The challenges of going independent in Malaysia
Malaysia’s IFA industry is at an early stage of development. Most bankers don’t want to leave more stable, better-paid jobs and embrace the challenges associated with going it alone. But, says K R Raju, founder and group chief executive officer of the Blueprint Group of companies, it is only a matter of time before clients recognise the value of independent advice.
In order for Malaysia’s IFA industry to move forward, product providers such as insurance companies and investment platforms must provide more support, says K R Raju, founder and group chief executive officer of the Blueprint Group of Companies.
These players need to be more transparent about products and margins, to help IFAs distribute them, he adds.
Raju believes that the regulator should play more of a part in facilitating this change, as it ultimately wants to protect consumers.
Another challenge stems from the fact that many banks aggressively drive their own products to boost profitability.
Yet as clients still lack confidence in IFAs, they feel safer using banks with big brands which they feel they can trust, adds Ravindran Nair, a financial planner at Blueprint Planning.
“Some of these banks have fresh graduates selling products to clients who are twice their age,” he says. “There is a real need to improve financial literacy – not just among the public, but also among intermediaries.”
Raju agrees: “Banks are selling products without formulating a financial plan for the individual. This means there’s a mismatch between the risk profile of the portfolio and the risk profile of the client.”
Appeal of the profession
So far, there has been limited interest among market practitioners in going independent.
A key concern for many, says Raju, is the fact that licensed financial advisory (FA) firms are subject to audit, for regulatory reasons, with very demanding compliance requirements.
In addition, advisers don’t always want to have to complete the training and certification required to become a licensed financial planner; the minimum requirement is a Certified Financial Planner (CFP) qualification. “People don’t want to have to study for this, go through the application process, and then be monitored throughout their career,” explains Nair.
Profitability is another concern for many individuals. Charging a fee for advice is a completely different model, and it’s harder to be profitable, says Nair. “People don’t want to leave their stable, well-paid bank jobs. Going independent is a risk.”
But in the long term, Raju says clients will recognise the value of independent, unbiased, objective financial advice not driven by commissions.
