The announcement of Bank Negara Malaysia to control and enforce the licensing of Financial Advisor under the Act Insurance 2005 has confuses the consumers and Malaysians in general.
Financial planner / investment advisor now had already licensed by Securities Commission and is been under Securities Industry Act 1983 (Section 14).
The matter had already being enforced since 31st of August 2004. Is it by the proclamation by Bank Negara to gazette financial planners under its jurisdiction will develop the newly introduced and young industry in Malaysia?
Is it the works done by the Securities Commission are unsatisfactory? Or is there any power struggle in enforcement happens?
Financial planning is one the most important knowledge and industry in life. Malaysians basically still never have been given enough exposure on this matter.
Insurance vs Financial Planning
Recognizing insurance as financial planning is not a precise thing. Insurance is one of the tools to financial planning but it is not financial planning.
There are seven key aspect in financial planning which covers business (cash flow), banking, property, stock/equity, insurance, tax and estate legacy (estate planning).
What is insurance actually? Insurance is a way of risk transfer so that losses are not fully bear by its policy holder. This is the insurance basic.
Insurance categorized into four types namely life insurance, health and inability insurance, general insurance and trade insurance. And the newest it is associated with investment.
However insurance is never have been fully made as only way of financial planning before except by insurance sellers (agent) who undeniably want one thing which is it high commissions.
The public should be made fully known about the total commission paid to insurance agents. Transparency factor should be made as an obligation condition to every insurance agent and financial planner.
The monthly installments (premium) paid to the insurers by his policy holder in fact is 55 percent (of the amount for the first two years) is used for commission payment. By other words, actual cost of a life insurance policy has been shared by the sales representative assigned to sell the insurance product.
Financial planner is not a product seller. As a financial planner his objective is to make a starting plan for the customer. Customer interest is their priority.
Each financial planner dictionary said that purchase of insurance is only to shift the risk of death and accident. It is not for investing.
Why should you buy an insurance?
Why should buy a life insurance if its return is estimated at around three to four percent only? An investment should give more returns than that. Therefore, it would be vital that this matter is explained to the general whether they want a risk transfer or want a return of investment / profit.
Even though, risk transfer through insurance is also very important. The matter should be explained clearly. For example, treatment in hospital will not cost cheaply. Therefore an insurance purchase is something which is needed.
Promotion of Financial Planning
Financial planning industry need better promotion and infrastructure than what there are today. Addition of guardian or lawmakers will be inconvenienced for this industry to grow.
In the United States for example where this financial planning knowledge is origin, there is no one rule except the monitoring of professional bodies association on it. They prefer openness principle (transparency).
All charges, products and implementation plan are explained fully to every customer. Public are convinced and know that there no hoarding or deviation can be done by certain parties.
Too much law complicates the growth of idea and creativity which is a necessity in this industry. It is true indeed, law is needed to control some irresponsible parties from manipulating the condition but this industry need many more Malaysians to understand and involve their self in it.
With many numbers of financial advisors and its knowledge is expanded to every level of society, parties which are irresponsible of course will not be able take advantage on it.
If seriously integrated efforts are carried out it is not difficult and be possible for at least this financial planning knowledge to spread to all level of society.
This matter is more important that having two enforcement authorities which could confuse people and investors especially in the financial industry of Malaysia.
Whatever your definition of the good life though, money plays an important part in it. However, there are many people who believe that the good life is possible only with the 5 Cs – credit card, condominium, car, cash and club membership. This definition of the good life is not only very materialistic, it is also incorrect.
Another problem is that people feel that they have to own the goods and gadgets associated with ‘modern living’ even though they may not be able to afford them yet.
Different vehicles are designed to be use with different octane number of oil. Higher octane number oil is basically designed for high performance vehicles such as sport vehicle and racing vehicle. Why is that so? This is to avoid premature ignition of oil inside the engine because of auto ignition, which happens before the spark plug ignite the fuel. This phenomenon is known as knocking. Knocking is not wanted because it reduces the performance of vehicle.
The insurance company base their decision on whether to accept or reject your proposal and what terms to impose on the information you provide in the Proposal Form.
