are required to operate in as a listed company are also comparable to the requirements in other bigger markets. We want them to have the same experience they would have as a listed company in bigger markets.

As an issuer, you want to have the ability to tap the market efficiently. You want to profile your company well and you want the ability to reach out to as many investors as possible. These are the things we aspire to deliver to companies that are listed here.

How do we do that? In terms of tapping the market, last year we revamped our Board structures, combining the Main Board with the Second Board, and we revamped the ACE market the previous semester. All this was done with a view to making our fund-raising platform much more efficient.

So we bring certainty. Now, when companies come to list, it is on a disclosure-based framework so there’s going to be very little assessment of their own business case. When you come to the main market, so long as you meet the criteria and there are no corporate governance issues, you will be allowed to list and tap the market for fund raising. Under ACE, so long as you get a sponsor, you can do the same.

The ability to tap funds is thus very important for these companies and we have benchmarked our processes against the best practices around the world.

We continue to encourage our companies to profile themselves through best practices, through events like Invest Malaysia. We want them to go on roadshows with domestic and foreign brokers. It is important for them to capture the attention of investors as investors today have so much choice. Our companies will not only be competing with other Malaysian companies but also with other Asian companies and global companies.

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The trading technology that we deploy ensuring that investors have easy access to trading is also very important. We have invested in systems supplied by big global companies to enable investors to enjoy the same kind of accessibility they would have in other markets as well. So, direct market access has been introduced.We expect to see much more electronic trades happening in the future. If you look at markets in the West, the kind of technology they deploy and the trading strategies used by traders are very sophisticated. So the technology that we provide must be able to cater to the needs of all the different types of investors. All these are the things we have to provide to ensure that we can meet the requirements of not just issuers but also investors.

Regarding governance, this covers security and safety aspects. When investors come to invest in the market, they want to feel assured that the regulatory framework is going to take care of their interests. They do not want to go into a market that is filled with uncertainty. When they go in they want to know that companies have to comply with certain standards, whether accounting standards, reporting standards, etc. They want to be able to rely on financial statements issued by companies and on statements made by Directors and management. Our job is to monitor all this and if companies make statements which are false, we need to find out and get that clarified. So, that’s the kind of regulatory role that we perform.

As for trading, we monitor trading activity on a real-time basis. We are doing all these to ensure the market is seen to be a safe marketplace, protecting the interests of investors.

So I keep stressing on quality first. That’s what we want to be known for. I think we have done a lot over the past few years but there’s always room to do better and that’s what we are pushing our people at Bursa to do.

So when we talk about investors, we want them to come here because here we have all these quality offerings that they should be taking a look at.

Over the years, domestic retail investor activity has shrunk. Further, about 66% of Malaysians who invest on Bursa Malaysia comprises those aged above 45 years. Why do you think there is this lack of interest by the younger population to invest in the market? What are Bursa’s efforts in meeting the challenge of filling this gap and in increasing the overall level of domestic retail investor activity? Dato’ Yusli: We face certain challenges today with investors. You can categorise investors as domestic institutions like EFP; the public funds; the private funds like Public Mutual; the foreign investors which would typically be the global funds or the global hedge funds; and the retail investors. The category that we want to focus on is the retail investors, mainly domestic retail investors.

We face different challenges for each of these groups. Foreign investors always need quality but perceptions can impact their thinking and among the challenges we face with foreign investors is that they have so much choice today. If you are a global investor based in one of the financial centres and you focus on hedging markets, at this point in time you have so much choice.

Malaysia used to be the biggest emerging market in the world at one time not because we were the biggest country but because our market was relatively well-developed earlier than the others. In the early 1990s, for example, we commanded a much bigger percentage of the emerging market share. However, over the last 10 to 15 years, with the emergence of China, India and Brazil, we’ve seen our share of the emerging market pie shrink.

Today, global investors looking at the emerging market space will see not just Malaysia but also a lot of these other bigger markets. So this

is where we have to fight for attention among global investors and this is why we’re profiling our companies, making sure that we highlight our strengths both as a country and as a company. This needs to be done on a fairly regular basis as you can’t do it once

a year and expect people to remember. As such, profiling is very important.

In the case of domestic retail investors, we face other challenges. In the early 1990s, the Malaysian market went through a phase when almost every investor was here. Some of the things that happened then are probably not going to happen again simply because we’re not commanding the same level of market share as we used to. The amount of liquidity that came

into our market in the early and mid 1990s was huge in terms of derivates those days. This drove the market

to a “frenzy” and there was a high level of activity. A lot of retail investors got quite caught up in this high level

of activity and I believe, unfortunately, people didn’t pay much attention to fundamentals. So, many people were introduced to the stock market without being adequately educated as to the risks and rewards of investing.

Not surprisingly, many people had a bad experience, especially as then the Asian crisis occurred. Because of that, we find many retail investors who used to be active then kept away from the market. Many of these people are now parents and when they relate their experience in the market, they probably don’t have many positive things to tell their children. Consequently, we find that retail investor activity has shrunk considerably over the last 10 years. Our challenge is to bring back the interest in the market, especially among the younger population who’ve been hearing not so good things about the stock market.

I think this is where organisations like yours come in. We want people to come into the market based on the research you have done, the information you have, and having looked at their own financial planning strategies.

I think it is never too young to start and we have made it fairly easy for people to invest. You can buy as few as 100 shares in a company today as compared to the previous minimum of 1,000 shares. So if you buy a share that’s worth RM1, your investment is already RM100. People blow that much on dinners and drinks most evenings, so that‘s certainly affordable. In trying to reach out to the younger retail population, we want them to understand this.

We have carried out programmes with brokers but a lot more still needs to be done in terms of reaching out to the younger generation. Many of them have the perception that it is very expensive to invest in the stock market, it’s very difficult to understand, and it’s very difficult to participate. On the contrary, it’s actually relatively easy if they take the effort and because of what I stated earlier about our trying to make sure we have good quality companies, there is plenty of choice. We have all kinds of stocks. We have stocks which pay good dividends and we have those that are in the early stages of their business cycle.

If you look at some of the companies that we profiled at the recent Invest Malaysia event, we have companies like Top Glove which are now global champions. These used to be small companies listed on the Second Board and look where they are today. I’m sure there’ll be more of such companies in the future, so investors just need to talk to their brokers and obtain their research reports.

We also provide our own research reports through our association with Standard and Poor’s. We have a scheme called CMFD-Bursa Research Scheme (CBRS) where about 200 companies are researched by S and

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P as well as by some local brokers. These research reports are available on our website and anyone can download them. That’s apart from reports provided by brokers. So brokers’ clients can gain access to their research reports as well.It is important for the younger generation to appreciate all the available information and not just the stock prices you see in the newspapers. What’s more important for them are the analysts’ reports that provide information on the company, its business model, who runs the company and its prospects. So, it’s good for them to understand that and then begin the process of investing.

Within about one year of the introduction of the FTSE Bursa Malaysia KLCI 30 in July last year, the market exhibited dynamism and rose almost over 400 points to about 1,300 points. What are the reasons for the move to the new index comprising 30 stocks? Are there any advantages to this?

Dato’ Yusli: The old KLCI had 100 stocks and that was an index that we calculated ourselves at the Exchange. We have a partnership with FTSE and we decided to create the new set of indices with FTSE over the last 3-4 years.

Over time, we have been creating new ones as well as changing, for example MESDAQ, the Second Board onto FTSE methodology. The last one we moved across was the KLCI. At that time we already had the FTSE 30, 70, 100. So we had to make a decision and this was based mainly on the feedback we received from investors’ fund managers which, indicated a preference for 30 stocks.

We know that the 30 stocks represent a significant percentage of market capital. I think it is well over 60%, close to 70%. Now, if you take 70 or 100 stocks, the percentage goes up, but not significantly more as there is a close correlation between 30, 70 and 100.

So when we moved to 30 stocks, the index moved up, as you say, from 1,000 to about 1,300. Even if it had been 100 stocks, it would probably have done the same. The same 30 stocks would have been in the 100 index and that would have resulted in the index moving in a similar fashion. That’s normal for most markets as you have some very very big companies and you have a lot of small and medium companies. But because of the sheer size of the big companies, they tend to influence the overall index more than the smaller companies.

However, what we would like to see at Bursa obviously is that we don’t want all the attention to be just focussed on the big companies. This is because, as I stated earlier, investors have different preferences. Some may want to invest in a very solid, well-established company with a strong track record for example Public Bank, Maybank or Maxis. Others may want to spread their money and put some of it in big companies and some in some of the newer type companies which are growing in their business cycles, Top Glove type, for example. So, we would like to see investors do that and based on adequate research and advice from brokers.

So our job is to make sure investors have access to all these different types of companies. The CBRS scheme, for example, is a way to provide the information to investors, especially the retail investors as we acknowledge that retail investors don’t have the same kind of access to research as big institutional investors would.

The availability of Islamic products such as sukkuks on Bursa has definitely added another dimension of growth or opportunity for local as well as international investors. However, there are limited opportunities for domestic retail investors as sukkuk type products are not widely available in the retail market. Is this another area that Bursa would like to focus on in moving forward?

Dato’ Yusli: Islamic finance is one of the areas that we are putting a lot of effort and resources into in moving forward. We believe Malaysia has a very well-established and well-recognised Islamic finance sector

and we believe there is an opportunity for us to do even better. So, we have a team looking at how we can grow this business. We believe that Islamic finance adds another layer of quality to the products currently available. I talked earlier about companies that are well-run and the kind of governance practices we have and if these companies also meet the Shariah criteria, then there’s another layer of quality criteria being applied. So we then expect these companies to be of even better quality in terms of fundamentals than other companies that may not meet the Shariah criteria. So, if you invest in a company that meets the Shariah criteria, you would know that this company doesn’t have too much debt and that reduces the risk for investors.

We acknowledge that a lot more can still be done in terms of the products that are available for investment, especially by retail investors, for instance, sukkuks as you mentioned. We would like to see more trading taking place on sukkuks but this is currently not happening.

Raja Teh: We don’t have a retail trading framework at this point in time.

Dato’ Yusli: Even with the institutions, it’s not really a big market for secondary trade. People tend to buy in the whole so again this would deprive other investors of investment options.

So we’re looking at what we can do to develop products based on these, to me, fundamentally strong instruments that would be attractive for certain types of investors. So that’s what the team is looking at.

Dato’ Yusli: At the end of last year we had the most in terms of value for sukkuk listings of any exchange in the world. So we think this reflects Malaysia’s position in the Islamic finance sector globally and we believe the number can grow significantly in the years to come.

Raja Teh: Our issuers never used to list their private debt securities so this is the first step. We hope moving from this we can get more participation and we also hope to move towards an exchange trade model for all private debt securities.

Dato’ Yusli: We encourage financial planning practitioners to look more closely at what we have to offer in the marketplace.

As for derivates, this is another area of business we believe that has tremendous potential for growth and when we look at how the derivates markets have grown all over the world, it is basically to meet the requirement in a lot of cases for risk management and hedging, which we believe is not well-appreciated in Malaysia. So for investors who for example trade actively, they may want to look at how they want to hedge their positions.

At the moment we have a futures index but I think we need to provide more instruments for global trade. The most active market we have is the palm oil futures contract and that is quite actively traded. It is used by people who produce palm oil as well as those who buy palm oil to hedge against price fluctuations. The other people who trade would be those who just want to speculate on where they think palm oil prices will go based on events occurring in the world, weather patterns or what happens to soya bean production. So I think that’s another area the financial planning industry would want to look at in terms of what products should be looked at by their clients.

Raja Teh: In terms of portfolio diversification, our investors tend to be very equity-centric. Considering the various products we have, they

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should also look at defensive types as well as the more speculative types like options and derivatives.

Dato’ Yusli: Over the years we have been introducing things like ETFs. ETFs are also a good place for retail investors to start because you’re buying into a basket of stocks. You’re not taking the view of one particular stock and so we have an ETF based on the top 30 stocks that we have.

REITs again would tend to be less volatile but they give you good yield.

Raja Teh: REITs behave very much like defensive instruments because they are based on the yield so they are almost like fixed income.

Dato’ Yusli: Today we have more than a dozen REITs. So if investors are looking at different types of instruments, they are available and we would very much like to work with your industry to see how we can reach out to more investors.

One ongoing issue in the financial planners’ perspective is the private pension scheme, especially how to create a safety net for clients or investors. As you rightly pointed out, local investors or clients that we have tend to be equity-centric, more inclined towards share trading and unit trusts. However, this does not help in constructing a balanced portfolio. Including Bursa products like ETFs, REITs, sukkuks, etc would help in creating a balance. We need to educate investors on achieving this balance. Further, to construct a long-term pension scheme, we need a well-developed fixed income market as well as an equity market. While we have the infrastructure, there seems to be a shortfall in terms of the pension market. What is your comment on this, Dato’?

Raja Teh: We started with the listing regime introduced in 2008 so there was a bit of education to get the issuers to agree to come on board. If you see it from the corporate issuers’ perspective, it was a lot easier to go to the Over-The-Counter or OTC market. But I think we have been fairly successful. We’ve managed to get about 12 sukkuks and 4 bonds listed within 60 days. We’re also going to attract foreign issuers. So, that’s the first step.

We do recognise the fact that we need to bring these products. This year, we’ll try to work on trying to diversify these kinds of product lines. Essentially, we would like to make fixed income products accessible to the retail market. That’s also our focus.

Dato’ Yusli: I think the sukkuk market could do with being a lot more transparent, more liquid and more accessible to more investors. For too long it’s been dominated by the banking fraternity so we should bring in more investors. We have a platform and we’re looking at how best we can do that.

Financial Planners generally encourage clients to let fund managers decide on the portfolio mix and the allocation between fixed income products and equities rather than the clients themselves decide and dictate. This is because most Malaysian investors do not do research. So investor education has to be initiated and carried out by institutions. As such, the role of institutions in bridging this gap in investor education is still important. What are your views on this, Dato’?

Dato’ Yusli: It depends on the investors. If they feel they have sufficient knowledge and the ability, they can do it themselves. If they don’t have the time to do the research and to monitor, they can let the fund managers use their discretion. But certainly, there are plenty of options if you look out for them.

Raja Teh: For hybrid products, we feel we see equity people tend to look at equity or, at the other end, fixed income and not so much at the hybrid in-between products like REITs and ETFs. This could be due to lack of education.

Dato’ Yusli: For ETFs, for example, the cost of trading is the same as that of trading in shares whereas if you go into a mutual fund, the fee structure is different. Also, with ETFs, it’s real-time pricing. So it’s just a question of educating investors.

Raja Teh: REITs, for instance, are an equity but behave defensively. Again, when you look at the current REITs, we have mainly institutional investors so I think retail investors need more education on hybrid products because you can have the safety net of fixed income with a little bit of margin to play on.

Dato’ Yusli: We’ve just come off a downturn so although we see the index has gone up quite a bit, that index reflects mainly the performance of the big cap stocks. Generally, if you look at the medium and small cap stocks, many of them haven’t really recovered from the downturn over the last couple of years. In terms of timing, it’s a good time for people to be looking at what’s available on offer. If they do their research properly and get the right advice, they can find some stocks which are still reasonably priced because you always want to buy low and sell high. How often do you get cycles like this? When is the next downturn? So I think investors should seriously take a good look at what’s available.

Raja Teh: Looking at dividend yield, I think most retail investors tend to look just at capital gains. If you were to put your money in fixed deposit today, you can get about 3%. So it doesn’t always have to be of a speculative nature, especially with the very well-run companies giving better returns.

Dato’ Yusli: You get both. If you hold it long enough, you get capital gain as well. Another thing a lot of people don’t appreciate is that the capital gain you earn on trading stocks is tax-free. How many things can you do in investing that are tax-free?

Raja Teh: Similarly, whatever REITs we have are tax-free as opposed to, say if you were to rent your property, you still have to pay tax.

The Prime Minister recently announced the New Economic Policy. How do you think it will impact Bursa?

Dato’ Yusli: I think the NEM is generally good for the country and essentially for the people in the long run because things like high income, sustainability and inclusiveness were talked about. I think that there’s no one who wouldn’t want high income or not be included in the policies. So, in the long run, it’s going to be beneficial for the people.

We just have to make sure that everything that’s done is sustainable in the long term. In that respect, it’s comprehensive, it’s in everybody’s interest.

The challenge now is getting the detailed roadmap set out, and then getting it implemented as efficiently as possible. We understand that the government will set up dedicated units to do all this and hopefully, this will be done efficiently.

For us, of course it should be positive in the future because as the country grows, as businesses thrive, the market should reflect that. Our market is going to reflect the performance of companies. If companies do well, then obviously this will be reflected in the share prices and the index, valuations will obviously go up.

We just have to make sure that all the plans are achieved and we have to ensure all the things that are talked about quality are maintained. To me, that will be a winning combination for the country and for the market.

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A Moment with MFPC PresidentKee Wah SoongPresident, MFPC

Since the last issue there have been many positive and encouraging developments at the MFPC as we continue to meet our objective of promoting the professionalism and enhancement of the Financial Planning profession.

First Graduation of Shariah RFPs

The graduation was indeed momentous as it marked 2 firsts for the MFPC. The first of these was the graduation of the MFPC’s first group of Shariah RFPs. This creation of a pool of qualified professionals well informed in Islamic Financial Planning will help to meet a growing market need as well as to support the nation’s goal to position Malaysia as a leading Islamic financial centre.

2010 MFPC Graduation

To begin, I would like to congratulate all the 250 RFPs, Shariah RFPs and Affiliate RFPs who graduated at the MFPC’s 2010 Graduation Ceremony on 16 January. Welcome to the financial planning fraternity!

Your success in achieving the RFP designation and passing all the professional requirements to be our ordinary members marks the first major step in your careers as professional financial planners. However, I would like to remind you that this must be the beginning of your commitment to lifelong learning not only to keep pace with new developments and challenges that arise but also to acquire new techniques of practice and perfect old ones. The key to responding successfully to the challenges of today’s fast-changing and dynamic Financial Planning landscape is to acquire new tools continually through the pursuit of lifelong learning.

First Conferment of MFPC Fellow Members

The second was the first conferment of the MFPC Fellow Member status. The recipients of this designation were Mr Kee Wah Soong, Mr Foong Soo Hah, Mr Mohd Taipor Suhadah, Mr Ezamshah bin Ismail and Mr Chong Ching Shon. The MFPC Fellow Member status is awarded based on contributions to the MFPC and upon the fulfilment of certain criteria. The MFPC’s congratulations to all of them.

Changes to be made to the MFPC Constitution at AGM on 24 June 2010The changes have to be made in the MFPC Constitution to provide equal status for those with Shariah RFP designation.

a) Shariah RFP Designees• MFPC to incorporate Shariah RFP designees as of equal standing to RFP designees.• The professional financial planning designation owned by the MFPC and conferred

on persons, in accordance with this Constitution and who have fulfilled the criteria set by the Certification and CPD Board and who remain to be members of MFPC.


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b) The Composition of the National Council

c) Office Bearers

Organisational voting members contribute 60% (ChPO and FSO) of the NC Composition, and individual contribute 40%.

I would like to highlight that MFPC has started to focus on growing the number of MFPC individual members. MFPC would like to have the active participation from individual members. I would like to urge RFPs and Shariah RFPs to actively participate in all the MFPC activities, as well as at Boards, Committees and National Council level.

I am happy to inform that since the MFPC’s inception in March 2004 until today; we are working hard and committed to raise our profile to establish a reputable professional body by Malaysian for Malaysian. In terms of financial resource and management, we have kept the books pretty healthy; a small profit was obtained for the past 4 years.

Class of Membership

(Voting Members)

ChPO (LIAM, NAMLIFA, MII) – by appointment

FSO – by election

Individual – by election

IPP – auto appointment

Total

Current

Allocation

of NC seats

6

11

6

1

24

Proposed New

Composition

Allocation of NC seats

6

4

6

1

17

Office Bearers

President

Deputy President

VP External Relations & Publicity

VP Membership

VP Research & Publication

Treasurer

Secretary

Sub Total

Immediate Past President (IPP)

Committee Members (NC Members)

Total NC Members

Current Number

1

1

1

1

1

1

1

7

1

16

24

New Number

1

1

1

1

1

1

1

7

1

9

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MFPC Income and Expenses – 2004 to 2009Maintaining a healthy financial status

Year

200420052006200720082009

TOTAL

Income(RM)

{A}

513,565568,752

1,827,0841,581,7831,656,0861,838,0557,985,325

Expenditure(RM)

{B}

562,818 616,436 925,838

1,282,923 1,527,003 1,511,594 6,426,612

Taxation(RM)

{C}

7,200207,60090,84644,707

141,268491,621

Deficit/Surplus of Income over expenditure for the year after taxation (RM)

{A} - {B} - {C}

(49,253)(54,884)693,646208,01484,376

185,1931,067,092

Nonetheless, with our limited resources, we have managed to put in place tremendous value added services to all our members. It is important to make know to you that all the RFP modules are now an up-dated version and the Question Bank is also fully reviewed and additional new examination questions have been developed.

In 2009, a significant achievement for the MFPC is the development of the Shariah RFP programme and it Question Bank. We certainly hope that our members will make full use of this opportunity to acquire further knowledge and skill in Shariah financial planning.

I) Review of RFP Programme Materials Module 1 - Fundamentals of Financial Planning (5th Edition, 2008)Module 2 - Risk Management and Insurance Planning (3rd Edition, 2008)Module 3 - Investment Planning (5th Edition, 2008)Module 4 - Zakat and Tax Planning (5th Edition, 2008)Module 5 - Estate Planning (3rd Edition, 2008)Module 6 - Retirement Planning (3rd Edition, 2008)Module 7 - Applications in Financial Planning (2nd Edition, 2009)

II) Development of New Shariah RFP Programme MaterialsModule 1 – Fundamentals of Shariah Financial PlanningModule 2 – Risk and Takaful PlanningModule 3 – Shariah Investment PlanningModule 4 – Zakat and Tax PlanningModule 5 – Shariah Estate PlanningModule 6 – Retirement PlanningModule 7 – Application of Shariah Financial Planning

III) Review and Enhancement of RFP Question BankThe RFP examination question bank thoroughly in 2008-2009. The question bank was also enhanced with new questions consistent with the revised texts.

IV) Building of the Shariah RFP Question BankSince Islamic Finance is a very new subject matter in Malaysia, the Council has worked hard to form a reputable Committee to look into developing the Shariah RFP examination question bank. The members of the Committee comprise Shariah scholars and professionals from local universities and the financial planning industry.

V) Creation of other New Programmes to Meet the Needs of the Industry and to Develop the Financial Planning Profession

• Special Executive Accelerated RFP (SEAR) Programme • Certificate of Proficiency in Financial Planning (CPFP)• Shariah RFP Capstone Programme • 2-day Financial Planning Workshop for Undergraduates and

the Public• 1-day Shariah Financial Planning Awareness Programme

Value Added on our Existing Assets

Achievement and Growth of the MFPC

At MFPC, we are also responsive to the industry demand; new programmes were developed and conducted to ensure financial planning education is propagated and promoted to the target groups professionally. These programmes include Special Executive Accelerated RFP (SEAR) Programme, Certificate of Proficiency in Financial Planning (CFFP), Shariah RFP Capstone programme, 1-day Shariah Financial Planning Awareness Programme and 2-day Financial Planning Workshop for Undergraduates and public.


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Launch of New Programme : Shariah RFP Capstone Programme

In our proactive response to further help our members meet current market developments and to meet the nation’s aspiration of making Malaysia an International Islamic Financial Centre, the MFPC will launch the 6-day Shariah RFP Capstone Programme very soon. This positive development is in view of the exponential growth of the Islamic Finance market and the increasing need of clients for Islamic Financial Planning products, a trend which is expected to continue in the future.

Those who complete the programme and pass the examinations will obtain the Shariah RFP designation. Lecturers teaching on the programme comprise academics and practitioners with a wealth of expertise and knowledge which will benefit students greatly. As for assessment, there will a 3-hour examination with 75 multiple-choice questions and the submission of a project paper on a financial plan.

Members are encouraged to enrol for this programme and to take advantage of the 10% discount on fees offered to them. So, act now for a better tomorrow and contact our Secretariat for more information and registration.

We are delighted to inform you that Yang Berhormat Dato’ Sri Liow Tiong Lai, Minister of Health and Member of the MFPC Advisory Board has accepted our invitation to launch the Shariah RFP Capstone Programme on 24 June 2010, 12.30pm, immediately after our AGM at Royal Selagor Club, Kuala Lumpur. We look forward to meeting you at the event.

MFPC needs members’ assistance to help and promote the two flagship programmes, RFP and Shariah RFP• Members are advised to pay membership subscription on time to support ongoing enhancement and value added

services to benefit members and the industry as whole.• The MFPC would like to encourage all our members to come forward and participate in our projects and activities. • With your support and your active participation, the MFPC will be able to raise the profile of the financial planning

profession and the industry, and effectively reach out to the public.

MoU between MFPC and MPM

Another highlight was the signing of an MoU between the MFPC and Majilis Peperiksaan Malaysia (MPM), a statutory body under the Ministry of Education on 16 January 2010. With this, MPM has been appointed the Examination Facilitator to administer all Shariah RFP examinations nationwide effective March 2010. MPM will also manage the Shariah RFP Examination Question Bank.

We are confident that with MPM’s 30 years of experience in administering university, school (STPM) and professional examinations, the Shariah RFP Examinations will be conducted professionally, efficiently and effectively. Four examinations will be conducted yearly under MPM management at our six examination centres in Kuala Lumpur, Penang, Kuala Terengganu, Johor Bahru, Kuching and Kota Kinabalu.

We assure our members that the MFPC will strive continuously to ensure international examination standards and quality in all our Shariah RFP examinations as well as the RFP examinations.

financial 1st May 2010 Issue financial 1st May 2010 Issue

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Announcement of RM 300,000 Scholarship Fund – MFPC Big Ang Pow

In conjunction with the Chinese New Year celebrations, the MFPC organised a seminar themed Latest Trends and Developments in Retirement and Financial Planning on 24 February 2010. The half-day event was held at the Auditorium of the Securities Commission in Bukit Kiara.

At this seminar, the MFPC presented an ang pow in the form of a RM300,000 Shariah RFP scholarship fund set up for the benefit of our members and students. Our aim in setting up this scholarship fund is to build the Shariah RFP brand regionally and internationally and to encourage undergraduates and practitioners to venture into the Shariah Financial Planning profession. It also aims to create employment opportunities for young graduates.

Further, the scholarship aims to promote Shariah financial planning education for financial services practitioners in Malaysia; to encourage business expansion and /or new advisory business on Shariah compliant financial planning services; and to promote and to enhance continuous professional development of practitioners in the industry.

In view of the robust growth and positive developments in Islamic Finance, I would like to encourage our members to equip themselves with skills and knowledge in Shariah Financial Planning. We strongly believe that this will offer financial practitioners and our young generation with better opportunities for employment and to hold key positions in the industry. Most importantly, it will provide professional financial advisers and planners further business growth and enhancement. They will be able to offer a wider range of financial planning services and products, both conventional and Shariah compliant. In the present highly competitive business environment, our ability to provide value added services to our clients is vital. As such, we are certain that financial practitioners including financial planners, unit trust consultants, insurance agents, takaful agents, bank officers and also university and college undergraduates will benefit enormously from acquiring the Shariah RFP professional qualification.

Seminar for Outstation Members and Setting up of Branch in Penang and Kuching

Other benefit for our members, particularly for those outside the Klang Valley, the MFPC has conducted a seminar on Financial Planning, Building a Strong Foundation Today for Tomorrow in Kuantan, Pahang. Participation at the seminar held on 3 April was very encouraging and we plan to hold more of such seminars for our outstation members. These seminars will keep our outstation members and practitioners informed of trends in emerging market demands for financial planning services, and to be kept updated with current developments and changes in the industry.

The setting up of branches in Penang and Kuching are in the pipeline.

MFPC 6th Annual General Meeting

Finally, on behalf of the MFPC, I would like to invite our Corporate and Ordinary Members to attend our next AGM to be held on 24 June 2010. We look forward to your attendance. Please contact our Secretariat at 03-26945899 for more details.

Your PathwayTo ProfessionalismCertificate of Proficiency in

Financial Planning


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If you worry about making money on the way up, you worry about losing it on the way down. So it should come as no surprise that the wealthy are now concerned that they will run out of money as global financial turmoil such as the recent one will put the pinch on their finances in the foreseeable future.

But psychologists say there are two forms of “worry”. One involves anxiety and fear, and another is “productive worry” where individuals use their concern as a motivational tool to solve their problems.

Current worries have produced lower expectations, increased savings and the unlikely emotional feel-good power of “smart shopping” and being thrifty, if only because those solutions are easier and more realistic than trying to play a fast game of catch-up.

People who are focused on wealth -- who spend much of their time worrying about making it and how they can better their future financially - have a greater chance of attaining wealth, but they also feel the pain of loss more acutely. They’re better off after the loss of wealth than most people, but emotionally they hurt more than people with less wealth but different priorities.

But rich or poor, there appears to be a phenomenon at work here that is as much psychological as it is about cash.

Clearly, investors personalize losses more than gains. But for investors who have reached their financial goals, setbacks represent the destruction of a dream.

And if spending less, being a smart shopper and saving more are helping to raise the self-esteem of the wealthy, there’s at least a chance that these changes will be permanent, that old spendthrift habits will not return even if the market is bad.

No matter whether the cost of living is high and the way to deal with expensive living is to reduce spending and to live within your means.

Seniors living on fixed incomes need to worry less about indexes and focus more on their own consumption. The “average” person consumes a very different set of goods than what we find many people consume. In other words, it’s important to create a budget now and stick with it.

Whether you are retired or not, it’s important to estimate as accurately as possible your expenses in retirement. For instance, it’s likely that you will spend more on health care in the later stages of retirement than in the early stages. And it’s likely that you’ll spend more on travel and entertainment in the early stages than later. One of the major risks in retirement is inflation; a major factor in retirement funding calculations is future inflation. Saving money in the bank, while a great initial step toward financial freedom, is unlikely to generate returns greater than inflation. Therefore, focus on educating yourself on the damaging effects of inflation and the need to accept some level of investment risk.

Most people at certain milestones in their lives may need assistance in solving money dilemmas. The following questions highlight some of the issues that prompt people to seek help:

• Will I have enough money when I retire?• How slowly should I drain my retirement holdings?• Should I take my EPF in a lump sum?• What investments are most tax-efficient?

Basic Retirement Planning Checklist

• Have you done your cash flow planning? The very first step that every soon-to-be retiree should take is to construct a

Anizah TeoRFP, ChFP, FChFP, ChLP, CIAM , CMSRL, FAR

Worried about Your Retirement $?


17

written budget and balance sheet. In the budget, you’ll need to look into the future and determine your cash inflows (income) and cash outflows (expenses). Hopefully, your inflows exceed your outflows, or you’re already off to a bad start. Next, you should draw up a simple balance sheet listing your assets and debts to help determine your net worth.

• Do you have adequate and long term insurance and a health care plan? One of the most frequently overlooked areas of life planning is comprehensive insurance plans in the event of disability, medical and final expenses. Review your insurance needs. Life events such as marriage, divorce, new babies, changing jobs and retirement change everything. These events are prime opportunities to review beneficiaries of life insurance policies. Whatever the case may be, a review should definitely be considered. Everyone should seriously look at life insurance coverage before one becomes uninsurable due to ill health.

• Have you performed a comprehensive retirement need calculation? This will give you an idea of how much you need to finance your retirement needs for your golden years.

• Is your asset allocation aligned with your retirement goal, risk tolerance and time horizon? Accepting too little investment risk is likely to hurt your long-term portfolio returns. You may start with a diversified aggressive portfolio, and then switch to a moderate one halfway toward retirement, then to a conservative portfolio few years from retirement.

• Do you update your EPF account and nomination? You should also ensure that you update your beneficiary whenever there are any major life changes such as marriage, new family members or the death of a nominated beneficiary.

• At the final stage of crafting an effective retirement plan, have you reviewed your financial, business and legal documents

according to your wishes in order to have comprehensive estate planning?

Having a blueprint of a retirement plan will ensure your desired retirement lifestyle becomes a reality. It’s one of the major tasks of your lifetime. It is a lifelong process. Proper planning and wise decisions will make it a satisfying reward in achieving your financial goals.


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functional financial plan for their clients, whilst conforming to set practice standards and ethics.

The traditional ways of selling insurance live on; however, as people’s needs are growing, so must our accreditation. Topics such as asset allocation, management & protection, cash management, credit management, direct investments, emerging markets, estate planning, estate tax, health care planning, investment planning, mutual fund, retirement planning, stock analysis, unit trust planning and wealth management are the many key words that we hear today.

There must be a sense of responsibility in all of us to better ourselves constantly via the learning process. Education is the key word. The world around you changes when you are viewed as a professional financial planner. Being a qualified financial planner indicates your commitment to stay ahead in the competitive world today.

How can you project trustworthiness and honesty? What does it take to be a trusted financial planner? The main challenge is to earn and maintain trust with your customers. Trust, is the most important key. As a trusted financial planner, you need to know that giving people financial advice is not just about advising them about their money. Securing the financial aspects which will impact a person’s overall quality of life is the foremost duty for all financial planners and it is not to be taken lightly.

As defined by Dr. Stephen Covey, to demonstrate trustworthiness, a person must have a balance of High Character and High Competence. Many financial planners either over promise and

Qualified financial planners is are professionals who use the financial planning process to help clients work out their plans to meet their life goals, taking into consideration all of their clients’ needs – budgeting, savings, taxes, investments, insurance and retirements needs. In other words, a financial planner looks at the ‘big picture’ of an individual’s finances and makes timely recommendations that are spot-on.

The variety and complexity of financial products are increasing and consumers are becoming more demanding. Financial planning is therefore essential in meeting an individual’s life goals through the proper management of his finances. It’s a 5-step process that centralizes on:

• Gathering a client’s financial data and life goals• Analyzing and evaluating the current financial status of the

client• Developing a strategy or making recommendations • Implementing the strategy• Monitoring the entire process.

A qualified financial planner demonstrates technical competency and practical experience. This in turn enables financial consultants to independently write a comprehensive,

Muhamad Umar Swift RFPChief Executive Officer/Group Managing Director, MAA Holdings Berhad & Chief Executive Officer, MAA Assurance

Be a Trusted Financial Planner


19

don’t deliver, or promise what they cannot deliver, both of which affect trust.

In this competitive environment, it is important that professional financial planners continue to provide evidence that we are trusted financial planners and care about our clients. To provide advice on financial matters, trust becomes even more important.

Trust need to be established in the early stages of the relationship with a client. It needs to be built and reinforced at every stage during the sales process in order to keep the relationship strong. Building trust is the way to more sales, more referrals, and more repeat business; it also helps to build customer satisfaction and loyalty.

As qualified financial planners, everything we do either enhances trust or the other way round. With this in mind, what can we do to enhance and maintain our position as trusted financial planners? Here are some key factors:

• High Character: The characteristics that customers look for are integrity, high ethics and respect.

• High Competence: Customers expect the person to be equipped with technical knowledge, be able to listen and communicate well.

• Common Interest: The ability to communicate on and develop common interest areas.

• Problem Solving: The ability to provide information that can help clients in their decision making.

• Value-added services: Periodically reviewing a client’s financial needs demonstrates that you care.

• Being Prompt and Responsive: Return calls and emails immediately.

• Honesty: Answer questions clearly, confidently and truthfully.

By doing all these, customers slowly develop the sentiment of trust; eventually, they will believe in your commitment, the manner in which you operate your business and your credibility. These are values that we must cultivate as our personal ‘investments’ in the customer.

Fulfilling customer expectations are one of the many ways to increase customer satisfaction that ultimately leads to trust. Some of these may seem trivial and the least bit important to you, but to the customer, they are paramount:

• Be on time for your appointment; excuses are aplenty but never real.

• Know the name of the customer; pronounce it correctly.• Meet at a place convenient to your customer, not you.• Be attentive; listen and do not interrupt.• Don’t shy away from questions; answer with confidence.• Avoid sensitive subjects; religion and politics are high on the

sensitive list.• Ask questions, especially when you are not sure. • Review what you have gathered from the customer to avoid

misinterpretation.

No one knows when these customers will come forward to buy from you. One thing you can be sure of is this: when they are ready, they will look for you. You need to be persistent and also patient. This is an investment for which you cannot expect an immediate return. Time well invested almost always bears fruit.

“Continuous success is a result of continuous improvement. “- John Maxwell.


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While most insurance intermediaries in the market focus on selling personal insurance which includes income protection, critical illnesses, hospitalisation, and retirement benefits, business insurance, which has a huge untapped market, will definitely provide them with another avenue to grow their business. They can provide their clients, particularly business people, the total insurance solution. This will not only take care of their clients’ personal insurance needs, it will also help unlock the value of their wealth from the business.

Business insurance includes, among others, keyman insurance, business debt cancellation and business continuation plan. Keyman insurance will benefit a company in that through an insurance policy bought on the life of the key person(s) – keyman insurance – by the company, the company can be compensated if something happens to the key person(s) of the company. However, the types of insurance purchased as keyman insurance will determine the deductibility of the premiums paid and the taxability of the proceeds received by the company.

Basically, the premium on the policies is allowable if the insurance has no element of investment and the insurance is taken on the life of a “key person” whose absence would result in a reduction in the profits of the employer or the company. Policies that have no element of investment are term life and accident policies. A whole life policy and an endowment policy have elements of investment and are therefore regarded as

capital assets of a company. The premium payable on a whole life or an endowment policy is not allowable in arriving at the adjusted income from a business of a company.

In the case of the taxability of insurance proceeds, the proceeds receivable on a term life policy or an accident policy is taxable on the employer or the company as the sum is receivable in respect of an insurance premium that has been allowed previously. On the other hand, the proceeds receivable in connection with a whole life or an endowment policy is not taxable as the insurance premium has not been allowed.

More importantly, the sum assured proposed for keyman insurance can readily be determined by some methods and the amount will normally be quite large. This means insurance agents may expect a higher first year premium (FYP) from selling keyman insurance.

Next, with regard to business debt cancellation, when a company borrows from a bank for the purpose of business expansion, the directors will normally be asked to be the personal guarantors for the money the company borrows. In the event that one of the directors dies and the company defaults on payment, the director’s personal assets will have to be disposed of in order to repay the bank and this will greatly affect the deceased director’s family. To address the issue, the company can buy an insurance policy for the director and should something happen to him, the sum assured will be paid to the company and it can be used to release the director’s personal liability from the bank.

Henry Tan RFP, MMKTG, BABATraining ManagerFinancial Services Academy

Providing The Total Insurance Solution for Business People


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While both keyman insurance and business debt cancellation require the involvement of the company, the business continuation plan proposes an agreement be concluded among the business owners of different business structures like sole proprietorships, partnerships, and private limited corporations. When a triggering event like death, total permanent disability, or critical illness occurs, the surviving

owner(s) will buy over the interests of the deceased owner so as to continue the business, which is the preferred option for most of them.

One of the funding mechanisms for such a buy-sell agreement is the purchase of insurance policies by the individual business owners, assuming that they are all insurable. And the amount of insurance one can buy equals the percentage of one’s shareholding in the business. In the case that one of them is not insurable, other methods of funding must be used and the buy-sell agreement can still be concluded. One of the benefits for such an arrangement is the repeat sales in terms of future top-ups as the value of the shareholding of each owner increases in tandem with the growth of the business over time.

The above illustrations clearly show that business insurance is the avenue for insurance intermediaries to acquire more business and thus higher FYP by providing their customers with a total insurance solution. And a higher FYP is the answer to achieve your ultimate goal of attaining the prestigious MDRT status.

Insurance intermediaries must recognize that business insurance offers great potential for increased business by providing a total insurance solution to their clients. And they can pick up the above-mentioned concepts easily as there are such courses that are readily available in the market but the concern is the application of the concepts in their sales approach as most of them do not really make use of them after learning.



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At certain times in your life you need to make financial decisions. Getting a mortgage, saving for education or retirement and protecting your family with life assurance are all critical financial decisions. Unless you are very good at personal finance DIY, you most likely need help in selecting at least some of the financial products to ensure you select what best suits your needs. This is the job of the Independent Financial Adviser (IFA). IFAs are independent of any product. They act on your behalf and recommend the most suitable financial products if any. Their independence enables them to research products from across the market. In contrast, some other types of advisers such as tied agents who operate in high street banks, mutual funds and life insurance companies have contractual obligations to one or more product providers, which means the advice they give is limited based on the products of these providers.

The Introduction of IFAs in MalaysiaThe introduction of new professional intermediaries such as Independent Financial Advisers to enable Malaysians to obtain professional advice on the growing and more complex range of financial products and services was an important recommendation of the Financial Sector Masterplan 2001.IFAs will play an important role in providing holistic financial advisory services to consumers, ranging from insurance protection, savings for education, retirement planning and investments for the future.In addition to insurance products, IFAs may provide advice and market other financial products subject to the prior approval of the relevant authorities.IFAs who will be involved in providing advice must be approved by Bank Negara Malaysia (BNM) and must possess the minimum professional qualifications as specified by BNM. This is to ensure that they have the appropriate level of competency required to provide advice to consumers.The use of the term “financial adviser” will be restricted to holders of a Financial Adviser’s Licence, a Financial Adviser’s Representative Licence and exempted entities under the Insurance Act 1996. The restriction on the use of the term “financial adviser” will instil consumer confidence that the financial advice is from an entity licensed by BNM.To further encourage the development of IFAs in Malaysia, BNM also allows tied agents of life insurance companies to continue receiving their unearned future basic renewal commission from existing life business portfolios for the remaining years after gaining the IFA designation. This is to ensure a smooth transition to their careers as IFAs.

Selection between being tied to one principal company or being an IFA to represent products from across the marketAlthough perceived as a growing threat to the tied agency system, the IFA channel is still very much in its infancy in the industry. Tied agent advisers will remain a major intermediary for the foreseeable future, as it is still the most effective way of selling financial products.Clearly, changes in legislation, technology, customer behaviour and competitive pressures will continue to affect the landscape of the current and future distribution channels in the financial industry.No one financial entity has all of the right solutions to all of the financial problems out there. Without liberalization measures such as the introduction of IFAs, the agent will probably need to form a consortium consisting of a number of agents tied to various product providers. With such a platform, the agent is able to source the product that his product provider is unable to provide, from another tied agent. In the UK, despite the many barriers that have been placed in the way of the IFAs, they are the most successful distribution channel today and account for approximately 80% of all individual pensions products sold and well over 50% of investment and savings products. The IFA industry in Singapore has also been gaining momentum, gaining market share and recognition.

As consumers become more sophisticated, experience in the more developed IFA markets such as the UK reveals that: • Consumers generally understand the distinction between tied and

independent advisers • Consumers think independent advice is better than tied advice • Consumers prefer to engage an independent adviser. IFAs can be categorised as those who have an advisory business and those who act more as simply distributors for one or more providers. “At VKA, our business model comprises both and we believe strongly that IFA is the way of the future,” said Javern Lim, Founder & Managing Director of VKA Wealth Planners Sdn Bhd

The No.1 Career in USA and East AsiaIn countries like USA, Canada and Australia, independent bodies such as JOBS Almanac, each year rate the best careers based on income level, stress level, working duration, career prospects, market outlook and job satisfaction. Based on this:• The best job in USA and Canada (since 2000) is that of an independent

financial planner. Similarly, the best career in Australia since 2003 has also been that of a financial planner (Australian Education Department).

• Today, a career as a financial planner stands strong among the top three careers in the US, Canada, Australia and several East Asian countries such as China, Hong Kong and Singapore.

• In 2010, there is no doubt that in Malaysia, too, a career as a financial planner is on its way to becoming among the top three careers. The trend has already begun, making it a career with great opportunities. No capital, no risk and no experience are needed and it provides enormous room forgrowth, financially and emotionally!

Going independent as an IFA• The freedom to place clients’ interests first. Independent Financial Advisers are the only type of financial advisers who are able to make a selection from all the products available in the marketplace.Being an IFA representative gives you the freedom to select the best in each product class to create the best value for your clients. For example, with the knowledge that different insurance companies have different areas of strengths, you have the freedom to recommend the best product from a particular insurance company that would meet your clients’ needs.

• The ability to provide truly holistic financial planning This service provides customised lifetime financial plans for clients. It encompasses all aspects of capital and income management up to and into retirement, protection, tax-efficient investment , estate planning and preservation. The IFA model gives you access to a whole range of financial instruments and services, from insurance and investments to estate and tax planning, making the task of constructing a truly holistic financial plan for your clients possible.

• Staying ahead of the competition The regulators and related financial associations like the MFPC will continue playing their role in promoting public awareness of the importance of financial planning. Consumers will eventually understand the distinction between tied agents and independent financial advisers.

Considering the UK, Australian and Singapore experience, many of the top tied agents have foregone their “pots of gold” built over the years with their insurance companies to join the IFA industry.

Going independent now ensures that you remain ahead of the competition.

• No sales maintenance quotaThis means that you have the freedom to recommend the best product from a particular financial company that would meet your clients’ needs. You are not obliged to promote any specific financial products just to fulfil your agency quota to avoid being demoted or terminated. The continuity of enjoying all future income from your existing business portfolio without restriction of sales maintenance quota will enable a successful IFA to plan and enjoy his/her lifestyle freely.

• True business ownershipIn the case of insurance companies, mutual fund companies and banks, the clientele built by their tied agents are wholly owned by their principal company. There is no perpetual recurring income from existing clientele if the tied agents decide to leave the company. Under the IFA business model, the clientele base belongs to the financial adviser firm. “The IFA representatives of VKA will continue to enjoy their commission income from their existing block of business even though they decide to join another financial planning firm or set up their own practice later. At VKA, an IFA is truly independent and you own your business!” said Javern Lim, Founder & Managing Director of VKA Wealth Planners Sdn. Bhd.

Next Steps

Common concerns of tied agents when considering becoming independent are:• Accessibility to existing clientele base for continuous after sales service• Loss of commission income if any• Lack of knowledge as to how the IFA structure works.

No matter what the concerns, with their growing importance, IFAs are clearly the new wave of the future, clearly the next generation distribution channel.

If you think that going independent as an IFA is the right choice for you, you are welcome to visit our office to experience the actual working environment of an IFA company. We are more than happy to share with you our passion and direction in developing a career as an IFA in Malaysia and also show you how we have successfully transformed ourselves from being tied agents to truly being an IFA.

Making the Transition to an Independent Financial Adviser

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Seminar on Islamic Finance & Shariah Financial Planning

16 Jan 2010, PWTC, Kuala Lumpur

During registration...

Welcome & MFPC updates by Mr Kee Wah Soong President MFPC

Speaker: Mr Leonardo Zanolini, Chief Operating Officer, HSBC Amanah Takaful (M) Sdn Bhd.

Topic: Development and Updates of Takaful Business in Malaysia

From Left: Ms Chung Kar Yin, person in charge of PWTC, En. Mohamed Akwal Sultan, Mr Alex Foong, Y.Bhg Datuk Dr Syed Othman Alhabshi,

Tuan Haji Omar bin Abu Bakar, Mr Kee Wah Soong, Mr Leonardo Zanolini, Mr Ahmad Tajudin bin Abu Bakar.

From Left: Mr Leonardo Zanolini, Mr Ezamshah, Y.Bhg Datuk Dr Syed Othman Alhabshi, Mr Kee Wah Soong.

Speaker: Y.Bhg Datuk Dr. Syed Othman Alhabshi Chief Academic

Officer INCEIF. Topic: Development of Islamic

Finance in Malaysia and the Global Environment

Speaker: Mr Ezamshah Ismail Chairman, MFPC Shariah RFP

Development Committee.Topic: An Overview of Fundamentals

of Shariah Financial Planning

Emcee : En. Anuar Shuib

MFPC organised a seminar entitled “Islamic

Finance & Shariah Financial Planning” on 16

January 2010 in conjunction with the MFPC

graduation ceremony. At this seminar,

MFPC invited experienced and well-known

professionals in Islamic Finance such as

Y.Bhg Datuk Dr. Syed Othman Alhabshi, En.

Ezamshah Ismail and Mr. Leonardo Zanolini.

These speakers shared their expertise

and insights into the trends, future and

prospects of Islamic Finance & Shariah

Financial Planning. Approximately 500

people attended this informative seminar.

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MOU Signing Ceremony with Majlis Peperiksaan Malaysia (MPM)

16 Jan 2010, PWTC, Kuala Lumpur

Emcee : Mr James Bong

Speech by Mr Kee Wah Soong President, Malaysia Financial Planning Council (MFPC)

Speech by Tuan Haji Omar bin Abu Bakar, Chief Executive of Majlis Peperiksaan Malaysia (MPM)

Exchanging the Memorandum of Understanding (MOU) between Malaysian Planning Council (MFPC) and Majlis Peperiksaan Malaysia (MPM)

To ensure, constant professional standards in the shariah RFP examinations the MFPC is pleased to sign an MOU aapointing MPM as the Shariah RFP examination facilitator. MPM, a statutory body under the Ministry of Education, was established on 1st February 1980 under the Malaysian Law and the Examination Council Act. MPM is entrusted to hold the roles and functions of conducting specific and important examinations and all crucial matters related to such examinations. We are confident that MPM shall conduct the Shariah RFP Examinations nationwide professionally and effectively.”

“We would like to take this opportunity to thank MFPC for appointing MPM as examination facilitator for the Shariah RFP. The cooperation between MFPC and MPM will enable MPM to participate and contribute to the growth and development of Shariah financial planning in Malaysia by training more qualified and competent Shariah financial planners. With many years of experience in conducting and managing specific and important examinations, MPM is confident to carry out the entrusted roles and functions under this agreement professionally.”


Group photo of RFP Graduates

3rd MFPC Graduation Ceremony & Dinner16 Jan 2010, PWTC, Kuala Lumpur

At the dinner held after the graduation ceremony, Ms. Joanne Yeoh played a musical piece on the violin, enthralling the audience. Everyone left in high spirits when the dinner ended at about 11 p.m. Undoubtedly, the graduation and the dinner were memorable for all.

Welcoming Speech by Organising Chairman, Mr Vincent Kwo

Speech by MFPC President, Mr Kee Wah Soong

Emcees of the day Mr SK Samy andPn Sharifah Fazlina Bt. Syed Jaafar

Opening Dance bySutera Dance Group

Violin presentation byJoanne Yeoh

The MFPC organised its 3rd Graduation Ceremony and Dinner on 16th Jan 2010 at Putra World Trade Centre (PWTC), Kuala Lumpur, with the theme ‘Advancing Knowledge, Transforming Lives’. A total of 250 graduates were awarded the RFP, Shariah RFP and Affiliate RFP. Our Guest of Honour at this event was Y.Bhg. Datuk Ranjit Ajit Singh, Managing Director of Securities Commission Malaysia.

“Our theme for this year’s graduation, “Advancing Knowledge. Transforming Lives”, aptly describes the Malaysian Financial Planning Council’s commitment to supporting and developing the financial planning profession in Malaysia through making available professional education. Towards this end, and with the support of Bank Negara Malaysia and the Securities Commission Malaysia, and in working together with industry players, the MFPC has, since its inception, taken a proactive stance towards the continued growth and advancement of our members, the profession and the industry…”

“…the MFPC would like to encourage all our members to come forward and participate in our projects and activities. With your support and your active participation, the MFPC will be able to raise the profile of the financial planning profession, the industry and effectively reach out to the public…”

“This graduation marks your first major step in your careers as professional financial planners. Every journey to the right destination has to be taken with the right first step in the right direction. You have every right to be proud of your achievement of having taken the right first step with your graduation today...” “...As you embrace exciting new prospects and opportunities as financial planning professionals, I am sure you will also take the opportunity to make a positive impact on raising the profile of and promoting sound financial planning among Malaysians. As a fellow practitioner, it is my honour to welcome you into the financial planning fraternity and I wish you all the best in your new careers.”


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Competent & Professional Cheers !Pledge reading led by Ms Woo Pei Geen

1st batch of Shariah RFP 2010

Guest of Honour: Y.Bhg Datuk Ranjit Ajit Singh, Managing Director Securities Commission

“The growing complexity in the investment world and the types of investment products available to investors also emphasises the need for top quality financial advice. As such, the role played by institutions like the MFPC is crucial in promoting and supporting the development of the financial planning profession in Malaysia through making available professional education such as the Registered Financial Planner (RFP) Programme. In addition, the introduction of the Shariah RFP programme is commendable and will complement our concerted efforts at deepening and broadening the Malaysian Islamic capital market...”

“...The financial planning industry will be vital a component of the investment management industry. A well-developed and thriving financial planning industry is critical in ensuring that Malaysians have easy and efficient access to the high value-add services that well-trained financial planners can offer. As such, we are pleased to see the work by MFPC to assist in fulfilling the growing need of Malaysian investors for high quality financial advice from certified and knowledgeable financial planners.”

Best Student 2009’, Ms. Woo Pei Geen Best Prize Winner 2009’, Ms. Foo Lei Lei Book Prize Winner 2009’, Mr. Yap Kok Weng

Group Photo of Affiliate RFP Graduates

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VVIP at the 3rd MFPC Graduation CeremonyBack From Left: Mr Mohamed Taipor Suhadah, Mr Omar b Abu Bakar, Dr Ahcene Lahsana, Mr Alex Foong, Mr Kenny Chong, Mr Ezamshah Ismail,

Mr Mohamed Akwal Sultan, En Md Adnan Md Zain.Sit From Left: Mr Vincent Kwo, Mr Kee Wah Soong, Y.Bhg Datuk Ranjit Ajit Singh, Y.Bhg. Tan Sri Dato’ Hamad Kama Piah bin Che Othman

Fellow MFPC Members with VVIPsFrom left: Mr Kenny Chong, En. Ezamshah Ismail, Ms Vincent Kwo, Y.Bhg. Tan Sri Dato’ Hamad Kama Piah bin Che Othman,

GoH: Y.Bhg. Datuk Ranjit Ajit Singh, Mr. Kee Wah Soong, Mr. Alex Foong, En. Mohamed Taipor Suhadah.

Thank you to the working committee Enjoying the dinner... Yeah!!!

Our deepest appreciation goes to all the sponsors!

Main Sponsors

Advertisement Sponsors

Other Sponsors


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Conferment of Fellow MFPCAcademic Qualifications:• Associate CIFP, RFP, Shariah RFP, ChFC, CLU ACII, AMII, BSc (Hons)

Contribution to the Industry• Vice President of MFPC and Organizing Chairman for the Launching of MFPC and MFPC First

Convention at PWTC on Jan 2005.• Vice President for two portfolios: Membership & Publicity in 2004 - 2006.• Organizing Chairman of the ‘Elevating Financial Planning Literacy of Malaysians’ workshop

for 10,000 undergraduates with 26 Universities nationwide, 109 half-day workshop with Pemodalan Nasional Berhad (PNB).

• Founding Deputy President and Past President of the Malaysian Association of Chartered Financial Consultants (MAChFC).

• Secured the ChFC recognition for licensing with Securities Commission.

Academic Qualifications• Masters in Actuarial Science (North Eastern University, Boston)• Bachelor of Science (Hons) in Mathematics, University Malaya• RFP

Contribution to the Industry• Member of Board of Directors of Malaysian Institute of Insurance (MII) since 1989• Member of the Rating Review Committee of Malaysian Rating Corporation Bhd since 1993 to

1996. • Past President of Life Insurance Association of Malaysia (LIAM) and the Past President of

Actuarial Association of Malaysia • Chairman for the MFPC CCB Board and Member of Shariah RFP Development Committee.

Academic Qualification• Master’s in Business Administration (MBA), Drake University• Loma, USA• RFP

Contribution to the Industry• Represented MII in the MFPC protem committee during the initiate stage of the formation of

the MFPC• Examination Board Chairman • Vice President for Research and Publication • Chief Editor for financial 1st • Senior Management positions the private educational and training institutions.

Academic Qualifications• Masters in Actuarial Science (North Eastern University, Boston)• Certificate in Shariah Law and LLM in Business Law from International Islamic University

Malaysia [IIUM] • RFP

Contribution to the Industry• Director of the Malaysian Insurance Institute (MII) and the Insurance Mediation Bureau (IMB).• Vice-President of the Malaysian Takaful Association (MTA).• Currently a Director of The Malaysian Rating Corporation Bhd (MARC) and chairs the

Remuneration Committee and Nomination Committee.• Shariah Supervisory Board Member of RGA Global Reinsurance Company Limited (Labuan

Branch) for their Retakaful business.• Currently lectures at the International Center for Education in Islamic Finance (INCEIF)

Academic Qualifications• Degree in Business Management and a Master’s degree from University of RMIT,

Australia• FChFP, RFP, ChILP, ChLP

Contribution to the Industry• Vice President for External Relations from 2004 – 2006• MFPC Secretary since 2007 – 2009• Admin & Finance Board Chairman and Deputy Chairman for Certification & CPD Board

in year 2007 – 2009 • MFPC Financial Planning Roadshows Nationwide in 2005 and 2006• Past President of Namlifa, and served as the Chairman of NAMLIFA FLPC Board

(Financial and Life Practitioner Council) from 2006 – 2008

Mr Kee Wah SoongPresident of MFPC and

Chief Executive Officer of Malaysian Synergy Wealth

Bhd & Premier Financial Advisers Sdn Bhd

Mr Alex Foong Soo HahDeputy President of MFPC

Mr Mohd Taipor Suhadah

Head of Education and Training of the Malaysian

Insurance Institute (MII)

Mr Ezamshah IsmailChairman of MFPC

Shariah Development Committee &

Secretary of MFPC

Mr Kenny Chong Ching ShonManaging Director of KMS Business Solutions Sdn Bhd & Great Eastern Life Assurance (M) Bhd Group Sales

Manager (GSM)


MFPC Chinese New Year Get Together24 Feb 2010, Securities Commission Malaysia, Bukit Kiara

In conjunction with the Chinese New Year celebrations, the MFPC organised a seminar themed Latest Trends and Developments in Retirement and Financial Planning on 24 February 2010. The half-day event was held at the Auditorium of the Securities Commission in Bukit Kiara.

In his welcoming address, Mr Kee Wah Soong, President of the MFPC, announced the good news of an ang pow in the form of a RM300,000 Shariah RFP scholarship fund set up for the benefit of members and students. He stated that the aim of the scholarship fund is to build the Shariah RFP brand regionally and internationally and to encourage undergraduates and practitioners to venture into the Shariah Financial Planning profession. It also aims to create employment opportunities for young graduates.

Mr Kee continued by providing an update of developments. He informed the audience of Bank Negara Malaysia’s endorsement of the Shariah RFP programme and that holders of the Shariah RFP designation are eligible to apply for the Financial Adviser’s License and the Financial Adviser’s Representative License.

Members were encouraged to equip themselves with skills and knowledge in Shariah Financial Planning. Non Muslim practitioners, in particular, were advised to embrace the current developments in the industry in view of the robust growth and positive developments in Islamic Finance.

A total of 500 MFPC members/non members attended the seminar

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3131

Speaker: Mr Rafie OmarTopic: Power of Attorney in Estate

Planning

Mr Rafie Omar, Chief Executive Officer of Amanah Raya Legacy Sdn Bhd started the ball rolling as the first speaker. His gave a lively presentation on Power of Attorney in Estate Planning and had the audience in stitches with his humour.

He focussed on the relevance of a POA in estate planning. The POA is a written document in which the Principal or Donor appoints someone else called the Agent or Attorney or Donee to act for him, empowering the Attorney to carry out any legal act the Donor asks him or her to perform.

Mr Rafie stressed that a POA is more important than a Will. It allows the Donor to pick someone he trusts to handle his affairs in case he becomes incapacitated in any way. It provides the Donor peace of mind, reassuring him that in an emergency, the Attorney will have the authority to act. Without a POA, it becomes expensive and time-consuming to go through court action to appoint a guardian or conservator to make decisions when one suddenly becomes incapacitated. Also, a Court appointee is not a person selected by the Donor.

A POA must be in writing and must be executed and authenticated before individuals who are qualified to do so, e.g. a Commissioner of Oaths. A copy of the POA must be registered with the Senior Assistant Registrar of the High Court who shall maintain a record of all POAs deposited therein. This is important as a POA comes into effect the day it is signed and registered. A POA may be revoked by the Donor or renounced by the Attorney.

He also emphasised that although the POA is extremely important for estate planning, many misunderstand and confuse a POA with a Will.

Both have two very different functions. A Will takes effect upon one’s demise while a POA applies during one’s lifetime and ceases upon one’s death. A POA and a Will thus complement each other and there is no overlap.

The next speaker, Mr Matthew James Vincent, Chief Investment Officer of MCIS Zurich Insurance Berhad gave an Update on Insurance and Investment for Retirement Planning.

The speaker began with an update of the Malaysian insurance industry. As at 2008, the penetration rates for life insurance in terms of premiums as a percentage of GDP stood at 2.8% as compared to the world rate of 4.1%. LIAM is aiming for a rate of 3.5% in 2015. For non life insurance, the rate was 1.77%.

The growth in insurance premium has been driven by increased penetration, increasing disposable income and a 2% population growth. Over a five-year period (2003 – 2008), the life insurance (LI) sector has seen an 8.7% growth per year, general insurance (GI) recorded a 6.9% growth while Takaful had the highest premium growth of 24.4%.

Moving on to Malaysian Takaful, he reported that the estimated potential of the life Takaful market is estimated as US$ 3,411 and the potential Takaful GI market is estimated as US$1,703. The total gross contribution of the Takaful market at year end 2008 was US$ 1.2 bn. Growth has thus been strong, with Life Takaful dominating.

Mr Vincent then went on to discuss Distribution Channels. The Tied Agency remains the dominant form of

Speaker: Mr Matthew James Vincent

Topic: Insurance and Investment for Retirement Planning

distribution for life insurance products. This is despite its decline in relative importance with the rise of other channels, and with the complexity of insurance products requiring specialised knowledge.

As for Bancassurance, effective September 2009, 42% of new life premiums written were generated via this channel, challenging the dominance of the tied agency. It is also becoming an important and growing factor in the GI business (currently 10% of GWP).

Direct Marketing, another distribution channel, poses very little channel conflict with the Tied Agency. The cost is low for the product provider who can pass on commission savings and it bypasses the need for advice or needs based selling. Nevertheless, the product set needs to be relatively homogeneous.

Rising levels of Internet penetration are expected, and increasing confidence with online payment security will increase the potential size of this channel.

Platforms have seen rising importance, linked to the rise of IFAs. While being channels in their own right, platforms also facilitate other channels. They are the supermarket of investment products with online offerings, a wide array of third party managed investment trusts, and the operation of administration platforms for advisers/dealer groups. They are potential no-advice channels, but often used by dealer groups for administration (i.e. Wrap Accounts), with consolidated reporting, and multiple investments to multiple managers held in one account.

Another distribution channel, the Independent Financial Advisers (IFAs) /Dealer Groups, is increasing in importance, as evident in other jurisdictions. This channel is more holistic in nature as opposed to product flogging, and cover investments, insurance, estate planning, tax advice, mortgage broking and legal services, providing a “one stop shop”. Dealer Groups of IFAs hold the umbrella license to operate, with IFAs being the authorised representatives. If not utilising platform technology, they typically offer their own researched selection of product providers. As they do not themselves offer in-house products, this resolves any conflicts.

The next generation of distribution channels are Managed Accounts (MAs) wherein underling investors own the shares outright that match the model portfolios of product providers. One of these are Separately MAs where the portfolio is managed in accordance with a mandated investment strategy, all investors in strategy have their portfolio invested in the same way, investment decisions are made by an investment manager and executed on behalf of all investors by the managed account operator.

In the case of the other, Individually MAs, the portfolio is tailored to each individual’s requirements. In certain circumstances, the investor makes the investment decision on each transaction. These may authorise an investment specialist to execute transactions and are generally only provided to investors with large sums of money to invest.


Forum on Islamic Capital Market & Retirement Planning

Mr Zainal Abidin Mohd Kassim spoke on the topic Retirement Planning through Risk Sharing: Importance of the Islamic Capital Market and Takaful.

He talked of the “ticking time bomb” in the developing world, i.e. the inadequate provision for retirement. This has been the result of a growing ageing population resulting in a strain on social security systems including health care, and falling birth rates causing an increasingly disproportionate ratio between the working and the retired population.

While the developed world arrived at the current problem over a reasonably long period of time, China took 12 years from 1972 to 1984. Similarly, it took 114 years for France’s over 65 population to double from 7 to 14 percent. However, the same change is expected to happen within 20 years in Iran and Tunisia. Thus, while developed countries had generations to build their ‘safety nets’ for the ageing population, the developing world is much less prepared.

24 Feb 2010, Securities Commission Malaysia, Bukit Kiara

Further, in many developing countries the family support structure is quickly eroding and governments in these countries are also behind the curve in terms of putting together an integrated and sustainable social security net. Consequently, individuals need to plan for retirement and not be overly dependent on the government.

At retirement, one needs a regular income throughout one’s and one’s spouse’s lifetime and medical care in times of need. We can work towards these needs by saving, either directly or indirectly through the capital market or through intermediaries such as Islamic banks and takaful companies. We can also invest in our own business, invest in our family, defer retirement or share our risks through a takaful policy.

Mr Zainal then went to elaborate that the basic principle of Islamic Finance is risk sharing rather than risk transfer. The concept of “brotherhood” in Islamic Finance means the sharing of risks through helping one another in times of need. The smallest nucleus in a community is the family structure. The next level is that of your neighbours. Then there is the community that you live in. Helping the members of your family, your neighbourhood and ultimately your community is the basic form of risk sharing.

Risk transfer involves profiting from “trading in risks” and derivatives are instruments of risk transfers. Takaful involves risk sharing, while conventional insurance companies take a premium in exchange for taking on the risk.

Investing in the Islamic capital market for retirement planning means investing in Shariah compliant investments including certain equities, sukuks, precious metal, commodities and properties, and in mudharabah, and wadiah accounts in Islamic banks.

Capital markets are a medium of raising capital, whether to invest in a business, to purchase assets for the purpose of rental or to purchase commodities as a hedge against inflation. Equities and sukuks represent equal units in packaged assets, benefits and services. Holders of equities and sukuks share in the venture (and therefore the risk) proportionate to the number of units they own.

By investing in shariah compliant assets (through equities and sukuks), the investor is supporting Socially Responsible Investments. The conditions for shariah compliant investments are:

• No riba (no debt earning interest)• No gharar (no uncertainty, transfer of risks)• No Maysir (no gambling, taking on speculative risk)• No investments in non Shariah compliant businesses.

The speakers who spoke on the forum Islamic Capital Market for Retirement Planning were Mr Zainal Abidin Mohd Kassim (Mercer Zainal Consulting Sdn Bhd); Mr Andy Lim (Managing Director, Philip Mutual Berhad) and

Prof Dr Saiful Azhar Rosly (Professor, Islamic Economics and Head, Islamic Banking Department, INCEIF).

Mr Zainal Abidin Mohd KassimMercer Zainal Consulting Sdn Bhd

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In using Takaful as a savings medium, one must note that Takaful plans are different from investing in unit trust / mutual funds in that Takaful involves a commitment to regular savings. These savings can be maximised over the period before and after retirement by minimising distribution and investment expense, and exploring asset classes which have a reasonable certainty of keeping up with inflation and minimal price volatility.

The criteria for choosing the investment vehicle are that it should be inflation linked (either directly or indirectly). Also, one’s investment/savings should also contribute towards the betterment of society (e.g. not investing in gambling stocks, or companies which contribute to global warming). In addition, the instrument should also be appropriate for one’s financial situation. This means one should not take too much risk if one cannot afford to make a loss, and go for low volatility investment instead. Finally, one should understand one’s investment.

Prof Dr Saiful Azhar Rosly Professor, Islamic Economics and Head, Islamic

Banking Department, INCEIF

The final speaker on the forum was Prof. Dr Saiful Azhar Rosly whose spoke on the topic Your Investment and Your Retirement.

He explained that the types of investment and the corresponding shariah instruments and contracts are: Physical assets (Al-Bai Bitahman Ajil); savings accounts (Al-Wadiah Yad Amanah); fixed deposits (Al-Mudharabah Investment); common stocks (Al- Musyakarah); unit trusts (Al- Wakalah, Al- Musyakarah); bonds (Bay’ al-‘inah) and insurance (Takaful).

The Shariah framework rests on five principles:• Prohibition of riba (profit derived from loans)• Application of Al-Bay ( work, effort and responsibility) • Avoidance of gharar in contracts (ambiguities in prices, subject matter, counterparties)• Prohibition of gambling or maisir (outcome due to pure chance).

The applicable Islamic maxims on risk are Al-ghorm bil ghonm (With profit comes risk) and Al-kharaj bil daman (With profit comes liability/responsibility).

Mr Andy LimManaging Director Philip Mutual Berhad

The next speaker, Mr Andy Lim, spoke on Creating an Islamic Portfolio for Retirement.

In creating an Islamic portfolio for retirement, he advised that one should make the power of compounding and time one’s best friends. In other words, it works to our advantage to start early and leverage on the power of compounding.

Also, one should focus on asset allocation. This point was underscored by Brinson, Hood and Beebower in 1986: “Asset allocation on average accounted for 93.6% of portfolio performance.”

Thirdly, one should diversify to reduce risk. In this regard, the various Islamic investment instruments available are Islamic Bonds/ Sukuk, Shariah Compliant Stocks, Islamic Unit Trusts, Islamic Exchange Traded Funds (ETFs), and Islamic Real Estate Investment Trusts (I-REITs). As at 30 November 2009, 846 Shariah-compliant securities were listed on Bursa Malaysia, accounting for 86% of all listed securities and 64% in terms of market capitalisation.

He stressed that while there is a need for diversification, there is also the need to change the portfolio mix over time. Islamic Global Wrap Accounts, he went on to add, allow investors to access multiple international financial markets and instruments such as International Islamic Unit Trust Funds, Islamic Exchange Traded Funds (ETFs) and International Stocks.

One advantage of these accounts is greater choice as investors enjoy greater flexibility in creating a personalised portfolio from an extensive range of investment instruments. This is as it allows investors to access multiple international financial markets and instruments. A further advantage is investors diversify investment risk using a varied range of financial markets and instruments. Finally, the account leverages on technology in the management of the retirement portfolio, being an integrated, multi-product financial platform.

Where risk appetite is concerned, risk avoidance is halal or permissible when there is no expectation to earn fixed income. However, risk avoidance is haram or prohibited when there is expectation to earn fixed contractual returns. Risk aversion is mubah or permissible as there is willingness to take no risk with an expectation to make more profit. Finally, risk seeking is makruh or permissible when there is willingness to take more risk with an expectation to make less profit.

His session ended with a description of the types of Shariah compliant investment in relation to the corresponding risk and expected return levels. In ascending order they are: cash, Islamic deposits, sukuks, i-REITS and i-unit trusts, direct investment in real estate, and investment in shares.

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Financial Education Seminar

3 Apr 2010, MS Garden Hotel, Kuantan

“Building a Strong Foundation Today, for Tomorrow”

MFPC has progressed indeed very well in meeting with the national agenda to promote the awareness of the importance of financial planning to undergraduates and the public at large. Therefore, MFPC was pleased to organise a Financial Education Seminar entitled “Building a Strong Foundation Today, For Tomorrow” at MS Garden Hotel, Kuantan on 3 April 2010. We were glad to receive the excellent support of our event partner, Agensi Kaunseling dan Pengurusan Kredit (AKPK) and our co-organizer, NAMLIFA Kuantan Branch to make this event yet another success in April 2010.

We were honored to have YB. Dato’ Haji Shafik Fauzan bin Sharif, Pengerusi Jawantankuasa Pelancongan, Kesenian dan Warisan, Pembangunan Keluarga dan hal Ehwal Wanita Negeri Pahang as our Guest of Honour on that day. Also, we invited six experienced speakers: Mr Tan Choon Kiang, Principal Consultant of Crystal Strategic Planners; Mr Mohamed Akwal Sultan, Chief Executive Officer of AKPK; Mr Michael Kok , President of NAMLIFA; Mr Alvin Yap, Managing Director of A. D. Financial; Mr Rafie Omar, Chief Executive Officer of Amanah Raya Legacy Services; and Mr Ridzuan Bin Abdul Rahim, Communications and Public Affairs Division, Perbadanan Insurans Deposit Malaysia.

Guest of Honour YB. Dato’ Haji Shafik Fauzan bin Sharif

Mr Tan Choon Kiang5 Things I Wish my Dad Taught me

About Money

Mr Mohamed Akwal Sultan Effective Debt Management Today for a

Better Tomorrow

Mr Michael Kok Managing Your Risk Comfortably

Our sincere appreciation to our event sponsors

Working Committee Members

Mr Alvin Yap If Its Worth Striving For,

Its Worth Preserving - Strategies to your hard earned wealth

Mr Rafie Omar Shariah RFP & MFPC for Stronger

Future

Mr Ridzuan b Abd RahimDeposit Insurance System Malaysia

Emcee : Pn Junainah Bt. Ahmad Esa


36

financial 1st May 2010 Issuefinancial 1st May 2010 Issue

Money Compass: The Making of Young Buffet 13th Mar 2010, Securities Commission Malaysia Bukit Kiara, Kuala Lumpur.

MFPC ACTIVITIES....

Financial Planning Workshop for Public & Practitioners 2nd to 4th Feb 2010, INTAN, Kuala Lumpur.

Shariah RFP Question Bank Review Session 19th & 20th Dec 2009, Shangri-la, Putrajaya.


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MFPC ACTIVITIES....financial 1st May 2010 Issue

Shariah RFP Module 1 Tutorial Class13th March 2010, MFPC Office

12th Post Graduate Education Fair 2010 16th to 18 th Apr 2010, Mid Valley Exhibition Centre, Kuala Lumpur

RFP Module 7 & Certificate of Proficiency in Financial Planning17th Apr 2010, MFPC Office


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How many of us plan for our future financial needs? Studies

indicate that the majority of us especially the young, are still

ignorant about the importance of having sustainable future

income, especially after retirement. One prime reason cited is

the lack of awareness among youth regarding the importance

of assessing their own financial future. This is related to people’s

their perception that their contribution to the Employees

Provident Fund (EPF) is sufficient to cover their living expenses

after retirement. Many believe that their EPF savings are

enough to support future outflows, including medical

expenses. If that’s so, consider one of the research findings by

EPF which shows that 60 percent of retirees use up all their EPF

savings within just 4 years! By the time you retire, you would

certainly have lost half of your monthly salary, particularly if

you are a working individual or professional. How then would

you be able to maintain a similar lifestyle with limited finances

for another 15 years of life, assuming a life expectancy of 75

years and a retirement age of 56 if you do not prepare for your

retirement?

In addition, it is part of our culture that children are expected

to take care of their aged parents. As such, as they get older,

some parents tend to rely on and expect financial support

from their children. However, as society becomes more affluent,

traditional cultural values change. This has resulted in parents

who assumed that their children would take care of them in

their old age being “abandoned” by their children. To avoid

future frustration, all youth should plan for their own future.

Proper financial planning will allow them

to carefully plan their finances from

now until their retirement. With a solid

financial plan, today’s youth will be able

to chart their financial independence

and will be able to maintain a decent

lifestyle without having to rely on

anyone else. At the end of the day,

everyone deserves a better life in the

future but without proper planning, we

will not have sufficient funds to fulfil

all our retirement needs and continue

living with peace of mind.

Studies have also shown an alarmingly

low level of awareness of financial

planning in many societies, particularly among the youth.

A study in USA found that 20 million of the population had

no intention of saving at all, though they were aware that

financial uncertainty in an uncertain environment may cause

financial distress to them in the future. The major cause for

this phenomenon is the failure of people to understand the

crucial need to assess their future financial requirements.

The young, in particular, are not interested to discuss their

mortality as they feel death is yet far off and that they will have

enough time to think about it when the time comes. For now,

they feel they should be enjoying their income to the fullest.

As a consequence, a great number of young executives are

badly trapped in credit crisis as reported in the study, due to

excessively spending more than what they earn.

With changes in consumption habits and as people become

more health conscious, life expectancy is expected to increase;

thus, the need to plan for future financial resources to cover

future expenses becomes more imperative. In addition, there

is also a strong trend that our young professionals prefer to

marry at a later age. This trend results in reduced prudence in

spending habits. Not knowing how to manage their finances

wisely, they may be trapped in financial inadequacy as a late

marriage also means having children at an older age. If they

don’t plan early, they may have to continue working well after

their retirement age in order to cover future expenses.

The majority of us depend on our EPF contributions but

Prof Madya Dr Mohamed Dahlan IbrahimDean Faculty of Entrepreneurship and Business,Universiti Kelantan Malaysia (UMK)

Providing Our Youth Financial Planning Education


3939

without proper financial planning, the fund will not be

sufficient to cover future living costs. As mentioned earlier,

a study conducted by EPF shows that 60% of retirees use

up all the money in their fund within 4 years. As the current

average life expectancy is 75 years, how will we be able to

finance our future needs for another 15 years if we retire at

56? Knowing the disastrous consequences of not having an

effective financial plan, rigorous efforts should be undertaken

to educate the public, especially the youth on financial

planning so that they will be able to plan for a better life in

the future. The maxim ‘failing to plan means planning to fail’

will become a reality if proper attention and intervention is

not put in place. All of us deserve a comfortable life during our

retirement; therefore, we must act now and start planning for

our future. The earlier we plan, the better because we will be

able to manage our funds more flexibly in order to earn better

returns. Taking lessons on financial planning or engaging the

services of a financial planner is a matter of choice but what

is more important is the right attitude and mindset towards

adopting a profitable financial plan.

Educating the youth on financial planning is a must and it

should start as early as possible. In developed countries, the

majority of their youth are taught financial literacy while they

are in primary school. As a developing nation, we must make

concerted efforts to increase the level of financial literacy

among our youth, making them aware of the importance of

planning for the future, particularly in terms of investing a

portion of their present fund for future consumption. Despite

the fact that financial management courses are being taught

at our institutions of higher learning and students learn how

to maximise shareholders’ wealth, they do not understand

that that one should also learn how to maximise one’s wealth.

This must also be taught. The inclusion of personal financial

planning as one of the modules covered in the current financial

management syllabus is relevant.

Universiti Malaysia Kelantan (UMK) has taken the initial step to

introduce individual financial planning modules as electives.

Students thus gain knowledge on financial planning and they

also gain the opportunity to take up a career in the financial

planning industry, if they should decide to do so. In addition,

UMK is currently working with relevant government agencies

such as Agensi Kaunseling dan Pengurusan Kredit (AKPK) to

continuously educate our students on the importance of

managing their personal finances while they are still studying

and on developing a personal financial plan for their own

future. As we do not want to see our youngsters trapped in

financial difficulties at a very young age, educating them will

help to reduce this problem in the future. In doing so, we will

be able to save public money used to help those in financial

predicaments. Indeed, it is better to use public money to feed

the needy, rather than to aid the greedy.

4040

What to do next?


Be calm and do not panic.

If there are injuries to any persons, call 999 for assistance.

If there are no injuries, move your vehicle to a safe area away from traffic, where possible.

Note the names and addresses of the other driver(s) involved.

Note the model and vehicle registration number of the vehicle(s) involved.

Note names and addresses of witnesses, if any.

Sketch a simple diagram of the accident scene and the position of each vehicle right before and after the accident (Photos of the accident scene, if available, can be very helpful).

Exchange information on the names of your respective insurance companies/takaful operators.

Do not discuss whose fault it was. This may complicate handling of your claims.

If your vehicle needs to be towed, ensure that the vehicle will be sent to the correct workshop. Call your insurance company/takaful operator or its accident hotline number for the appropriate workshop.

Report the accident to the police promptly.

Inform your insurance company/takaful operator promptly even if you do not intend to make a claim. The third party involved in the accident may make a claim against your insurance company/takaful operator which would cause you to lose your NCD.

Complete the claims form in full and include any additional relevant information. If in doubt, ask your insurance company/takaful operator for advice.

This article is from insurance info, a consumer education programme initiated jointly by Bank Negara Malaysia and the insurance and takaful industry to raise consumers’ awareness on insurance and takaful matters. For more information, log on to www.insuranceinfo.com.my

BANK NEGARA MALAYSIACENTRAL BANK OF MALAYSIA

Make Prudent FinancialManagement a Way of Life

1800-88-2575www.akpk.org.my

Get knowledgeable about managing your finances smartly.

Learn to put into action your financial knowledge by practising positive financial habits daily.

Enjoy financial freedom through your determination and discipline.

Financial Education

Financial Counselling

Debt Management

financial 1st May 2010 Issue Make Prudent FinancialManagement a Way of Life

1800-88-2575www.akpk.org.my

Get knowledgeable about managing your finances smartly.

Learn to put into action your financial knowledge by practising positive financial habits daily.

Enjoy financial freedom through your determination and discipline.

Financial Education

Financial Counselling

Debt Management

42

Invitation Financial 1st advertisement

Your Particulars

NameDesignationCompany NameAddress

Malaysian Financial Planning CouncilSuite 7.01, Menara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur.Tel: 03-2694 5899 Fax: 03-2694 6899Email : [email protected] or [email protected]

TelDate of Submission

September 2010 December 2010 March 2011

As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you’re a financial genius. Ron Chernow

As far as your personal goals are and what you actually want to do with your life, it should never have to do with the government. You should never depend on the government for your retirement, your financial security, for anything. Drew Carey

Financial Quotes


44


“Wealth Management” is now a familiar term. Many consider it essential to learn and know how to go about it, especially in the current uncertain economic and financial environment. Further, one’s financial situation at retirement is determined very much by how much one can make, accumulate and utilize until the end of one’s life journey.

Model portfolio and asset allocation are the basic techniques to keep the retirement plan on track and this is achievable through periodic reviews conducted by a qualified financial planner.

Knowledge Management

As the saying goes, Knowledge is Power. An investor must acquire basic knowledge of the economy and understand the terms commonly used by fund managers and financial planners. The investor is also encouraged to understand the features and benefits of the basic financial products before engaging a financial planner to recommend where to allocate his hard-earned money.

Here, I would like to provide a simple explanation of some of the basic investment instruments and their features.

1) Shares and investment in Futures contractsa. Sharesi. This involves buying into blue chips or cash cow

counters which will earn you capital appreciation and good dividend income.

ii. A large amount of money is required for such investments and withholding power is key.

iii. You must understand the market fundamentals and make your own investment decision, not by “hear and buy” but by “analyze and invest”.

In the case of shares, the principle is to “buy low and sell high”. Simple enough, but many tend to do the opposite.

b. Futures contractsi. Investing in futures contracts requires knowledge of

the particular investment instrument, say the stock index movement or crude palm oil price movement “in the near future” (a specific time frame of a Futures contract), expecting the price to rise or fall.

ii. The reward will be gained when you keep yourself informed of the particular instrument.

iii. Investors who are not well-versed with the fundamentals of investing in Futures can be considered to be gambling, not knowing what the result will be.

Thus, having an understanding of the fundamentals of the Futures market and basic economics theories can provide a prudent view in determining the Up or Down investment view.

2) Unit Trusts and Capital Protected Investmentsa. Unit Trusts i. A unit trust is a pool of funds gathered from many

investors who are not able to allocate large amounts of money to invest in certain selected shares. [Refer to 1 (a).]

ii. This is for micro investors who wish to invest in big and valued companies with a minimum capital outlay. The returns will take a longer period to be realized as compared to direct investment into shares and Futures contracts.

iii. However, the past performance of a unit trust, no matter how positive, does not guarantee the future results. Unfortunately, many investors are still attracted to unit trusts with double digits return without knowing their own risk appetite (can take negative return and capital depreciation).

b. Capital Protected Investmenti. Capital Protected investment is for conservative

investors who seek protection in keeping the initial investment outlay intact regardless of the market volatility. At the same time, betting on investment returns provided by a special investment arrangement (an investment instrument normally provided by renowned international asset management companies).

ii. Sometimes it requires a higher capital outlay to be invested and a certain time frame before the investor can realize the investment, normally a minimum investment time frame of 2 years.

iii. A penalty charge is imposed on premature withdrawal. Hence, the said investment is rather illiquid within the specific time frame.

3) Life Insurance and Investment-Linked Insurance a. Life Insurance i. Life Insurance is a binding contract which promises

to provide a large capital outlay when someone is in need of money to fulfil a specific life time goal when unforeseen circumstances strikes.

ii. Certain products provide cash value at the end of the contract period and some do not.

iii. Legislation (Insurance Act 1996) governs the operation of this mutual understanding between the policyholder (person who makes premium payment)

Anthony Ang RFPAVP, Business DevelopmentOSK-UOB Islamic Fund Management Berhad

Besides Wealth Management, What Else to be Managed ?


45

and the insurance company (the entity that pays you the sum assured or provides the protection).

b. Investment-Linked Insurancei. This is an insurance product that has investment

features. Hence, the cash value is not guaranteed. The cash value depends on the investment returns throughout the insurance coverage period.

ii. It is similar to unit trusts [refer to Item 2 (a)] as the amount of investment can be increased or reduced according to the investor’s requirement. The golden rule is to maintain a minimum investment amount to keep the insurance coverage ongoing.

iii. The investment amount is partly utilized to pay off the risk premium (to provide the insurance coverage) and the remaining is invested in the selected investment portfolio.

The objective of investment is to accumulate more assets by contributing to current savings, and is thus wealth accumulation. On the other hand, the objective of insurance is to protect all assets by paying off current and future expenses needs, and is thus wealth protection. Family Management

Wealth management ensures assets are being treated well so that more assets can be generated in the near future. I have no doubt that a qualified financial planner is able to perform his duty well but the investor has to ensure the efforts taken in wealth management must be complemented with good family management.

Fairness and good family relations are the key factors. Family businesses and assets are created through the hard work of the first generation, are continuously nurtured by the second generation and are harvested by the third generation.

Generally, the key person determines the successor to the wealth he has created based on favouritism. Contesting the will and interference by other family members and relatives will definitely diminish all planned in the wealth management context.

Undoubtedly, economic fundamentals are important. However, positive family values and culture work together to ensure wealth is managed effectively and all family members benefit from the wealth one worked so hard to accumulate and manage prudently. Love and justice, above all, are the key words.

Health Management

Health is wealth! A balanced diet, moderate exercise, vitamin supplements and stress management are all vital for good health. Should one fall ill in spite of these, one can rest assured if one has a medical card and adequate total critical illnesses coverage.

During his youth, an investor would be concerned with how much the investment returns are, how many good investment opportunities are being realized, how many bungalows and shop lots are bought and so on. When the investor gets older, however, the investor will start to be concerned with the quality of the time spent with his family and friends, and the state of his health.

An investor may able to take a high risk high gain approach in his investment but I think he would not dare to ignore keeping a healthy lifestyle. The investor must keep in mind that wealth can be accumulated but not health.

You may have all the financial gains you want but you may lose it all due to poor health. Therefore, health is also one of the classes of assets to be managed in one’s retirement plan.

Self Management

Finally, an investor must cultivate a positive attitude in achieving wealth management objectives throughout an infinity time frame. Wealth management does not end when the initiator (the person who starts the wealth management programme) has achieved his financial goals. It continues to benefit the beneficiaries for many years with the aim of ending the myth that “wealth is not sustained for more than three generations”.

Hence, the initiator fosters the right behaviour in “save, invest, review” within family members in order to continuously work closely with the appointed financial planner to keep on accomplishing the financial goals.

The right attitude and active participation in wealth creation, accumulation and protection are vital to assure the success of the wealth management programme.

In conclusion, wealth management is not a fairy tale where your dream will come true without your making any efforts. The financial planner cannot create wonders but wonders can be created when you know what to manage, who to manage, how to manage, and when to manage.

financial 1st May 2010 IssueChapter 8 So Where Else Can I Put My Money?

With all the planning activities that we have done earlier, it makes sense for us to put the money that we have set aside into the appropriate vehicle so that we can reasonably achieve our goals and objectives. Below are the some of the common types of investments available to us.

Fixed Deposits / Savings This is the most common form of savings whereby the depositor places funds in a bank’s fixed deposit for a fixed period in return for a fixed interest. There are varying interest rates for different periods of maturity, at the end of which the depositor can either choose to withdraw the principal amount plus interest or roll over to a new period.

Equity (Stocks / Shares) Equity means share ownership in a company. Investing in equity means buying shares in public-listed companies that are listed in the stock exchange where shares are bought and sold daily. Equity owners or commonly called shareholders, benefit from this investment by receiving dividends declared by the company and/or a gain in the price of the shares.

Fixed Income Securities / Bonds Apart from raising funds by giving investors a part ownership of the company, companies may choose to borrow from the general public by issuing bonds. Bonds are therefore debt instruments where bondholders receive fixed interests (or coupon payments) on a periodic basis. The debt is usually for a fixed period, at the end of which the company promises to repay the principal amount borrowed.

Real Estate / Properties Real estate investing is an ever popular form of investments as investors like the thrill of physically “seeing, touching and feeling” their investment and getting rental income out of it. The location of the property is the most important consideration when choosing which property to buy for investment purposes.

There are a few ways in which one can invest in these asset classes:

1. Direct Investment In Malaysia, investors can choose to invest directly in all the classes directly except bonds, which are only reserved for institutional investors who invest a minimum of RM5 million. As mentioned, investors can buy and sell shares directly from Bursa Saham Malaysia

2. Unit Trusts

These are professionally managed funds where the unit trust companies pool funds from a number of investors. The funds are then invested into 4 main asset classes, namely equity, bond, money market or properties. The

46

financial 1st May 2010 Issueinvestor gets a subdivision of all these assets called units. Investors can buy and sell these units from the unit trust companies based on the fund’s end-of-day prices.

3. Investment-linked policies (ILP) ILPs are insurance policies that give policyholders the power to determine which fund(s) their cash values are to be invested. The funds offered are either managed by the insurance company that issue the policy, or by other asset management companies. The asset classes that these funds invest into are usually equity and fixed income securities. There are two types of ILPs: regular premium and single premium. Single premium policies are suited for those who have a lump sum of cash and wish to protect their money against life risks. Regular premium policies usually offer the complete range of protection options on the one hand and investment element on the other, allowing the policy holder to exercise the dollar cost averaging method of investment. 4. Exchange Traded Funds (ETFs) ETFs are like unit trusts index funds except that it can traded during the trading day in the stock exchange just like any other stocks ETFs are not only confined to investments in equities, but also bonds, real estate investment trusts and commodities such as gold. The advantage of investing into ETFs is the lower expense ratio and management fee as compared with unit trust funds becauseit charges only the usual brokerage fee to buy and sell a unit. This is the one of the latest offerings in Malaysia. For more information, kindly visit http://www.klse.com.my/website/bm/market_information/exchange_traded_fund

5. Closed End Funds(CEFs) This is another innovative product recently introduced into the Malaysian investing scene. A CEF is a public limited company engaged wholly in the business of investing its funds in securities for the purpose of spreading investment risks and managing a portfolio of investments to gain revenue and profit for its shareholders. Hence, investors are regarded as shareholders of the company, which itself has a fixed number of shares. Unlike ETFs, CEFs are bought and sold in the stock market between the investors themselves. For more information about CEFs, kindly visit: www.sc.com.my/eng/html/resources/guidelines/GlPubOfferClosedFunds.pdf

6. Real Estate Investment Trusts (REITs) This is like an ETF except that it invests in a portfolio of real properties which have reasonably high and stable rental yields, like office buildings, hotels or shopping malls. This fund is suitable for investors who want a constant stream of income, which in turn is derived from rental income received from tenants into the fund.

Understanding Your Risk Tolerance

KeongAre you sure you want to move out some of your money from the fixed deposits to look for higher returns elsewhere? My cousin who invested in the stock market some years ago got badly burned when the economic crisis hit us.

KrishnanYes, I know. But it’s very tempting because the FD rates are so low now. I have a few colleagues who have also made a lot of money from stock market.

KarimWell, guys, let me put it this way. I’ve heard this debate before. People who have not tried stock market investing will usually want to try their fortune, and people who have got burned will stay away from the stock market. People’s behaviour is like that.

47

Chapter 8 So Where Else Can I Put My Money?

With all the planning activities that we have done earlier, it makes sense for us to put the money that we have set aside into the appropriate vehicle so that we can reasonably achieve our goals and objectives. Below are the some of the common types of investments available to us.

Fixed Deposits / Savings This is the most common form of savings whereby the depositor places funds in a bank’s fixed deposit for a fixed period in return for a fixed interest. There are varying interest rates for different periods of maturity, at the end of which the depositor can either choose to withdraw the principal amount plus interest or roll over to a new period.

Equity (Stocks / Shares) Equity means share ownership in a company. Investing in equity means buying shares in public-listed companies that are listed in the stock exchange where shares are bought and sold daily. Equity owners or commonly called shareholders, benefit from this investment by receiving dividends declared by the company and/or a gain in the price of the shares.

Fixed Income Securities / Bonds Apart from raising funds by giving investors a part ownership of the company, companies may choose to borrow from the general public by issuing bonds. Bonds are therefore debt instruments where bondholders receive fixed interests (or coupon payments) on a periodic basis. The debt is usually for a fixed period, at the end of which the company promises to repay the principal amount borrowed.

Real Estate / Properties Real estate investing is an ever popular form of investments as investors like the thrill of physically “seeing, touching and feeling” their investment and getting rental income out of it. The location of the property is the most important consideration when choosing which property to buy for investment purposes.

There are a few ways in which one can invest in these asset classes:

1. Direct Investment In Malaysia, investors can choose to invest directly in all the classes directly except bonds, which are only reserved for institutional investors who invest a minimum of RM5 million. As mentioned, investors can buy and sell shares directly from Bursa Saham Malaysia

2. Unit Trusts

These are professionally managed funds where the unit trust companies pool funds from a number of investors. The funds are then invested into 4 main asset classes, namely equity, bond, money market or properties. The

36

People who have invested in the stock market and suffered losses would wish they had stayed invested in FDs even though it gives low returns, and people who are currently earning low returns would want to seek higher returns in more risky investments.So who is right? In essence, it’s a bit like the 3 blind men who only touched the ears, the trunk and the torso of the elephant and tried to describe the shape of the elephant based on the individual parts that they touched. Investing in anything other than FD has its risks. Let’s try to understand what some of those risks are:

Monitor Investment Performances RegularlyNever leave your investments to chance. You should review the performance of each asset class, fund, or fund manager on a regular basis, say, every half-yearly. This will enable you to make the necessary adjustments if any of your investments are not performing up to expectations.

Have a Strategy for InvestingThe game of investment requires a strategy that is customized to you unique circumstances. If you are investing to grow your retirement nest-egg, for example, your investment strategy would be different if you have 20 years to your retirement age than if you have only 5 years to go. In any case, ask your financial planner on his/her investment strategy, whether it is dollar cost averaging, tactical asset allocation, and so on, and for the rationale for recommending that strategy.

1. General market risks These are daily market fluctuations caused by the demand and supply situation, which in turn are caused by factors such as economic conditions, unstable political situations, investor sentiments and so on.

2. Ination risks This risk will directly affect funds that are placed into those asset classes that are not inflation-hedged, like fixed deposits and bonds.

3. Liquidity risks This type of risk occurs in asset classes where there are not many buyers or sellers that are readily available, like properties.

4. Default risks This risk is where the borrowers are not able to repay the principal amount or the interest. Bonds are particularly vulnerable to this risk.

5. Foreign currency risks This risk occurs when we invest in overseas or offshore investments, where the currency that we invest in weakens against the currency that we originally invested.

6. Estate shrinkage risks There is always the risk that a person dies suddenly whilst in the midst of “playing the investment game”. There may be a severe market downturn that can adversely affect the value of the investment at time of death.

Tips for Investing SuccessNow that there are so many product offerings in the investing market, we need to know which ones will really suit our investment appetite and risk tolerance. Below are the tips that can help us to enhance our chances of success in investments:

DiversificationLike the saying goes: “Spread your eggs in different baskets”. In that way, even if you drop one basket, you still have your eggs in other baskets that are not broken. Generally, diversification can help you spread your risks, be it by asset classes and/or by geographical location.

Obtain professional advice for your investment portfolioA good adviser will first seek to understand your goals and objectives as well as your investment preferences. Based on your risk tolerance and investment horizon, he/she will be able to design an investment portfolio that is appropriate for you. (See Chapter 10 – How to Select a Financial Planner).

Compare performances of different fund managers for various asset classesAfter you spread your eggs in different baskets, it makes sense for you not to let only one person hold all your baskets. Let different people hold your baskets for you. There are fund managers who specialize in different asset classes in different geographical loca-tions. Look for the fund managers who have a good history, i.e. in terms of consistency of returns and ability to shield the investment from heavy losses in a severe market downturn. But remember, past performance does not guarantee future performance.

Longer Investment HorizonGenerally, the longer the investment horizon, the lesser is the investment risks. This is because the investment is given the time and opportunity to ride out the possible fluctuations to produce the desired returns.

Understand the Political and Macro-economic FactorsThe investment markets always have a reason for moving up or down. Therefore, by understanding the relevant indicators, you can make a more informed and educated decision as to which asset class or geographical location to invest in at any point in time. Mac-roeconomic indicators like interest rates, commodity prices, foreign exchange, inflation data, together with political developments all have an impact on the financial markets. Understanding these can assist you to make important investment decisions.

48

Pre-requirement to enrol for Registered Financial Planner (RFP) Module 7 Examination • We are pleased to announce that the Certification and CPD Board (CCB) has adopted a more flexible approach to allow

RFP students to enrol and sit for the RFP Module 7 Examination upon completing the RFP Module 1 and any other three (3) RFP Modules. Hence, the minimum requirement to register for the M7 examination is to pass at least 4 RFP modules. This is applicable to self-study and class students.

• Nonetheless, RFP students are still required to complete and pass all the seven (7) modules of the RFP progarmme in order to be conferred with the professional designation of RFP.

Membership Benefit• A special 10% discount is given to all members who have made advanced payment on yearly subscription for 3

consecutive years effective 1 March 2010.

• You are invited to download the membership renewal form at www.mfpc.org.my

If you need more information, please contact the MFPC Secretariat at 03-26945899. Thank you.

Patabisitharam a/l S.P. ThavasunaiduD.o.B: 29 September 1960 D.o.D: 16 April 2010

Mr Patabi, a committed member who devoted much of his time and efforts to the MFPC, will be greatly missed.

He served as a member of the MFPC National Council and the Certification and CPD Board from June 2007 until April 2010.

We would like to express our heartfelt gratitude for his numerous contributions.

OBITUARY

Announcement

50





CYCLE 1






RM600

CYCLE 2






Shariah RFP


Shariah RFP

Issue May 2010

KDN NO: PP 14412 / 10 / 2008 (020393)

Exclusive InterviewY.Bhg Dato’ Yusli Mohamed YusoffCEO, Bursa Malaysia

MFPC 3rd GraduationCeremony & Dinner

16 Jan 2010

Forum on Islamic CapitalMarket & Retirement Planning

24 Feb 2010

www.mfpc.org.my

Malaysian Financial Planning Council(Reg. No.: 0402-04-5)

Suite 7.01, 7th Floor, Menara Tun Razak, Jalan Raja Laut, 50350 Kuala Lumpur.Tel: 03-2694 5899 Fax: 03-2694 6899

Launch of New Programme:Shariah RFP

Capstone Programme“A Swift Path Forward to

Shariah Financial Planning”24 June 2010

Royal Selangor ClubKuala Lumpur

Documents

KDN NO: PP 14412 / 10 / 2008 (020393)mfpc.org.my/wp-content/uploads/images/magazine/2010/MAy/mag2010-05.pdf · Well, the 10th Malaysia Plan announced recently by the Prime Minister