Keynote Address: “Upholding High Integrity – The Cornerstone in Financial Planning” by YBhg Dato’ Ahmad Fairuz Zainol Abidin, Deputy Chief Executiveat Annual Financial Planning Signature Conference 2017
29 August 2017Securities Commission Malaysia, Kuala Lumpur
Yang Berbahagia Dato’ Wira Othman Bin Aziz, Deputy Minister of Finance I,
Yang Berusaha esteemed Presidents of the financial planning associations,
Ladies and gentlemen,
Assalamualaikum and a very good morning
- It gives me great pleasure to be here today. I would like to express my appreciation to the Malaysian Financial Planning Council or MFPC for all the preparations made as the main organiser of the second Financial Planning Signature Conference. The presence of YB Dato’ Wira Othman bin Abdul Aziz , Deputy Finance Minister l, makes this occasion even more special.
This event holds particular significance as it is a joint effort by all the relevant financial planning associations for the second year running. It serves as a true reflection of the industry’s commitment to unite for the betterment of the profession.
- The theme of this year’s conference entitled “Upholding High Integrity – The Cornerstone in Financial Planning”- resonates closely with the SC. As a regulator which practices proactive oversight in maintaining the integrity of the market, high integrity should similarly be adopted as the main ethos of every capital market professional, including licensed financial planners.
Overview of the capital market
- In the last two years, we have witnessed a challenging global capital market environment. Global uncertainties have impacted not just the Malaysian equity market and currency but other emerging markets as well. Nevertheless, our market continues to remain resilient in the face of a rapidly evolving market with positive growth observed this year across all capital market segments.
Ensuring growth and development of the market
- Although the volatilities and uncertainties in the international markets remain, there is still a bright future for our capital markets industry. Overall, the SC’s strategic initiatives remains focused on ensuring growth and stability. We will continue to pursue new drivers of growth, create an enabling environment that promotes innovation and efficiency whilst ensuring protection of investors as well as fair and orderly markets.
- Our focus to grow Malaysia’s competitive positioning is driven by key market segments. On the area of product diversity, one of the initiatives this year is the implementation of measures recommended by an SC-led task force to spur ETF market growth. The initiative is aimed at increasing participation from both institutions and retail investors. We also recently implemented various digital market strategies including the issuance of the Digital Investment Management framework in May this year as well as operationalisation of P2P platforms.
- There have also been efforts to deepen our existing market segments, with particular focus on improving traction of investment products such as PRS, VC/PE, and retail bonds. To this end, the SC will continue with the implementation of recommendations developed by relevant taskforces as well as concurrent initiatives.
- Another significant milestone I wish to highlight is the launch of the Islamic Fund and Wealth Management Blueprint early this year, aimed at further strengthening the position of Malaysia’s Islamic Capital Market. The local Islamic capital market continues to raise the bar globally for product innovation and financial intermediation. In particular, the launch of Asia’s first Islamic exchange-traded fund (i-ETF) and Asia’s first exchange-traded sukuk.
- Leveraging on growth of Islamic capital market, the SC is also currently developing a framework for sustainable and responsible investment or SRI funds and is planning to launch the framework by year end. These initiatives are part of SC’s developmental agenda to facilitate the creation of an ecosystem conducive for SRI stakeholders. The issuance of the world’s first green-sukuk last month garnered recognition by the World Bank in terms of our pioneering role in harnessing capital markets, and in particular Islamic finance, for climate friendly investments.
- In terms of new regulations, I would like to bring to your attention the new marketing representative framework that we introduced in June this year. Financial planners will now be required to formalise introducing or referral arrangements it has entered into. I hope that this framework will provide consistency and clarity to both the industry and investors on the role and parameters of an introducer in performing the introducing, referral and marketing activities within the capital market.
Importance of integrity in an increasingly sophisticated market
- In an increasingly sophisticated market, the hallmark of maintaining integrity remains paramount. Ultimately, any initiative can only be successful if there is market confidence which can only be preserved by good conduct. It is on this basis that we at the SC, have shifted our supervisory focus from being primarily based on compliance reviews to now include reviews on culture and conduct. Under our supervisory review, the SC now places greater scrutiny on governance and conduct in addition to our long-standing focus on micro-prudential soundness and investor protection.
- As investors are presented with greater opportunities to allocate their capital across different asset classes and diversify their risks beyond their geographic boundaries, financial planners are relied upon to provide independent and professional advice to help them frame asset accumulation strategies and select appropriate investments from the many products of financial services providers.
- On SC’s part, we have always considered the financial planning industry to be an important bridge between products and investors, providing a full value chain of capital market intermediation services to meet the future financial needs of Malaysian investors. A well-developed and thriving financial planning industry is critical to ensuring that Malaysians will have access to the high value-added services that go beyond traditional asset classes, to providing end-to-end advice on all viable investments.
- As the industry is well aware, the SC has invested considerable efforts in not only providing a robust regulatory framework to ensure high standards of investor protection, but we also continue to provide the necessary support from a regulatory and developmental perspective to assist the orderly and healthy growth of the financial planning industry in Malaysia.
- Initiatives under the SC-Industry 3 Year Joint Action Plan, which was launched in 2015 included streamlining the regulatory requirements for financial planning firms that deal in PRS and unit trust, as well as obtaining funding from the capital market development fund (CMDF) to implement various measures to accelerate and shape long-term growth. From a holistic perspective, we believe that such developmental initiatives will contribute to creating a conducive environment for the industry to galvanize its growth momentum.
- Such measures introduced over the past 3 years have started to bear fruit and influenced the industry’s growth. Within that period, the number of licensed financial planners has grown by about 23% (since 2015), while the number of firms has grown by 45%. We expect these numbers to rise further following the recent approval of 3 new financial planning companies.
- In addition, initiatives under the CMDF funding mentioned earlier, that was allocated to MPFC and the Financial Planning Association of Malaysia (FPAM) for scholarships, internship programs as well as coaching of select financial planners, aims to add another 500 professionals to the profession in 3 years’ time. With these upcoming initiatives as well as on-going ones such as the apprenticeship program by FIMM, we hope to see the industry becoming more robust and vibrant in the years to come.
- As the industry gains more prominence through the various efforts, financial planners must not be complacent in upholding professionalism and good conduct. Instead, these should be further enhanced in order to continue earning consumer’s trust while building on reputation and gaining new clients. In this respect, financial planners whether fee-based, commission-based, AUM-based or a mixture of these must always put the interest of the clients first.
- To this end, I am delighted to note that this year’s signature conference is emphasising the importance of high integrity as the profession’s foundation. Where ethics are at the core of a healthy industry, wise financial planning professionals will support the goal of “setting a higher standard” and self-enforcing it.
- Finally, let me touch on a new joint collaboration between SC and financial planners, which sees financial planners providing free initial assessment to investors in one-to-one sessions at InvestSmart Fest this October. The programme named “Connecting You to a Financial Planner” aims to raise awareness on the importance of financial planning in securing a stable financial future. It is enlightening to see the associations and practitioners stepping up and working together with the SC to volunteer their time and services for this 3 day event. We are optimistic that the programme will raise the profile and showcase financial planners as a profession as well as highlight services and benefits of engaging a licensed financial planner. We encourage all financial planners present here today to donate your valuable time and effort to this deserving initiative.
- On this note, let me end by reminding participants that the SC continues to be open in engaging and listening to the industry’s legitimate concerns. Our objectives in doing so will be to get regulation right for the sector. We want to see competition, investors appropriately protected, as well as successful and sustainable FP firms
- Thank you very much for your kind attention.
Strategic Communications Department
Securities Commission Malaysia