Financial planning is a process of developing strategies to help people manage their financial affairs to meet life goals. In creating recommendations and plans, Financial Planner may review all relevant aspects of a client’s situation across a breadth of financial planning activities. Including inter-relationships among often conflicting objectives .
Financial planning is a long term journey. Not so many people may endure gratification that may come along the way. Malaysian particularly is lacking in this area. We do not posses long term plan as a habit. The timeframe is very long. Longer than any of :
- Annual Budget,
- Malaysia Plan,
- National Economic Policy
- Vision 2020
- National Development Policy
- National Vision Policy
- National Transformation Policy
- Shared Prosperity Vision
Financial Planning normally will starts upon your graduation. Once you’ve graduated, less than a year you’ll find your dream career. As early as 23 year old, you already landed one. Then it will last until you reach to 60 year old. This timeframe accumulate to 37 years of journey! Can you wait that long? I doubt highly doubt it.
Financial planning process is a collaborative and iterative approach. That financial planning professionals use to consider all aspects of a client’s financial situation when formulating financial planning strategies and making recommendations. Basically it does involves with:
- Establish and define relationship with the client
- Collect the client’s information
- Analyse and asses the client’s financial status
- Develop the financial planning recommendations and present them to the client
- Implement the client’s financial planning recommendations
- Review the client’s situation
Basically, the most difficult area to start with is, establishing and define relationship with the client. It requires trust, trusting and trustworthiness. Trust need to be earned by the Financial Planner. Then, the client needs to give in their trusting to Financial Planner by putting a risk into the trust. Lastly, Financial Planner needs to become trustworthiness with their works.
The needs for financial planning
Almost everyone in the world needs financial planning. This is due to the facts that, we do not learn it in school or university. This is true at least to all Malaysians who is now in their 20’s. That is why Malaysian financial literacy is quite low when you are comparing to developed nation.
Plan for your priority
Every each one of us is unique. We have different needs and circumstances. Therefore, different people requires different needs to plan for their priority in life. But everyone of us need to have a financial plan. This is to make sure that we are not sway away from the path that we should be treasuring. For instance:
- Being debt free
- Being prepared for an emergency
- Owning a home
- Planning for retirement
- Tax planning
- Managing finances
- Supporting others financially
- Managing investment
- Distributing asset
Financial planning is very crucial nowadays. According to EPF, only 3% of depositors are able to retire. Whereas 97% of depositors need to working till the end of their life. If this is true, then this has become pandemic to Malaysian’s retirement planning. Retirement planning is the pinnacle of financial planning.
In order to achieve this, several government agencies have made lots of effort to address burgeoning issues/target. Among them are:
- Ageing nation
- By 2030, Malaysia is expected to become an ageing society. With people aged 60 year old and above making up 15% of the total population. This will slow down our economy. Due to lacking of labour forces to drive the economy.
- High income nation
- Malaysia intend to become high income nation by 2026. This is just 4 years away to achieve it.
- Wealth accumulation
- Preparing for retirement needs
- Knowledge to invest
- Information to make decisions
- Access to products and services
- Option to compare and diversify
SC and other agencies have made lots of financial awareness to Malaysian. This is to improve overall financial literacy among Malaysian. So that retail investors may support economic growth. In the future, we may divert away from high dependence on foreign direct investment to support our economy. Instead we may leverage on retail investors participation to live on our own feet.
Financial Planner to support economic growth
The role of Financial Planner is to provide an advice. Particularly for investor who want tailored advise and solutions, based on their needs, risk appetite and investment goals. As the industry evolves in complexity, especially in aspects of retirement, there is greater demand for personal advice. One that prioritises outcomes for individual investors vis-à-vis their risk profile and helps them meet their investment goals.
Although it is still small in size, there has been traction with Digital Investment Manager, DIM and Financial Planner who provide personal advice. DIMs adopt a more standardised and automated approach to personal advice in addition to managing one’s portfolio. While FP provide individually customised advice based on investor needs and risk appetite .
- Financial Planning Standards Board
- Khazanah Research Institute
- The Star
- Securities Commissions Malaysia