In the wake of the massive crash of the Luna stablecoin that brought the crypto industry to its knees, people everywhere are demanding justice. There are memes comparing it to the notorious Bernie Madoff, right next to McDonald’s job ads for those who lost their life savings.
Blame It On Stupid!
The creator of Luna which lost almost 100% of its US$40 billion value at one point, told the Wall Street Journal that it’s not a scam: “I made confident bets and made confident statements on behalf of UST because I believed in its resilience and its value proposition. I’ve since lost these bets, but my actions 100% match my words.”
He emphasized: “There is a difference between failing and running a fraud” (italics added).
There is an age-old wisdom called the Hanlon’s Razor which states: ‘Never attribute to malice that which can be adequately explained by stupidity’. What this means, reductively, is that not everything is a fraud. People can and do make dumb mistakes.
So don’t automatically assume that everyone is evil. The world is not out to scam you. Sometimes sh*t happens! You just have to accept that as a part of life.
If the Hanlon’s Razor is applied to the context of Luna, it suggests that stupidity is to blame: Not everyone is smart enough to manage a multi-billion-dollar crypto fund. Sorry to the investors who lost everything. Do you buy that?
Law enforcement investigations are now underway. Unfortunately for Luna, stupidity is not a great legal defence. There might not be an intent to defraud investors, but failure could mean negligence which is punishable by law. Were proper measures taken to safeguard investor monies? Was there a duty of care to do the right thing? Did they fail to do so, chose not to react in time, or were wilfully ignorant of the fallout?
Stupidity Is A Big Risk
What is not obvious to most investors, and which Hanlon’s Razor elucidates, is that that the risk of stupidity is as serious as the risk of scams! But investors tend to mix up the two even though incompetent or dumb management is a much more outspread problem than perceived. While scams are intentional, stupidity is not and generally can’t be helped (‘if you are dumb, you are dumb, so help you God’).
One reason is because so much of the crypto DeFi space is unregulated. DeFi or “decentralised finance” with their anonymous operations and offshoring structures are still beyond the reach of national laws. Furthermore, in a traditional financial firm, the management has to be ‘fit and proper’ with deep requisite experience and board oversight.
But with most DeFi projects, you are stuck with the founding team. Even if they can’t perform, you can’t fire or remove them. And while they claim to be decentralised, their decision-making flows often indicate otherwise.
We created a quadrant to illustrate this. In a very simplistic world where investment projects are ranked on two factors – only 1 in 4 (or 25% chance) have the rare combination of competency and virtue (green area). There is a possibility that 2 out of 4 projects (50% chance) are led by those who are incompetent, or by those with malice (red area). In other words, there is an equal chance of project failure due to either stupidity or scams.
Each quadrant can be profiled by these fictional ‘straw men’:
a. Smart + Evil: For instance, pure villains such as Gordon Gekko (the fabled Wolf of Wall Street) or Hannibal Lecter.
b. Stupid + Evil: This could be like the Dr. Evil and Mini Me characters, or the bumbling burglars in Home Alone movies.
c. Stupid + Good: A classic case is Forrest Gump, or when Mr. Bean tries to save the world.
d. Smart + Good: The most relatable is Ironman, a genius and philanthropist, in the Marvel Universe; or Dr. Manhattan in the DC Universe.
For the Smart Investor, there are two things to take away from this. First, while there is moral hazard or malice everywhere, it particularly thrives in an unregulated environment. Second, never underestimate the power of stupidity. Dumb management can do a lot of damage. If you want to invest your life savings with a bunch of college dropouts and young punks who genuinely want to make the world a better place, please don’t cry fraud when you lose.
Disclaimer: Contents above are for educational purpose only.
About the Author
Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. He is also the resident consultant for GLT Law, a multi-award-winning legal practice with specialisation in digital assets.
For many Malaysians approaching retirement or already retired, one of their biggest fears is having a massive hole blown through their nest-egg which they have painstakingly built up over the decades to see them through their golden years.
For many people, the situation becomes even more tenuous as their retirement funds are barely sufficient to provide a comfortable level of living or last till end of life.
Two of the major risk factors that can reduce individual retirement savings are health and income shocks, says Mohd Sedek Jantan, head of Investment & Financial Planning / Investment Unit at UOB Kay Hian Wealth Advisors Sdn Bhd.
Health shocks are defined as unpredictable illnesses that diminish health status, he says. “Individuals facing health shocks are often affected by significant out-of-pocket (OOP) healthcare expenditures incurred to obtain healthcare and the income loss from an inability to work.
“The OOP spending has particularly serious effects on poor households, who tend to spend more on healthcare as a share of their income compared to their richer counterparts,” he says.
On the other hand, income shocks are referenced by how many significant drops in income a person has suffered over their working career, says Mohd Sedek.
“For example, the current Covid-19 pandemic has caused the unemployment of large numbers of people, while others are facing pay cuts. The income shock during the pandemic is more severe among young adults.
“Income shocks are strongly associated with an expected spending reduction and, at a certain level, the individual will liquidate their savings in order to put food on the table.”
Mitigating Against The Risk Factors
Mohd Sedek says like other expenses in retirement, planning can make a difference in managing such risks. He says healthcare costs influence retirement income planning, and as such, the impact of rising healthcare costs should be a priority consideration.
“The most economical way to absorb the health shock is by changing lifestyle,” he adds.
He says research studies on people’s behaviour have shown a causal relationship between unhealthy lifestyles and healthcare expenditure, where individuals who practise unhealthy lifestyles need more healthcare services, forcing them to spend more on healthcare expenditure.
Taking steps to improve health can reduce annual medical expenses, he adds. In the case of Malaysia, hypertension stands as an important area of worry for economic evaluations because of the wide range of issues involved for the individual and for society.
“It is one of the most expensive diseases as far as treatment is concerned, as it generates higher healthcare expenses than those produced by individuals with normal blood pressure.”
However, he notes there is a reduction in total direct costs of the hypertension population if each patient’s blood pressure becomes controlled.
“This reduction in direct costs can be achieved by changing lifestyle habits, for example: reducing dietary sodium intake, decreasing body weight, quitting smoking, and reducing alcohol intake. In addition, anti-hypertensive medications can lower the risk of cardiovascular mortality in hypertensive individuals,” he adds.
High Cost Of Medical Insurance
R. Sathia, co-founder and CEO of GFlex40, a Malaysian insurance technology company, concurs the highest risk factors that would lead to reduction of wealth for a majority of Malaysians are health issues, either for themselves or their closest family members.
“As it has been well researched, the cost of medical insurance in Malaysia is among the highest in Asia and continues to rise,” he adds.
He points out that Malaysia also suffers from among the highest obesity rates in Asia. “The risk factors increase chances of individuals falling ill, and when combined with the cost of healthcare can quickly result in depletion of any savings that have been built by individuals,” he adds.
To reduce the risk of this happening, Sathia says that apart from investing in maintaining one’s own health by way of exercise, diets, etc, another supplementary and important mitigant would be investment in the appropriate health or medical insurance plans.
“By procuring such a plan early in life, individuals can ensure they are covered for unforeseen circumstances later in life,” he advises.
For the individual there is little they can do to prevent the rising healthcare cost across the board in the market. “However, on a personal level, everyone can work towards limiting their exposure to such costs by living a healthy lifestyle from early in their life,” he says, adding this would include proper healthy diets and exercise.
Sathia notes that exercise is a particularly interesting topic when it comes to health/medical insurance.
“More and more insurance and Takaful companies are investing in health and exercise related insurances that track the lifestyle and exercise habits of customers through the use of electronic gadgets and apps.
“By availing oneself to such an insurance early and leading a healthy lifestyle, not only would the average person be able to improve on their overall health but they can also potentially reduce their own premiums as a result of their healthy lifestyle.
He also says there have been efforts across the world to factor in lifestyles and exercise behaviours through electronic monitoring as inputs in pricing health and medical insurance by technology driven insurance companies.
“These efforts coupled with efforts to optimise operations of third party administrators and hospitals would eventually be able to lead to a reduction of pricing,” he adds.
Wealth Protection Measures
So, whatcan we do to prevent rising healthcare costs from eroding our retirement nest-egg?
UOB Kay Hian Wealth Advisors’ Mohd Sedek says reviewing one’s current insurance plan is vital to ensure it does not eat up the retirement saving.
“As healthcare costs continue rising, it is important for each individual to have life and medical insurance. According to the Employee Benefit Research Institute (EBRI), healthcare expenses are the second largest component, and these expenses steadily increase with age.”
Further, it is important for the policyholder to review their insurance policy from time to time, to ensure having adequate protection for the future and safeguard the income-earning abilities.
Sound financial advice also plays an important role when it comes to retirement planning.
“Individuals, regardless of their income level, should engage with a certified financial planner to ensure the retirement saving is not just sufficient but also sustainable, to hedge it against healthcare cost,” advises Mohd Sedek.
A financial adviser, he says, will review the individual’s overall financial situation and address the solution based on their needs. From the analysis, the financial planner will help the individual to address the challenges by:
Estimating their expected out-of-pocket healthcare expenses, such as insurance premiums;
Creating contingency plans for unexpected expenses such as long-term care; and
Working closely with the client to help protect their wealth by integrating healthcare costs into the overall retirement plan.
He adds there are a number of insurance types and riders that can help to hedge the rise in healthcare costs, such as investment-linked products, medical card, critical illness coverage and specific elderly insurance.
In addition, the financial planner can explain the cost–benefit for each insurance plan, creating trust funds and other advanced planning strategies.
Risk Management Needed To Absorb Income Shocks
To mitigate against income shocks, individuals should do planning that includes matching up income streams, including guaranteed income, to fund recurring healthcare expenses such as insurance premiums.
Individuals may also plan on maintaining an emergency health savings fund for non-recurring health expenses, says Mohd Sedek Jantan, head of Investment & Financial Planning / Investment Unit at UOB Kay Hian Wealth Advisors Sdn Bhd.
Also, delaying withdrawal from the EPF can create a larger monthly benefit. “Hence, personal budgeting is important to achieve a clearer vision of personal finances so you can begin to plan your spending and saving and take control of your money.
“In short, budgeting helps you to ensure you have the right amount of money at the right time.”
And when doing budgeting, both regular events and extremely uncertain events must be dealt with. It is advisable for individuals to set aside at least six to nine months of living expenses in a money market account, one that offers liquidity and the safety of the principal.
“An emergency savings fund should be established so you don’t have to consider tapping your retirement savings,” he adds.
Dealing With The Medical Insurance Conundrum
If they can afford it, it is prudent for senior citizens to have medical insurance as it can help offset the medical expenses that they’ll incur as they age.
However, the flipside is that medical insurance premiums increase dramatically as we grow older, ironically at a time when we are no longer generating income.
So, is there a way out of this predicament?
Mohd Sedek Jantan, head of Investment & Financial Planning / Investment Unit at UOB Kay Hian Wealth Advisors Sdn Bhd, notes that age is one of the prime elements in the health insurance premium calculation because it impacts the medical support a policyholder may require.
It is significant to understand that an elderly insured individual will possess medical conditions quite different from those of a young or adult insured individual, he says.
“Typically, the premium amount increases on average about 5% to 8% for every year of age; it can be as low as 5% annually if you’re in your 40s, and as high as 12% annually if you are over age 50,” he says, adding that high-risk health status also has the potential to greatly increase costs.
As such, Sedek says it is advisable to buy health insurance “at a young age to avoid high insurance premiums”, as the policyholder is able to lock in lower premiums and reduce the total amount they will spend on life insurance over the course of a lifetime.
Advancement in technology is changing the way care is delivered; allowing elderly consumers to apply self-directed care, while availing healthcare professionals access to information essential to the healing cycle in an instant. Furthermore, technology allows for aged care businesses to answer consumer demand in areas that were previously difficult to access.
Frost & Sullivan stated (Major Trends & Attractions In The Global Aged Care Market, 2015), that increased use of technology in the aged care market not only has economic benefits, but enables the ageing populace to enjoy better quality of life. Consumers and care workers alike would have a smoother journey in the care experience when care is delivered to where and when it is needed.
Ageing populations around the world are rapidly growing and aged care businesses need to capitalise on this technological boon to succeed in the future. Hence, increasing attention is being given towards developing new technologies that will help capture quality data.
Taking stock of the local environment, let’s look into three key areas in healthcare that technology progress will enhance and propel news levels of consumer demand and quality service.
Living at Home Longer and Safer
For elderly people to live longer in their homes, wearable devices – such as smart bands, intelligent insoles, and so on – and smart home technologies are being developed in order to support them through improved remote monitoring.
Sensors will regularly track the individual’s health readings and feed data into a central monitor point for the overseeing healthcare professional to keep track in real-time and provide feedback/support from distant locations. In the event a possible fall or mishap occurs, an immediately response could be mobilised.
With the development of the Internet of Things (IOT), technologies that integrate various devices together have become increasingly sophisticated, to the point where sensors can alert a central monitoring system of a possible mishap if a resident of a home has not left a particular room for an unusual amount of time.
Lost and Found
Alzheimer’s Disease International reported that the number of dementia cases in Malaysia were estimated to double every 20 years. That is one new dementia case in every three seconds. Depending on the stage of the disease, persons with dementia may require 24-hour supervision.
In these cases, wearable technology is invaluable. Apart from tracking vital signs and providing reminders for the wearer to take their medication, some wearable devices incorporate GPS to track children and seniors alike, or detect if a user has been immobile for a prolonged period – in this case, it will call for emergency services or pre-set contacts numbers.
Assisted Daily Living
In Frost & Sullivan’s report, competition in robotics development is expected to grow intensively between 2020 – 2030. There are many benefits robotics could bring to aged care.
Robots can provide help with daily living activities such as cleaning and cooking, as well as assistance with exercise and transferring (for example: from chair to bed). They can also be companions, analyse emotional well-being and act to mitigate feelings of loneliness amongst the elderly.
In Japan, senior care robots are already being piloted. Therefore, we can expect to see more sophisticated robots in the future that could help elderly people do more and achieve better quality of life.
Technology Enhancing Care Quality
Melinda U, General Manager of Managedcare Sdn Bhd, says the ability to access and analyse well-documented information is crucial to making sound decisions for the best possible health outcomes, not only when care is needed but also for prevention.
“These technologies give empowerment to individuals by helping them to self-manage their health and to take action when alerted about a potential crisis early. For medical and healthcare professionals, it enables them to provide more timely interventions and efficient support.”
Integrating new technology into the aged care industry will create smoother processes in care delivery, provide better insights and establish superior customer care. Naturally, consumers will seek out businesses that can effectively showcase their ability to provide the best care to their clients.
Currently, there are many gaps within Malaysia’s care delivery process and aged care ecosystem in terms of efficiency and cost of care. Despite being in its infancy, Malaysia’s aged care industry is in a unique position to integrate and grow these technologies alongside its developing ecosystem.
“These technologies could cover the gap in service delivery, but they aren’t mainstream in Malaysia yet. There is still a lot of research and development going on in this area. However, Managedcare recognises its potential to complement our mission in making care more easily accessible and we are exploring these options” says Melinda.
Dear Mr Neoh, I was hoping that you can give me some advice on my situation, below is a bit about me:
I am Malaysian, now 62 years old. I am currently single, and I am still working for a living. My take home income is about RM3,000. I do have two children who are now already working and in their late 20s/early 30s. I am feeling a bit insecure because currently, I only have about RM40K in savings with me, and this represents the only money (savings) that I have. What should I invest in order to get extra when I am no longer able to work for a living? Recently, I was approached by a Unit Trust person from a reputable unit trust company who invited me to take up a scheme with her in order to grow my wealth. Since I have never had any investment experiences in life, I honestly think that I lack knowledge about investments. I don’t feel confident about this investment. In fact, I feel a little confused. Can you please give me some advice?
Mr Ng
Answer:
Hi Mr Ng,
Thank you for your email, I hope after reading this response, you will feel less confused but empowered to make a decision regarding the above.
I understand that you are still working, and I am assuming that the take home pay of RM3,000 mentioned here is a net income, consistent month-to-month.
While I agree that you should actively look for options to invest your money, it is very important for you to ensure that you make a good, quality decision.
This is because, if you invested into something that is too risky for you, or into something that is not what it seems to be, your chances of losing your money will be higher. This will be very dangerous for you, considering that you are now in your sixties.
Based on the illustration above, let us assume that you invest all RM40,000 but you suffer a loss of 50% in the first year. You will end up with just RM20,000. If this misfortune happens, you will then need a long time to get back to the original amount of RM40,000, assuming you are able to rebalance the remaining RM20,000 to an investment or portfolio that can grow at 10% pa.
The above projection shows that if invest RM20,000 into something that can generate 10% a year for the next few years, you will need seven years and four months before you can get back to the original amount of RM40,000; and by that time, you will be 69 or 70 years old.
Of course, if you can only feel comfortable investing into a “safer” investment generating 5% a year, you will need 14 years to get back to the original amount of RM 40,000 as can be seen in Illustration 3. By then, you would be 76 years.
The above example is why it is very important for us to ensure we don’t lose our money by investing into things that we do not understand, or are too risky to match our risk profile.
At the age of 62, and with RM40,000 being your total savings at this point, you may want to be conservative with your money. Having said this, it does not mean that you should just keep all the money in a savings account or all of it in Fixed Deposit. Because this is also dangerous since our purchasing power will decrease every year due to inflation (where you need to pay more to buy the same or even lesser amount of the item you need).
Therefore, you should consider investing not more than 20% of your money into equity (stocks or shares). But investing in shares requires knowledge, time, effort, and you will also need a bigger capital to have a reasonable holding of stocks that are properly diversified.
I suggest you invest into stocks or shares through a Unit Trust fund. You can invest into a Unit Trust fund that invests in “Blue Chip” stocks as it is more stable and less volatile compared to other stock funds. An alternative to a blue-chip stock fund, will be a Balanced or Moderate fund. This type of fund typically invests 50% of the money into stock and 50% into fixed income instrument, so it will be quite safe, since we limit your exposure to not more than 20% of your wealth.
I do not know the kind of fund or scheme the unit trust agent recommended that you invest into, therefore, I cannot comment on the suitability of the fund for you.
It is however very important for us to note that no matter what you will eventually invest in, the investment has to be one that suits your current needs, your capacity for risk-taking, and if things go south, will not put you into a position that will likely lose most if not all of your savings.
About the author
Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my.
The Securities Commission Malaysia (SC) today launched the Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework (Framework) to facilitate fundraising by companies in addressing sustainability concerns such as climate change or social agenda, with features that relate to the issuer’s sustainability performance commitments.
With the accelerated shift towards developing a climate-resilient future, high-emitting industries are at a high risk of being phased out. The SRI-linked sukuk will enable companies in these as well as other industries to transition into a low-carbon or net zero economy. As at December 31, 2021, the global sustainable bonds outstanding exceeded USD1 trillion with sustainability-linked bonds making up USD118.8 billion [1].
The Framework is an extension of the initiatives under the SRI Roadmap that was introduced in 2019 to broaden SRI products offerings. More significantly, this initiative reflects the SC’s commitment to expand the reach of the Islamic Capital Market (ICM) to the broader stakeholders of the economy and build an enabling ICM ecosystem for the sustainability agenda.
The SC recognises that there are significant opportunities for the market to attract a more diverse issuer and investor base and undertake a wide range of sustainable projects.
The SC Chairman Dato’ Seri Dr. Awang Adek Hussin said, “The SRI-linked Sukuk Framework will encourage greater mobilisation of private sector and issuers’ financing towards sustainable development and meet the increasing global demand for sustainable financing. This is in line with the initiatives outlined in the Capital Market Masterplan 3 to reinforce Malaysia’s value proposition as the regional centre for Shariah-compliant SRI.”
Under the Framework, the proceeds raised can be utilised for general purpose, subject to the issuer committing to future improvements for sustainability outcomes within a predefined timeline, which will be monitored using key performance indicators (KPIs).
The financial characteristic or structure of the SRI-linked sukuk may be varied based on the success or performance of the issuer in meeting its KPIs and sustainability goals.
The Framework also provides greater transparency for investors by requiring issuers to appoint an external reviewer before issuance and an independent verifier postissuance to assess compliance with the framework and issuer’s sustainability performance which can be tracked by investors.
Further details of the requirements for the SRI-linked sukuk are set out in the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework and the Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors, which can be downloaded here.
[1] Source: Sustainable Debt Global State of the Market 2021, Climate Bond Initiative
About the Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.
RFI Global’s 2022 Post-Pandemic Consumer Banking Expectations Report, prepared for FICO, confirmed that the pandemic has aggravated financial hardship for retail banking consumers in Malaysia, with 1 in 2 experiencing a drop in income. It has also revealed that many are motivated to search for better banking offers, and that the inclination to switch lenders has increased year over year.
Disruptive impacts from the pandemic differed across the region
While a considerable 23-30% of Australian and New Zealand respondents experienced a negative impact, 50% of Malaysians, 40% of Singaporeans and 63% of Indonesians saw a decline. Respondents in Thailand suffered the biggest blow, with 70% saying their income had been reduced.
The report uncovered that more than 1 out of 4 consumers across the region (27%) and nearly half (49%) of Malaysian respondents have deferred loan repayments. While nearly 1 in 3 (31%) in India and nearly half in Thailand (47%) deferred loan repayments as a result of COVID-19, this was much less common in Singapore (12%), Australia (9%) and New Zealand (7%).
Despite the uncertain financial climate, the majority of Malaysian retail banking customers plan to maintain or boost their investments (77%). Most are looking to maintain or increase savings (82%), and many will consider changing banking providers this year.
Increase in customers’ intention to switch banking providers
Surprisingly, while the report indicates that most customers were highly satisfied with their main banking providers, up to 20% of APAC banking customers who responded said they plan to change banks in 2021. In contrast, only 10% said they changed banks in 2021.
This increased propensity to switch lenders is highest among the mass affluent (defined as the high end of the mass market or those with at least MYR200,000 total investable asset holdings).
In Malaysia, 5% of retail banking customers and 5% of mass affluent customers switched in 2021. That is set to at least double this year, with 10% of retail customers and 14% of the mass affluent saying they are very likely to switch.
Top reasons cited by Malaysian respondents include a change in personal circumstances (31%), consolidation of accounts to where they now have a deposit account (25%), a desire for access to better investment and wealth management products and services (24%), as well as a change in where payroll is deposited (21%).
Financial impacts felt by even the wealthiest of Malaysians
Amongst mass affluent banking customers in Malaysia, 43% experienced a decrease in income due to the pandemic, with half of overall retail customers negatively impacted. Nearly half of the mass affluent (46%) deferred loan repayments as a result, just 3% lower than the wider retail banking market in Malaysia.
This disruption to income has left 2 in 5 affluent Malaysians saying they intend to reduce spending (40%), just as 39% of Malaysia’s retail banking customers plan to do.
Across APAC, the mass affluent are more likely to step up their borrowing compared to the wider market (16% vs 8% ). In Malaysia, specifically, more of the mass affluent plan to increase borrowing (19%) than retail banking customers (6%).
The report further revealed that 80% of the mass affluent are opting to maintain or boost their investment levels with banks, versus 77% of Malaysia’s overall retail banking market.
Impacts of the Pandemic on banking intentions
Consumers are changing their banking behaviors, in response to the financial impact of the pandemic. More than 4 in 5 of Malaysia’s retail banking customers will either increase or maintain their savings (82%). Across the region, the sentiment to maintain or increase savings was highest in New Zealand (94%) and in Indonesia (87%).
Despite a dip in borrowing plans year over year, the level of borrowing for APAC retail banking customers still remains higher than pre-pandemic times as consumers deal with the lasting effects of the disruption. “The pandemic has clearly exacerbated financial hardship for customers regardless of income class,” said Aashish Sharma, Senior Director of Decision Management Solutions for FICO in Asia Pacific. “As borrowing and spending habits contract, customers will be on the lookout for avenues to grow their wealth and boost their savings. Banks must be able to proactively identify customers’ needs, and pivot their approach to alleviate financial anxieties while ensuring their products suit customers’ affordability and funding requirements.”
Gravitating towards Digital
Many Malaysian respondents (47%) still consider the proximity of branches and ATMs as a top determinant for a main banking provider; however, the report highlighted the importance of providing digital services. As many as 72% of APAC retail banking customers chose a fintech product over the option to use their banks’ main services. This was highest in Malaysia (94%) where customers did so as they wanted ease-of-use, time savings and easier application processes.
Comparing 2021 to 2019, APAC consumers are increasingly gravitating towards digital channels at every stage of their application journey: initial enquiries and research (up 14%), follow-up enquiries (up 15%), and banking applications (up 15%).
How Banks can Ensure the Customer is at the Center of Actions and Decisions
Transform operations and data silos through the use of sophisticated analytics technology and centralized management platforms.
Make data-driven decisions by predicting, analyzing and optimizing customer interactions in real time for an event-based, profile-driven approach to relationship management.
Develop precise insights into optimal interactions and offers that would work best for customers
Create a digital twin (a type of virtual model used for simulation purposes) to leverage this continuous learning and test out radical new approaches and strategies in a low-cost, low-risk environment
Deliver hyper-personalized offers and customer actions in a scalable way
“Banks must understand their customers’ needs on a deeper and more granular level, or risk losing them to competitors and alternative providers,” said Sharma. “Maintaining customer satisfaction alone will no longer suffice; customer experiences must be radically enhanced. Customer-centricity will be key to consistently delivering hyper-personalized experiences and retaining customers.”
Survey Methodology
This survey was conducted in 2021 by an independent research company adhering to research industry standards. 1003 Malaysian adults were surveyed, along with 12,885 consumers in Australia, New Zealand, Singapore, Indonesia, India and Thailand.
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.
I still remember a business owner who asked my team to create his portfolio to make sure he would have enough money for his retirement. We advised that he could earn solid returns from a diversified global portfolio based on his financial profile.
He was assured that part of the strategy drawn up for him would spin out a good amount of cash on a regular basis. I convinced him to “buy” some sleeping pills and take a slightly higher level of volatility to achieve better capital growth.
A week after the meeting, he came back and said he was no longer interested in my portfolio because he had found a much better opportunity elsewhere. He said that a financial salesperson had explained to him that he could make more profit with lesser risk if he took another investment product.
All That Glitters Is Not Gold
A few years later, the same business owner revealed to me that the investment he had bought into performed terribly. It turned out to be more volatile than he had thought. It is no consolation to realize that he, along with others who had also bought into that product without taking a balanced look at all the facts, will suffer.
Remember all those expensive, slickly produced advertisements boasting market beating ratings and top quartiles? Contrary to what nearly everyone believes, you do not make money buying an investment just because it “looks good” on the surface.
Yeah, everyone is going to get rich washing Mercedes, and BMWs. How about slogans like “You can become a millionaire in three years”, “You can turn your financial dreams into reality”, “Amazing, fabulous, unbelievable strategies for building massive wealth”, “You can invest with the world’s blue chip funds with as little as…,” and so on?
Life is not all sunshine and lollipops. There will always be financial salespeople with sketchy reputation or those who will put their own interests before their clients. They are usually well spoken and persistent and like to target the most naive and least informed investors.
I have no desire to offend anyone. Speaking from my experiences, it is commonly believed that those working in the sales department of bigger institutions are compensated well because they make money for investors. Yet, some of their clients are getting worn down. Some are still losing money or making very little money after so many years.
Taking Advantage
I have seen investors saddled with unnecessary charges and lengthy lock-up periods. It is good for the seller but not the poor investor buying it. Some of these investors have absolutely no idea how badly they are being ripped off. Anyone with eyes and a brain knows what I mean.
So, you have been told not to worry just because your investment is being managed by the captain who has been dealing with multi millions or billions for a long time. Well, so what? Someone used to share with me that some fund managers should not be allowed to run a grocery store, let alone operate a billion-dollar investment vehicle.
Sorry to throw up at your party. There are some fund managers with poorer track records and far less skill but are managing far more money. Yet, some other great managers slip under the public’s radar because of the lack of publicity.
In my work, I love to find managers who have some limited capacity, so the big boys cannot compete against them. It is about sustainably higher returns for investors, not scale. Big is not beautiful here.
Many of you out there have been scammed, in one way or another, at some stage. Beware of financial schemes or money games guaranteeing anything from a few percent to double-digit returns within a few weeks or months. Financial scams are so popular because they take advantage of people’s fear, greed and ignorance.
The whole idea behind a scheme is that they do not want you to understand anything. Anyone can make any story out of thin air which is absolute nonsense. The fraudster allays your fears and provokes your greed, they entrap you by befriending you, and they say the investment is riskless then they talk about returns.
Betraying Your Trust
Some of the victims are professional business people because they are intelligent, they think they should understand what they are being told, so they go along with it. The people who sell them are often someone whom they know for a long time.
Fraudsters and operators of financial scams sometimes target business groups in order to find their victims. In some cases, members have innocently encouraged each other to put money into such schemes. Run like hell if someone is pressuring you to make a decision at any financial events.
Most of the modern schemes are versions of old frauds, first committed more than 100 years ago. They are known as Ponzi Schemes after a 19th century fraudster named Charles Ponzi who was offering a 50% return on investment in just 45 days.
Fraudster draws victims in by honouring the agreed interest for the first few installments, then drawing more and more money from them as they start to believe they are on to a sure thing. It is like “robbing Peter to pay Paul” as the fraudster pays the initial interest payments with the investments from other victims who have fallen for the scheme.
Always open your eyes. If you leave your head in the sand and ignore it, you are only going to be victimised.
About the Author
YH Wong has over two decades of experience in the financial services industry. His clients include high net worth investors and boutique institutions such as family offices and investment partnerships in the region. He is currently a senior partner with Satori Consultancy Ltd, a financial services company regulated by the Mauritian Financial Services Commission. He can be reached at yhwong@satoriconsultancy.com.
Back in 2018, the Managing Director of the Monetary Authority of Singapore (MAS) Ravi Menon, gave a speech about the future of crypto and cited an old concept in economics known as Gresham’s Law, which is loosely interpreted as ‘bad money drives out good money’.
He opined: “Like Money, crypto tokens can be a force for good or bad… It is the enchantment with these tokens as a way to make a quick buck and their abuse for illicit activities that are at the root of our concerns.”
Therefore: “We must work together – regulators and the crypto industry – to make sure that bad money does not take hold. And that a new generation of crypto tokens emerges, that harnesses the potential of blockchain technology for social good while mitigating the risks today’s tokens pose.”
For example, let’s say you are given equivalent amounts in both MYR and USD. As MYR keeps depreciating against USD, you will spend MYR first and hold USD in reserve. The so-called ‘bad money’ would be used for daily transactions and dominate circulation, while ‘good money’ would eventually disappear from circulation as it is kept for savings and long-term investment.
Imagine now that you are given BTC (bitcoin) instead of USD. If you expect that BTC will rise in value, you will not pay your daily expenses with BTC as you may lose out on its future valuation. This is one of the reasons why BTC has grown faster as a store of value than as a means of payment.
Going back to the MAS speech: Interestingly, it applies the concept to market conduct. It refers to the illicit use of crypto by bad actors in the market, along with the profusion and poor quality of crypto products as a form of currency. If these bad actors continue to flourish, they will crowd out and drive away the good actors. The crypto industry and its innovation benefits will suffer as a result.
But if crypto can be used responsibly as a force for good, it will be ennobled and gain wide acceptance by the public. This would turn into the opposite of Gresham’s Law (known as Thiers’ Law) which states that ‘good money will drive out bad money’.
Is Private Money Good or Bad?
The characterisation of crypto as either good-or-bad is not always helpful. Private money like crypto, which are not issued by central banks, is very diverse and hard to generalise. Tech is morally neutral. They are self-serving financial constructs and are not mandated to be a public good. The vast majority of them are work-in-progress prototypes that will fail.
On one hand, you would read of industry reports claiming that illicit or criminal activity constituted only 0.10% (according to CipherTrace) to 0.15% (Chainalysis) of total crypto transaction volume in 2021, the lowest level ever. This makes crypto sound like a model private citizen!
But on the other hand, the crypto scandals keep getting bigger and bolder, with contagion impact on venture capital and lending companies as seen recently. The industry has spawned an entirely new genre of lawlessness (which Elliptic calls) “DeCrime” which could rewrite the penal code. Black hat hacks are commonplace, highly sophisticated, and even state-sponsored.
Ironically, as crypto improves and creates better version of themselves, they become too good to ignore. Savings and capital may leave financial systems, for good. Domestic banks may become undercapitalised. In response, governments are mulling to create crypto-versions of central bank digital currencies (CBDC), so that their national currencies will not be substituted by crypto. And they have the natural advantages to do so. As the Bank of International Settlements remarked, “anything that crypto can do, CBDCs can do better”!
Investors are at a unique point in economic history. They are spoilt for choice between private money (crypto) and public money (fiat), something that was unthinkable a generation ago. They have free capital movement, in the truest sense of the word, across borders, assets and entities. Whether this is ‘good’ or ‘bad’ is anyone’s guess.
Disclaimer: All opinions expressed above are the author’s own.
About the Author
Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. He is also the resident consultant for GLT Law, a multi-award-winning legal practice with specialisation in digital assets.
From advertisement run by insurance company, investment company to banks, and even the likes of private pension and pension fund, the idea of retirement planning is central on the need to plan early so that we can have adequate savings that sustain our golden years.
That being said, most (if not all) messages revolving around the concept of retirement is more often than not about “whether you prepared enough money for your retirement”.
Imagine people who have been working diligently and save very hard to prepare for this eventual phase of life called retirement for the past three decades. When they finally retire from their full-time work, does this now mean they will have a very good retirement?
I believe that a good retirement is determined not by what product we use to prepare for it, but how we invest our retirement money. In fact, there are three non-financial sides that we should not ignore.
Time
“What we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.”
One of the biggest differences between before and after retirement is not just about our main income will come to a stop, but rather, we will now have all the time available to ourselves.
So, what we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.
There is a saying that sound like this, “Growing old with lots of money is no longer the goal. Dying rich cannot compete with living rich, and making a living does not measure up to making a life.”
This implies that while we may be rich financially, if we are not rich in life, then those money may not carry any significant meaning beyond fulfilling our basic need.
There are 24 hours a day and this means we will have 168 hours every week now. Before we stop working completely, assuming we spend eight hours a day for our work, and we work 22 days a month, we will now have an additional 160 hours available to us!
So, how are you planning to use this new found 160 hours of your life? Having an idea for this is crucial because how we use our time will determine how our money will be used.
Of course, we will have some ideas about what we want to do when we no longer have to wake up to clock in for work. Maybe we can go shopping, hi-tea with friends, travel and do some of our hobbies. This is such a good thing and it will surely be liberating for us to indulge in these activities. However, do we see ourselves constantly doing this to fill up the 160 additional hours for years or decades? Could we come to a point that these activities that look attractive to us now may then become boring in future (after enough repetition)?
Meaning
“When we do not find life interesting, we may start to lose a sense of what is worth living for.”
Another key factor for people not retiring well is boredom. When we do not find life interesting, we may start to lose a sense of what is worth living for. It may also lead to us seeking new excitement with the retirement funds we have and in certain extreme situations, the person may even squander away their retirement savings.
On the other hand, people who have retired well and happy in their golden years usually have a few things in common. One such trait is living their life with a purpose. This can include volunteering at certain organisations with a cause they believe in. It may also be work that allows them to use their talents or experience to help the younger generations, such as a mentoring program.
Money is not the main motivator for getting involved in such projects or activities, but rather living a life that is ‘rich’ in meaning and purpose. If we look around, there are many people that can already afford to retire, but yet they are still actively pursuing a certain cause.
Speaking with them to understand their mentality may also help in seeing a different perspective.
Health
“No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.”
Think about your retirement as having three phases. In early retirement, you hopefully have the time, resources, and fitness to lead an active life. In the middle of retirement, your level of activity will probably start to slow down. And in the third phase, most retirees begin to settle into their homes and prioritise their wellbeing.
It is in the third phase that health care costs can increase dramatically depending on your needs and your personal support network. This is also potentially one blind spot that most people have not come to realise.
Some retirees who anticipate assisted living or in-home nursing purchase medical insurance with very high coverage. But these products only can do so much, i.e. it only pays for our hospitalisation bills and some post-hospitalisation. Other things that require money but not a hospital stay are not covered (yet). Hence, there is still a need to plan for additional funds that cater to these situations and having a back-up fund that we can dip into is crucial.
A more sensible way is to plan and accumulate our retirement savings, while also planning how to keep ourselves healthy and fit so that we enter our retirement with reasonable health.
Sadly, too many seniors put off making these difficult decisions until they are dealing with a major health or financial crisis. Planning ahead puts folks in a much better position to choose how and where they are cared for on their own terms.
No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.
Retirement Planning Is Never Just About Numbers
Back to those advertisement messages we are bombarded daily, those are messages about how financial products can help us prepare for retirement. But it is not preparing for a full retirement as money is just part of the picture.
In order to plan holistically for a retirement that really has meaning, you will have to engage in deeper conversation that helps you in understanding yourself better, discovering your personal values, identifying how you envision your retirement life to be, and how are you going to fill up your 168 hours a week, before looking at the numbers.
Real retirement planning should be a process that integrate numbers, and your life. Because eventually, it is the person (you) that gives meaning to the number, not the other way around.
About the Author
Kevin is a NextGen Money Mentor and founder of NextGen Independent Advisors. He works with people to transform their relationship with money and be brave in their pursuit to live a meaningful life with their money. He is a CFP professional, a certified member of Financial Planning Association Malaysia (FPAM). Kevin can be contacted at www.kevinneoh.my.
Hi, I am new to stock investing. Should I invest for capital gains or dividend yields?
There is no right or wrong answer to this question. It is possible to build yourself a sizable portfolio regardless of your own preference between the two. With that said, however, after communicating with our pool of readers at Bursaking.com.my and KCLau.com, I think, it is better for you to focus on investing for dividend yields if you are a complete beginner.
Here’s why:
1. Dividends are More Predictable
Dividend income is more predictable than estimating capital gains. After all, dividends are cash whereas capital gains are merely paper gains and are subject to changes on a daily basis. Your investment returns would not be “yo-yoed” based on the ups and downs of the stock market.
Instead, you’ll enjoy the certainty of income flowing into your bank account on a periodic basis if you choose to invest for dividends.
2. Dividends Pay Your Fixed Bills
This leads to Reason #2. Regular dividends pay your fixed bills which include your rent, mortgage, car loan, utility bills, Astro, insurance and grocery. Even if you had the above covered, it is nice to have a nice “makan” out, movies, dating, wall climbing, or a ‘Cuti-Cuti Malaysia’ trip paid for with dividends.
3. Dividends Build Your Confidence
Often, investors see their first dividend income flowing into their bank accounts within three to six months after making their stock purchases. Subsequently, based on the stock purchased, they would receive dividends either on a quarterly, semi-annually or annual basis.
Imagine, being a new investor and starting to earn cash returns every three months from your portfolio, you would probably feel good regardless how the price of your stock is moving. Even if the stock falls in price, you would continue to receive cash returns from it. At least, the stock will be “good for something”, and it will incentivise you to keep it over the long-run.
4. Dividend Investing is Less Risky
Here is a definition of a good stock investment. It is one where the stock has excellent fundamental qualities, and its price is attractively undervalued. In other words, the stock must be good and cheap. Often, stocks which are consistent in their dividend payouts possess great fundamental qualities.
These include having a resilient business model, excellent management team, a healthy balance sheet and a proven track record of growing profits consistently. As such, you would minimise your risk or chances of making poor investment decisions if you just stick to stocks that have the qualities above.
5. Dividends Build Your Portfolio
Earlier, we had mentioned that you could use dividends to pay for your expenses. But, what if you are currently making tons of money and do not need to rely on dividends to fund your current lifestyle? Is dividend investing still suitable for you?
The answer is Yes. This is because you could reinvest your dividend income into another dividend stock or stocks that you prefer, thus, allowing you to further expand your portfolio in the future.
Over time, you may not need to save money to invest, but use your dividends to fund your future investment. It works like a cycle where you use profits to generate more profits.
6. Why Not Capital Gains?
Does it mean that investing for capital gains is not good? Nope. Investing for capital gains is good if you are a more sophisticated investor. Being a skilled investor, your chances of achieving capital gains will be higher than one who is unskilled.
In most cases, people who are into capital gains without any sort of skills are often gamblers and speculators in the stock market. They are often thrill-seekers who see the stock market as a legalised casino.
They are not necessarily profit-driven, and this differs from the mindset of stock investors who are very profit-driven.
7. Dividend Investing is Investing with Clarity
How do you tell the difference between an investor and a speculator? It is quite easy. First, if a person tells us that he is investing for capital gains, we ask him: “How much capital gains are you expecting?” If his reply is: “I don’t know” and often, that is quite a standard reply, I would classify him as a speculator.
This is because true investors have already calculated their expected returns before buying into a stock or any investment. For example, if you ask a dividend guy what he is investing for, his reply would usually be: “I’m expecting to make at least 5% ─ 6% from this stock investment.”
Definitely, he is investing with clarity and with purpose, and not so much into luck, rumours, tips, or comments.
8. Dividend Investing is Simple
Dividend investing helps new investors to make stock investment decisions easier, faster and better. These decisions are mostly based on facts and figures, logic, and common sense. Thus, if you know how to do some simple maths, you can become successful in dividend investing.
Here’s a quick way to determine whether a stock is undervalued or overpriced. First, the reason why people invest in stocks is to earn more than banks’ Fixed Deposits of around 3%. Hence, any stock with dividend yields below 3% is overpriced.
However, if the dividend yield of a stock is 5% and above, investors may look into it as it is considered to be undervalued at its current price. Thus, dividend investing is a simple system which promotes one to “Buy Low, Hold for Dividends, and Sell High”.
Formula:
Dividend Yield = (Dividends per Share / Current Stock Price) x 100%
9. Dividend Investing is Investing for Capital Gains
What? Am I serious? Yes. Investing for dividends is investing for capital gains. Why? Because stocks with consistent dividend payouts are in demand by a larger pool of investors. They include EPF, KWSP, Tabung Haji, insurers and mutual funds, particularly income funds.
These institutions have billions and are still receiving billions for investment purposes. In this time when the markets are uncertain and volatile, these large institutional investors may be adopting a defensive stance to their portfolio as they are expected to perform and deliver returns to their stakeholders.
It may explain why dividend stocks tend to achieve sustainable capital appreciation over the long-term.
About the author
This article is co-written by KCLau and Ian Tai.
KCLau is a financial educator. He had published 6 books and co-created a dozen online financial courses. You can download his popular Money Tips e-book packed with 44 money hacks absolutely free, here: http://kclau.com/lp
Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia.
Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at 
