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What is Millennial Wealth Management?

While millennials may sometimes be seen as flippant in their attitude towards wealth, this is far from the reality as many young adults are financially aware and understand the importance of saving and investing for the future. When it comes to millennial wealth management, this tech-savvy generation also expects convenience and automation in their investments while demanding top value for their dollar and solid returns from their investments, says Affin Hwang Asset Management chief marketing & distribution officer Chan Ai Mei.

In an interview with Smart Investor, Chan gives her take on Malaysia’s millennial investors.

Smart Investor: Technology and innovation have altered the investment landscape, especially for millennials. How has the investment landscape evolved?

Chan Ai Mei: Millennials are certainly more discerning when it comes to investing. A product of their environment, this digital-savvy generation desires much more convenience and automation in their investments without necessarily going through a financial adviser.

Most millennial investors instead prefer a DIY-approach and doing away with face-to-face meetings or phone calls. Also known as a generation of instant gratification and speed, you would be hard-pressed to find millennials which aren’t glued to their smartphones.

As a result, asset managers today have to evolve together and cater to the needs of this new generation through a rich front-end digital platform (whether through an app or an online portal). The objective here is to create a seamless investing experience from the process of on-boarding, selection of funds, making a deposit, fund transfers, portfolio monitoring and financial advisory.

How do you think millennials differ in their investment approach and what do they desire from their investments?

Millennial investors are very savvy consumers and they do pay a lot of attention to cost. These includes not just consumer goods and services, but also extends to financial products. However just because an item is cheaper, it does not mean that they are willing to forgo quality. They still demand top value for their dollar and want solid returns from their investments.

Another area that millennial investors might differ are their value systems and openness towards championing a cause that they believe in. Most millennials would only invest if it is aligned to their own personal values and they can see sustainable outcomes. This has also led to the rise of impact investing as well as the growing importance of environmental, social and governance (ESG) considerations.

Millennials sometimes get a bad rap about their attitude towards wealth and can be rash in making financial decisions. What’s your take on this?

We think more credit should be given to millennial investors. There are a lot of assumptions about millennials being reckless about their finances and only knowing how to live in the moment. However, most are financially aware and understand the importance of saving and investing for the future.

A key factor that may be hindering millennial investors from achieving their goals is perhaps in striking a balance between immediate and delayed gratification. Learning to control one’s impulses and practicing self-control would ultimately help investors achieve their long-term goals. However, striking a perfect balance may be difficult to achieve with competing priorities.

That’s why it’s crucial that investors first sit down and properly plan their investment goals (both short-term and long-term) and then draw up a financial roadmap towards achieving them. Don’t be afraid of setting ambitious goals, but the plan should also be realistic by incorporating measures to meet your short-term needs and lifestyle.

For instance, if you do enjoy forms of entertainment like movies, concerts or social events, you should also ‘treat’ yourself and consider allocating a portion of your budget towards these forms of discretionary expenditure.

What are some healthy investing habits millennial investors should adopt?

It’s first important to have this realisation that investing is a marathon and not a sprint. Millennial investors living in the digital age may find this paradoxical, when they are used to getting everything quickly at the tip of their fingertips.

But investing is a different ball-game altogether and rewards the patient. As legendary investor Charlie Munger puts it, “It is waiting that helps you as an investor, and a lot of people just can’t stand to wait”.

For millennial investors just starting out in their investment journey, our advice is for them is to stay disciplined and stick to their investment plan regardless of how markets behave. Dollar-cost averaging is a simple yet effective technique to ease one’s way into the market over periodic intervals and helps reduce the impact of volatility in one’s investment.

Newer investors’ nerves can be easily rattled when faced with choppy market conditions and this may drive them to making impulsive decisions in their portfolio and selling too early. However, our advice is for them to stay invested and avoid timing the market.

Let the professional fund managers make adjustments to the portfolios when market conditions warrant them. For individual investors, you should stay focused on your goals and rebalance annually to correct any portfolio drifts that will ensure you are on track towards achieving your goals with a level of risk you are comfortable with.

What should a millennial’s ideal investment portfolio look like?

Time is on the side of millennial investors and they should make the most of this finite resource. Whilst some millennials may be wary of taking too much risk and getting jittery quickly, they should also realise they have a much longer investment horizon to recoup back losses and compound returns further.

Thus, if circumstances allow, a millennial investor’s portfolio should be tilted more aggressively towards capital growth via equities and growth funds. The remainder of the portfolio can be diversified through allocations in fixed income that can provide stability and consistent income with lower drawdowns when market conditions turn more volatile.

For tactical exposure which constitutes a smaller portion of the total portfolio, millennials can also seek exposure in more thematic and structural growth funds like China consumption or disruptive technology for example.

By Bernie Yeo

Please click here to read the full article in the digital edition of Smart Investor (April 2020 issue).

April 1, 2020
2020 Morningstar Fund Awards Malaysia: Public Mutual Bhd

Public Mutual Bhd took home four awards at the Morningstar Malaysia Fund Awards 2020, namely Best Asia-Pacific Equity Fund, Best Malaysia Large-Cap Equity Fund, Best Malaysia Bond Fund and Best Malaysia Bond (Syariah) Fund.

Smart Investor met up with Public Mutual chief executive officer Yeoh Kim Hong to discuss the out-performance of its winning mutual funds, risks in the market risk, and the technologies the fund house has adopted to make its business more appealing and
efficient to investors.

Smart Investor: Congratulations on your win! Public Mutual won four awards this year. What are the key factors behind the winning funds’ successful performance?

Yeoh Kim Hong: Despite volatile market conditions in 2019, our winning funds continued to adopt a fundamental approach to investing by selecting stocks and bond/sukuk which have sustained earnings, strong financial positions and proven management track records.

Public Far-East Alpha-30 Fund (PFA30F), which is a regional equity fund that invests in a concentrated portfolio of a maximum of 30 stocks, won in the Best Asia-Pacific Equity Fund category. In 2019, the fund generated a return of +19.9% to outperform the regional equity markets, as proxied by the MSCI All Country Far East ex-Japan Index, which rose by 15.2% (in ringgit terms).

The fund’s performance was driven mainly by the out-performance of regional technology stocks which are leveraged to the increasing adoption of digital products and services globally, as well as the secular growth trends in online financial and e-commerce services.

The second equity award achieved is for the Best Malaysia Large-Cap Equity Fund category. Public Strategic Growth Fund (PSTGF), which focuses its investments on growth stocks in the Malaysian market, achieved a return of +4.3% in 2019. In comparison, the FBM KLCI, which tracks the performance of the domestic equity market, declined by 6%.

Despite challenging market conditions, the fund was able to achieve a commendable performance, as it focused on fundamentally-strong companies within the consumer, healthcare and technology sectors. These stocks benefitted from sustained consumer spending as well as the trade diversion arising from the US-China trade tensions.

Public Enterprises Bond Fund (PENTBF), which invests mainly in ringgit-denominated bonds, won the Best Malaysia Bond Fund category. In 2019, the fund achieved a return of +8.2% due to its focus on long-duration bonds with sound credit fundamentals, primarily in the infrastructure and banking sectors. Bonds in these two sectors saw strong buying interest on the back of easing monetary policies globally, which contributed to the fund’s strong performance.

The second bond award achieved is for the Best Malaysia Bond (Syariah) Fund category. PB Aiman Sukuk Fund (PBASF), which mainly invests in ringgit-denominated sukuk, registered a return of +9% in 2019.

The fund’s strong performance was due to its focus on long-duration sukuk with sound credit fundamentals, especially in the infrastructure and banking sectors. The fund also benefitted from its sukuk holdings issued by the Malaysian government, which performed strongly in 2019 as sukuk yields compressed.

Moving forward, how can your bond funds outperform in a volatile yet increasingly low-yield environment?

The low global interest rate environment as well as the accommodative domestic monetary policy is anticipated to underpin the domestic bond/sukuk market in 2020. Our bond/sukuk funds will continue to seek investment opportunities in bonds/sukuk with strong credit fundamentals while adopting an active portfolio rebalancing approach and maintaining reasonable portfolio yields to ride through periods of volatility in the domestic bond/sukuk market.

How will market risks like the US-China trade war, geopolitical tensions, and Covid-19 outbreak impact your investment decisions moving forward? What are some of the under-reported risks that could surface this year?

In light of the uncertainties pertaining to the US-China trade relations, our investments in sectors deemed to be susceptible to increased trade tariffs or restrictions have been reduced. In addition, our funds have largely avoided tourism-related sectors which are directly impacted by the slowdown in travel activities amid the Covid-19 outbreak.

Other uncertainties include the upcoming US presidential election in November 2020, the Brexit negotiations as well as the sharp fall in oil prices following the Organisation of the Petroleum Exporting Countries’ (OPEC) move to hike oil production despite weak global demand.

However, accommodative monetary policies by major central banks and various fiscal stimulus measures by global and regional governments should help lend support to global economic activities. The volatility in financial markets will provide opportunities for our equity funds to add to their positions in fundamentally-backed stocks with positive long-term growth prospects.

Meanwhile, there could be volatility within the domestic bond/sukuk market in the run-up to September 2020 when FTSE Russell is anticipated to announce its decision on the retention of Malaysian bonds in the FTSE World Government Bond Index (WGBI).

To navigate such market uncertainty, our bond/sukuk funds will continue to focus on high-quality bond/sukuk issuances and rebalance the funds’ portfolio duration accordingly. Our focus on fundamental research and long-term investment strategies should help both our equity and bond/sukuk funds to ride through market cycles as well as through periods of elevated market volatility.

What measures or strategies has Public Mutual put in place to deal with these market risks?

In addition to the aforementioned measures, we will continue to be vigilant to developments within the economic and financial markets so as to proactively manage the exposure of our investments to these risks.

In this respect, we believe our adherence to fundamental research and long-term investment strategies will serve us well in delivering consistent returns to our unitholders over the long term.

With Malaysia gravitating towards a digital economy, what are some advanced technology that Public Mutual has adopted to make its business more appealing and efficient?

Among our technological offerings for investors is a dedicated online investment platform, Public Mutual Online (PMO), which provides them with easy access to our products and services on a 24/7 basis. Its key features include a Fund Analytics feature that allows investors to easily review the different features and performance of our available funds.

Meanwhile, our PMO landing page allows investors convenient access to stock market performance data and fund reviews, as well as a quick overview of their portfolio holdings.

We also recently revamped our website with improved functionality as well as enhanced user navigation. Investors can now use the website to explore funds, view fund performance and discover the right funds for their investment needs. It also allows investors to conveniently access articles on the financial markets and financial planning.

New investors can use the Digital Onboarding facility to sign up without need for physical documents, while existing investors can leverage on other facilities to top up their investments and register for the Direct Debit Authorisation (DDA) facility within a few clicks.

We have also designed several digital tools as part of our efforts to facilitate our unit trust consultants (UTCs) in servicing investors. For instance, the CAMS software allows UTCs to present to investors their investment account details including returns.

Meanwhile, the U@Bis$ app allows UTCs to guide investors in answering a risk-profiling questionnaire, before subsequently building a unit trust portfolio based on the recommended allocation.

By Bernie Yeo

Please click here to read the full article in the digital edition of Smart Investor (April 2020 issue).

April 1, 2020
The Smart Investor’s Guide to Islamic Social Finance

What are the main tenets of Islamic social finance?

Sustainable Development Goals 2030

In 2015, countries around the world adopted a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable development agenda. Formulated on the principle that no one gets left behind, the Sustainable Development Goals (SDGs) have defined the world’s priorities and aspirations for 2030.

In 2016, a high-level panel commissioned by then-UN Secretary-General Ban Ki-Moon estimated a humanitarian financing deficit of $15 billion – and the gap is widening each year.

Last year, only 58.5% of requested humanitarian funding needs were met.

There’s an overwhelming need for capital to help fragile nations battle everything from widespread food and water insecurity to the fallout from natural disasters.

Uplifting Poverty Levels

To mobilise these efforts, we need to effectively uplift groups living below the line of poverty.

Although poverty levels have fallen dramatically since 2000, there are still 783 million people living below the international poverty line of $1.90 a day. Obviously, it calls for more creative and effective solutions to end poverty.

With technology playing a key role in implementation, this makes it more targeted and effective – an important move that we must take to lift people at the bottom of society from poverty and end world hunger to ensure that no one gets left behind.

An Important Role in Achieving SDGs

Islamic social finance was developed in adherence to the Sharia principles of socioeconomic justice, equality and collective prosperity.

Islamic social finance tools have been instrumental in the alleviation of poverty and socio-economic development for over 1,400 years. Among the instruments available in Islamic social finance to achieve this are zakat, waqf and sadaqah (charity) which have been adopted and applied even outside the Islamic world.

Zakat – wealth tax and a means of wealth distribution – is thought of as harmonising the relationship between the individual and public interest (maslaha). Each year, Muslims are required to donate 2.5% of one year’s total cumulative wealth to the poor in the form of zakat.

Waqf is an endowment to a religious, educational or charitable cause, most frequently used to build schools, hospitals or religious institutions. Given its communitarian nature, waqf is often used to fund social projects and services.

Sadaqah is a voluntary charity given on an ad-hoc basis; a concept similar to putting coins into a charity donation box.

These instruments are used to provide education and healthcare, to develop infrastructure and maintain social welfare provisions for the poor and destitute.

Charity through Islamic Crowdfunding

With the huge gap in humanitarian funding, coupled with the immense need, innovative financing models are starting to play a critical role as it becomes clear that no single factor can plug the deficit.

In the humanitarian sector, international aid organizations are looking to new sources of capital and utilizing Islamic social finance for humanitarian projects. Innovation in the financial industry happened at a very fast pace, and Islamic Social Finance is one of the industries undergoing rapid disruption by digital platforms.

GlobalSadaqah was a recipient of the Best Social Impact Islamic Fintech Firm Award at the World Islamic Fintech Awards 2018, during the Global Islamic Fintech Huddle in Bahrain. The Islamic crowdfunding platform helps channel donated funds to some of the neediest individuals in society. It connects individual donors to a diverse range of social causes that require financing around the globe.

For donors, digital technology makes it easier to identify, evaluate, and fund causes. For organizations collecting social finance, technology provides greater access to donors, lowers costs, and allows for greater reporting and communication. For institutions implementing projects, technology enhances project management, workflows, and monitoring. Perhaps most importantly, digital technology can help recipients of social finance and their communities by making resources more accessible and distribution more efficient.

March 26, 2020
Public Mutual Bags 4 Morningstar Fund Awards

Public Mutual Bhd was the biggest winner at the Morningstar Malaysia Fund Awards 2020, bagging four out of the five awards on offer.

The unit trust company took home four awards, namely Best Asia-Pacific Equity Fund, Best Malaysia Large-Cap Equity Fund, Best Malaysia Bond Fund and Best Malaysia Bond (Syariah) Fund.

Principal Asset Management Bhd’s Principal Islamic DALI Equity Fund (formerly known as CIMB Islamic DALI Equity Fund) won the Best Malaysia Large-Cap Equity (Syariah) Fund.

The winners were unveiled during an awards webcast today by Morningstar Asia Ltd, a subsidiary of Morningstar, Inc., a leading provider of independent investment research.

The annual Morningstar Malaysia Fund Awards recognise retail funds and fund houses that have added the most value for investors within the context of their relevant peer group in 2019 and over longer time periods.

Morningstar selects the winners using a quantitative methodology, along with a qualitative overlay. Weightings to one-, three-, and five-year risk-adjusted performance are factored into the methodology.

“Morningstar’s Annual Awards highlight the quality and breadth of investments available for investors in each region,” said Nick Cheung, chief executive officer for Morningstar in Asia. “Our 2020 winners have been great drivers of investor success. It is our honour to recognise their outstanding achievements and commitments to investors.”

He pointed out that every year, Morningstar presents awards to more than 30 countries globally to recognise exceptional fund managers and investment teams who deliver value to investors, and put investors’ interest at the first place.

“This is in perfect alignment to Morningstar’s vision, which is to empower investors to make more informed investment decisions, and make better investment outcomes.

“Morningstar has a long history of helping investors. Despite the current difficult environment, we continue to invest to allow investors to have more and expanded research coverage on equity, fund, ETF, ESG and private investments,” Cheung said.

For example, he said Morningstar will soon roll out a new web-based analytic platform of Morningstar Direct which has new features and data sets to allow investors to make better informed investment decisions.

Wing Chan, Morningstar’s director of Manager Research Practice, EMEA & Asia, said the 2019 rally in both equities and bonds has rewarded investors handsomely.

“However, it was also one of the more unpredictable periods in history, with low interest rates, heightened geopolitical uncertainty, and stretching asset valuations continuing to worry investors.

“The Awards winners, across our equity and fixed income categories, have proved their ability to deliver market-beating returns over the long term without undue risk,” he added.

Public Mutual, the No 1 private unit trust company and Private Retirement Scheme (PRS) provider in Malaysia, commands a market share of 34.6% for the retail funds sector and 42.7% for the PRS sector. A wholly-owned subsidiary of Public Bank, its total net asset value stands at RM85.3 bil as at end-January 2020.

Principal Asset Management is a joint venture between Principal Financial Group, a Nasdaq-listed global financial services company, and CIMB Group Holdings Bhd. Headquartered in Malaysia, Principal Asset Management has footprint across Indonesia, Thailand and Singapore, with nearly RM88 bil in assets under management as of February 2020.

2020 Morningstar Fund Awards Malaysia

Nick Cheung, CEO for Morningstar Asia

March 19, 2020
Global Diversification in the Year of the Metal Rat
The Year of the Metal Rat has started. The rat is the first of all zodiac animals. According to one myth, the Jade Emperor said the order would be decided by the order in which they arrived to his party. The rat tricked the ox into giving him a ride. Then, just as they arrived at the finish line, the rat jumped down and landed ahead of the ox, becoming first.

Feeling good about the Year of the Rat? Will the Metal Rat be seen as a deliverer of good fortune? If you look at the world objectively and understand what is happening regardless of what the famous Chinese fortune tellers or feng shui masters are going to sell to you, there are lots of good opportunities to be found around the world.

The view here is that the Year of the Rat will likely be bullish for risk assets although timing is always a tricky factor plus the expected volatility. The global investment backdrop contains many positives that remain in favour of maintaining a bullish outlook for stock market investors.

Don’t fight the Fed

“Don’t fight the tape, don’t fight the Fed.” It is never a good idea to fight the US Federal Reserve and other central banks, and that is one of the key reasons I subscribe to the overall positive outlook. It is a great policy if you are dancing until the music stops. I am flexible and can always adjust my thoughts and strategies along the way.

I sold a few positions and rebalanced one of my client portfolios which have made extensive moves and have gone parabolic during the latest rally. Let me make myself clear. The bullish position here does not mean complacency.

Can one actually make good money without lifting a finger these days? It is scary to find young professionals putting a majority if not all of their hard-earned savings into the stock market for quick money. I hope they really know what they are doing.

At the time of writing this missive, stocks are going higher around the world. With every tick up, the stock markets gain some more credibility with the public. Why not invest a little more? It is important for investors to avoid the temptation to buy blindly because of the tempting hot markets.

There is no need to get emotional in dealing with any asset classes or markets. Like most investors and traders, I like to make money in bull markets but one should always be disciplined and not get carried away.

Risk management vital

Please remind your spouse that anyone can make big money initially when everything goes up in prices but keeping it and staying in the game long-term requires risk management, which is one of the most important recipes in investing.

The global economy and markets continue to face old worries in the year of the Rat. The recent geopolitical situation in the Middle East shows there are always potential for negative surprises. I expect a more bumpy road ahead in the second half of this year.

We have always been told not to put all our eggs in one basket, right? Real diversification is important for medium to long-term investors who wish to load up stocks. On this note, are you someone who is still stuck with homegrown meat and potatoes ignoring other opportunities or are you an investor who has a diverse mix of asset classes around the world using different investment styles or strategies?

Investing globally

In my work over the years, I have always viewed investment choices as a global beauty contest. Chart 1 illustrates my model portfolio which is invested globally and can be customised for investors with different risk profiles.

Chart 1: Model Portfolio

Observations from Chart 1:
1. Globally diversified asset class exposure with different investment styles.
2. Maintain a minimum exposure to local assets.
3. Exposure to a range of alternative investment solutions that promotes low volatility.
Chart 2 and 3 show the performance in the US Dollar of a balanced strategy for more risk-averse investors with different time frames. Of course, past performance is not a guarantee of future results.

Chart 2: Balanced Portfolio (2019)

Chart 3: Balanced Portfolio (Since Inception)

I have observed that there is now a new appreciation among some investors that not all opportunities for profit are homemade. For others, there are still concerns and questions in their minds. Even good old-fashioned patriotism.

There are many benefits of a globally diversified portfolio which I will discuss more in another article. Spare your venom please. I am not suggesting anyone dump the local economy or markets.

Before I hit the send button, no matter what the Year of the Rat brings, I wish my readers a healthy, happy and prosperous Chinese New Year. In that order because without the first two, prosperity would have definitely less appeal.

The start of a new year usually comes with new resolutions of goals that we hope to achieve. These include setting for ourselves financial goals.

For those who are “home-biased” when it comes to investing, one of the financial goals they should aim for in this Year of the Rat is to learn how to invest globally.

———————————

YH Wong has over two decades of experience in the financial services industry. He is currently principle of Noble Hills Partners Ltd and is also a senior partner of a licensed offshore investment platform. His clients include high net worth investors and boutique institutions such as family offices and investment partnerships. He can be reached at yhwong@noblehillspartners.com.
February 10, 2020
Retirement Planning: Best Practices and Advice From Experts
How do you plan for your retirement?

How early should you start planning for your retirement?
(The answer may shock you!)

What are some of the proven retirement methodology that works?

How do you diversify your funds, savings, and assets to create more wealth and ultimately, becoming financially independent or financially free?

Today, we talked to a few experts, from the council and certified financial planner on how they help their clients plan and execute their retirement planning.

If you want to learn from the pros on how they do it, then keep on reading!

“As in all successful ventures, the foundation of a good retirement is planning,”

Generally, there are 2 types of fundamental retirement plan for the Malaysian workforce, your EPF and pension scheme if you’re a government servant.

News has again and again saying that these plans alone will not be enough.

Why?
1. We live longer, we have a longer lifespan than ever before due to medical and technology advancements.
2. Inflation. Cost of living goes higher, year by year, and so does your day-to-day expenditure, healthcare cost, children education cost and so on.
Now, let’s see what our experts have to say –

Yap Ming Hui From Whitman Independent Advisors

This is a very common issue – Most of our clients realized that they may not have enough savings for their golden age when they’re about to retire. (That would be a little too late.)

Worse still, escalating costs of children private education can easily drain your savings, especially for those who have two to three children.

Solution?
1. Start saving for your future self the moment you start earning an income, no matter how small the amount. If not now, then when?
2. Stay investing in the stock market regardless of the bull or bear market with a time frame of 20-30 years. (Invest for long term)
3. Researching and educating yourself to invest in a solid and quality investments (Whether it’s stock or unit trust) is a MUST before making such a decision to avoid scams.
4. Channel 30% of your gross income into a pension fund (mandatory 11%+ additional 19%). Of course, the quantum very much depends on your age, financial commitment or desirable retirement lifestyle.
5. Another one simple assessment method is to do holistic financial planning via our free iWealth mobile app which could assess your current situation, your desired lifestyle and how much you need to be financially independent.
6. Always prioritize not to lose your hard-earned money. For example, choosing a regulated investment, diversify into different asset classes, and set your own investment criteria, discipline, and strategy, and stick to it (If it works) no matter what.
Linnet Lee from the Financial Planning Association of Malaysia

If you expect to spend 30 years living in retirement, you should start accumulating your nest egg 30 – 40 years in advance, a great effort to start planning when you start working.

There are two ways of planning for retirement:

Capital Expense Method:

Whatever you saved for retirement (the capital), you will utilize during your retirement and estimate that upon death, the amount left is minimal.

This requires active management during retirement to ensure that the money is enough (the assumption is your money continues to work when you retire).

Capital intact method:

You accumulated huge sum of capital and live based on the interest and dividends received during retirement.

This capital you accumulated over the years can be passed down to your loved ones as a legacy.

So now, what you need is to identify suitable types of investment tools based on your risk appetite.

Other quick tips from Linnet Lee:
1. Consider late retirement if you are still healthy and energetic.
2. Consider keeping a minimalist retirement lifestyle.
3. Start investing in dividend-yielding investment vehicles such as
  a. Real Estate Investment Trusts (REITS)
  b. Exchange-traded Funds (ETF)
  c. Stocks
  d. Unit Trust Funds
  e. Private Retirement Schemes (PRS)
4. Ensure sufficient health protection through own savings plus insurance/takaful policies.
5. Best work with a financial planner to prevent costly financial mistakes.
6. Factor in cost that might incur more during retirement such as:
  1. home refurbishment/wear and tear
  2. maintenance of the family cars
  3. Purchase of healthcare products
7. Closely monitor your investment portfolio from time-to-time to best match your risk profile and lifestyle changes.
8. Avoid Scams that offer unbelievably high and quick returns.
Bryan Zeng from FA Advisory

One day, you will retire. The matter is when.

Are you planning for it?

Living in uncertain and turbulent times like now, external changes that are beyond your expectations will continue to happen.

Is your retirement fund robust and flexible enough to last through your retirement years?

We are talking about 20 – 30 years at least.

If you have not started your retirement planning, start now.

Take action to maximize your retirement savings while you are young and fit to actively earn income, make time and compound interest your best friend as money-making leverage for you.

Key actions that you can start taking are:
- Setting up an emergency fund
- Paying off debts
- Get sufficient insurance protection (trust me, medical inflation over 10% will wipe off your savings in months)
- Maintain a healthy lifestyle.
- Make efforts to improve your medical conditions if you are Obese, Overweight or Pre-diabetes. These health situations are reversible and would save on your future medical bills.
- Diversify your investment portfolio, consider alternatives to EPF.
Yes, these steps sound simple yet hard to be done.
Some strategies that you can take to make it happen are:
- Track and reduce your spending.
- Increase savings
- Create a second and third streams of income.
- Delay in retirement.
- Look for investment products that match your risk-return profile as well as being highly liquid with low or zero tax applicable.
- Simple investments with low capital outlay are his favourite.
Derick Tan from Association of Financial Advisers Malaysia

The best time to start investing for retirement is always “Now”. The sooner we start, the earlier we can achieve our retirement goals while undeniably having more choices to choose from.

Some keywords related to retirement planning and selection of investment instruments are:
- Long term regular savings
- Sustainable growth of your funds
- Diversified portfolio of your investment
As the world economy is uncertain and the market situation is unpredictable, Derick advises that you should place 70% – 80% of your savings in fixed income or money market asset classes, while the balance 20% – 30% can be channeled into equity class that invests in the Asia Pacific and China.

While the EPF’s management team has performed a good job in managing the retirement fund, you cannot depend solely on EPF savings for retirement. So, look into the following:
- How much EPF savings would you accumulate by the time you retire?
- How much fund is needed for your desired retirement lifestyle?
- What are your investment criteria to achieve your retirement goals?
- What are the pros and cons of each investment you have?
- Are you diversifying your investment into different asset classes or funds to manage potential investment risk factors?
In summary, you will need to have the right blend of knowledge and skill to profit from investment products, i.e. by fully comprehending the cut loss mechanism or even switching or topping up to average down to maintain long-term accumulation growth.

Phang Kar Yew from Malaysian Financial Planning Council (MFPC)

Planning for retirement is a long term journey. It takes a long term vision, long term commitment and long term investment strategy to be successful.

It is well-documented that over 90% of investment returns are generated through asset allocation.

As such, a portfolio of investments is required since asset allocation is all about spreading your investments across a variety of asset classes.

For those who do not have funds or technical skills to invest in the stock market directly, unit trust investment managed by professional managers with market diversification is a good start.

Do remember that you should be clear of your investment objectives, risk-return profile and manage your expectations over the investment performance.

Alternatively, investing in property can be a good choice.

Investing in real estate provides an excellent capital gain opportunity whilst enabling recurring rental income.

However, risks associated with real estate investment are higher than other investment instruments too.

Note: You should assess the property location, monthly installment amount, property price and the rental income before committing yourself to a property.

Investment properties with positive cash flow after deducting the cost of renting it out are rare gems.

Is there an alternative plan in place to cover the loan installments if the property could not be rented out for a long period?

If you can’t afford to have any unexpected downturn to the huge financial commitment, you should think ten times before you commit to it.

An exit plan is equally important as it could impact or limit the investment choices available for your retirement portfolio.

WHAT ABOUT YOU?

Have you started your own retirement planning strategy? What are some other tips that you can share with us? Let us know!
February 10, 2020
SC Guidelines On Digital Assets

The Securities Commission Malaysia (SC) has published the guidelines on digital assets outlining the framework for fundraising through digital token offerings in Malaysia.

As stated in the SC’s earlier consultation paper on the “Proposed Regulatory Framework for the Issuance of Digital Assets Through Initial Coin Offerings”, an Initial Coin Offering allows a company with an innovative business proposal to raise capital before it is able to do so through venture capitalists or lenders. It also allows the company to raise funds without selling their equity or taking out a debt while developing their innovative ideas.

“Digital tokens offering can provide another alternative fundraising avenue for early-stage entrepreneurs. This initiative supports Malaysia’s Shared Prosperity Vision 2030 (SPV2030) by supporting the growth of SMEs and micro businesses which are targeted to contribute 50% to Malaysia’s GDP. It also aligned with SPV2030’s aspiration to create 30% high technology Malaysian companies,” said Datuk Syed Zaid Albar, Chairman of the SC.

The Guidelines incorporates feedback received by the SC following the issuance of the consultation paper. Based on the responses received, there is overwhelming industry support for the SC’s proposal to leverage the expertise of a platform operator to review applications for issuance of digital tokens for fundraising.

Thus, the Guidelines sets out the requirements for all offerings of digital tokens to be carried out through an initial exchange offering (IEO) platform operator that is registered with the SC. In this regard, the IEO platform operator would be required to carry out the necessary assessment and due diligence to, among others, verify the business of the issuer and the fit and properness of the issuer’s board, as well as understand the features of the digital tokens. During the first phase of the implementation of the Guidelines, the SC will work with the relevant platform operators in assessing eligible issuers.

Prospective issuers must also satisfy governance and capital requirements in order to be eligible to raise funds through an offering of digital tokens. Issuers are required to demonstrate that their proposed project or business provides an innovative solution or a meaningful digital value proposition for Malaysia.

An issuer may raise funds up to a ceiling of RM100 million and tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits provided in the Guidelines. Each issuance must be accompanied by a Whitepaper, which should provide investors with among others, material information on the issuer, the digital token and the utilisation of funds obtained through the issuer’s fund-raising exercise. After the offering has been successfully completed, the SC will conduct post-issuance monitoring of the utilisation of the proceeds.

The Guidelines also sets out the requirements for IEO platform operators and the process to seek authorisation from the SC. It will be brought into force in the second half of 2020 to allow potential issuers, platform operators and investors to familiarise themselves with the requirements in the Guidelines. Members of the public are reminded that until the coming into force of the Guidelines, no person is permitted to offer or issue any digital tokens in Malaysia.

The Guidelines are available at the SC website here.

January 16, 2020
Retirement Plans for the Self-Employed

A large segment of the working population in Malaysia is self-employed or works in the gig economy, so what are their retirement plans? Drawn by the flexibility to choose which projects to take on, the opportunity to accumulate diverse work experience and the autonomy to set their own working hours, many gravitate towards the entrepreneurial route to pursue their dreams and chart their own paths.

Indeed, out of a total workforce of 15.54 million, according to the latest figures published by the Department of Statistics Malaysia, the World Bank estimates that more than one in four – about four million – are self-employed. From financial planners and small business owners to online merchants and e-hailing drivers, the nature of work among the self-employed is numerous, varied and multi-faceted.

In line with global trends, reports indicate that this is increasingly also the preferred choice of employment among Malaysian millennials and Gen Z – those born in the mid-1990s onwards. As exciting as this development is, Malaysians who are self-employed often neglect something everyone should do the moment they start working: saving for retirement.

Retirement savings for the self-employed

Being a freelancer, independent contractor or technopreneur means you do not get to enjoy the usual perks of salaried employment. Income typically fluctuates from month to month, and there are no pensions or mandatory schemes to provide a financial safety net.

It might be tempting, or even necessary, to channel any excess money towards expanding or covering the cost of business. The risk of saving too little for retirement is high.

This state of affairs is supported by a survey conducted by Private Pension Administrator Malaysia (PPA), the central administrator for Private Retirement Schemes (PRS), where 62.8% of those who are self-employed said they wish they are saving more for retirement. Unless you are expecting to receive a substantial windfall or a generous inheritance, it is important you start taking proactive measures to save for your retirement.

“While you are busy growing your business or juggling several projects simultaneously, don’t make the mistake of not saving for retirement at all,” says PPA Chief Executive Officer Husaini Hussin.

“Create a retirement plan based on your needs, goals and risk appetite and then stick to it by automating your savings.”

Source: PPA Malaysia

Why consider PRS

Having a retirement plan is vital for a successful self-employed person. It can mean the difference between toiling into your old age and taking leisurely strolls on the beach.

With PRS, a voluntary long-term savings and investment scheme designed to help you save more for retirement, you can contribute at your own pace and within your own financial ability.

“Think of retirement savings in terms of percentages instead of a fixed amount or putting aside only what is left over at the end of the month,” advises Husaini.

“This ensures you don’t overstretch yourself in a lean month and you save a little bit more when business is good.”

To have adequate replacement income to sufficiently sustain your standard of living throughout retirement, PPA’s research suggests setting aside one-third of your income every month. When you save a percentage of your income each month this way, market volatility works in your favour as you gain more units when prices are low.

“It is a great way to save for your retirement over the long term,” Husaini adds.

“The top performing PRS funds have given PRS members good returns since inception up to 31 October 2019.” (See table)

Another aspect of PRS is the Nomination feature, which supersedes all wills. Other than the mandatory scheme, PRS is the only savings scheme in Malaysia with a feature to ensure your loved ones or nominees receive your gift hassle-free in the event of your untimely demise.

Recently, Budget 2020 proposed that PRS Members be allowed to make pre-retirement withdrawals for the purposes of healthcare and housing without any tax penalty. Additionally, zero tax penalty withdrawals for medical expenses incurred by immediate family members are also allowed, in recognition of rising healthcare costs.

“The introduction of 0% tax penalty for pre-retirement withdrawals of PRS from sub-account B, which holds 30% of the savings for purposes of healthcare and housing, reflects the government’s understanding and commitment to help all Malaysians use a portion of their retirement savings for their needs,” Husaini said. “This proposal shall take effect from next year.”

Beyond that, PRS Members who reached the retirement age of 55 or suffer from permanent total disablement, serious disease or mental disability can withdraw the full sum of their PRS savings without any tax penalty.

PRS Online

You can start saving with just a few simple steps by using PRS Online Enrolment, a service developed by PPA to help you save for your retirement in an easy, convenient and secure way. All you need is RM100 for the initial contribution and the minimum amount for subsequent top-ups is as low as RM50.

There are 55 conventional and Shariah PRS funds offered by eight PRS Providers to select from, but if you can’t decide, opt for the age-based default option. It is a unique feature of PRS which will automatically align the suitable asset allocation to your age group.

“The beauty of PRS is the choice and flexibility that PRS members have to enrol or top up into multiple PRS funds anytime and anywhere with just one PRS account,” Husaini says.

“Track your savings and monitor your investments with the myPPA mobile app. You always have the option of optimising your returns by switching PRS funds within the same PRS Provider or transferring your savings to another PRS Provider.”

Furthermore, PRS contributions you make are also eligible for a personal tax relief of up to RM3,000 per year, giving you tax savings which can further boost your retirement savings. You could enjoy zero sales charges or free insurance or takaful with coverage of up to RM100,000 with certain PRS providers.

Do it on your own

Being self-employed can be exciting, scary, and rewarding all at once, but without a mandatory scheme that makes savings and employer contributions compulsory, the onus of building a retirement nest falls squarely on you.

Money starts working for you the moment you set them aside for retirement. Whether you’re an entrepreneur, a photographer or e-hailing driver, take advantage of the flexibility to choose how often and how much to save with PRS.

Do it on your own. Senang jer. Save in PRS.

January 7, 2020
Digital Fundraising Platforms in Malaysia

In a world where convenience is key, Malaysia’s equity crowdfunding (ECF) and peer-to-peer (P2P) financing industry continues its steady growth and is expected to cement its position as part of the country’s digital fundraising platforms and financial landscape.

Both the online financing platforms collectively raised RM587.05 mil as of September 2019, benefitting close to 1,600 micro-, small- and medium-sized enterprises (MSMEs), according to Securities Commission Malaysia (SC) statistics.

There are now 21 registered recognised market operators (RMOs) in Malaysia – 10 ECF and 11 P2P financing players – whose role is to facilitate fundraising activities for businesses or companies from both retail as well as sophisticated investors via their respective online platforms.

For perspective, ECF is a mechanism that allows a start-up or other smaller enterprises to obtain capital through small equity investments via online portals to publicise and facilitate such offers to crowd investors.

P2P financing, meanwhile, involves a lending and borrowing activity between businesses and investors that are facilitated through online marketplaces, in this case, P2P financing platform operators.

Positive Outlook for ECF

Since its introduction in Malaysia, ECF has become one of the preferred alternative financing options and an enabler for small and medium enterprises (SMEs) to raise funds for their businesses.

In fact, Malaysia is the first country in Asean to have a regulatory framework for ECF. Six ECF RMOs were approved by the SC in 2015, followed by one in 2018 and three more in 2019, each possessing its own unique expertise and reaching out to new groups of investors.

As of September 2019, a total of 70 ECF campaigns raised a total of RM67.7 mil and have supported 69 SMEs, with 75% of the issuers being tech companies.

Source: Ata Plus

Ata Plus co-founders Elain Lockman and Kyri Andreou opine there will be a positive outlook in the upcoming year for ECF as an alternative financing option and also as an enabler to spur the SME industry.

“The overall market outlook, however, is very dependent on external factors such as economic and geopolitical developments as Malaysia’s economy becomes increasingly intertwined with the global economy in events such as the recession in Hong Kong, the ongoing trade war between the US and China, the increasing number of civil unrest in many countries, and also climate change,” they explain.

Lockman and Andreou also note that ECF will probably see an increase in the number of deals as the Malaysia Co-Investment Fund (MyCIF) kicks in, along with growing awareness and understanding of the asset class among both companies and investors.

The government’s additional allocation of RM50 mil – announced during Budget 2020 – to the SC’s My Co-Investment Fund (MyCIF) is expected to help drive greater awareness of both ECF and P2P financing as viable and attractive digital financing options for Malaysian SMEs. This is in addition to the RM50 mil allocated during the previous budget, thus bringing the total fund to RM100 mil.

From the viewpoint of companies raising funds, share Lockman and Andreou, this RM50 mil allotment to match investments in ECF and P2P financing platforms will ease their ‘burden’ to an extent and will encourage more companies to consider ECF as a viable option for fundraising.

More exits expected in 2020

Earlier in October, Ata Plus announced its first exit which came in the form of Skolafund, an impact enterprise that crowdfunds scholarships to university students in need.

Skolafund, which fundraised on Ata Plus in February 2017, was completely acquired by one of Asia’s biggest donation crowdfunding platforms. The deal gives investors in the ECF round a return of 10%.

In the same month, ECF platform pitchIN also saw its first exit after a group of MyCash Online investors accepted a buyout offer for their shares from venture capital (VC) firm 500 Startups. The offer, which gave them 44.2% returns over two years since the ECF deal, was made alongside an investment by 500 Startups into MYCash Online.

MyCash Online is a fintech startup that provides an online marketplace for unbanked migrants to purchase products and services online without the need for a bank account or credit card.

The third “exit” came in the form of a biotech company, Greenlagoon, although it is not really a traditional exit. One of the very first companies that raised funds via ECF with US$191,000 (RM800,000) raised from 24 investors from Crowdplus. asia, it has completed two renewable energy projects with two more in the pipeline.

Ata Plus’s Lockman and Andreou foresee the recent exits would have given investors greater confidence and more possible exits in 2020 are expected. They foresee the coming year may also see the launch of the secondary exchange that can support interim exits for ECF investors which would also motivate investors to invest in this particular asset class.

Setting the tone for 2020

Bikesh Lakhmichand, founder and CEO of 1337 Ventures, a technology accelerator and venture capital firm, concurs with Lockman and Andreou that 2019 has been an exciting year for ECF. Both these major developments (exits being materialised and the announcement made regarding the MyCIF), he believes, will help catalyse the ECF scene and attract more investors.

“Although the number of deals listed and successfully almost doubled in 2019, the total funds raised amount decreased by about 20%. However, we believe that 2019 has been a great year for ECF as we’ve seen the first exits in ECF – not just one, but three!” he points out.

Lakhmichand also believes that the ECF scene has matured significantly since its early days. What’s more, the idea of ECF as a source of alternative funding has gained significant traction. In fact, to some companies, ECF is more preferable compared to traditional financial institutions, he claims.

“The scene is slowly shifting towards becoming a more mature market. Insights from 2019 show that issuers are becoming more realistic with start-ups providing more realistic valuations,” he notes, adding that investors are becoming smarter too, and are becoming more adept at sniffing out bad deals and are investing in deals that make sense to them.

“All in all, we believe that 2019 has been a great year in setting the tone for 2020. 2019 has helped legitimise equity crowdfunding via the first three exits with lucrative returns and the government’s MyCIF initiative.

“Furthermore, through the new issuers each with its own forte and focus, we believe that the ECF scene is set to grow exponentially in 2020,” Lakhmichand adds.

More players entering industry

On the P2P financing front, Fundaztic director and CEO Kristine Ng expects the industry to grow at an even faster pace as more players enter the industry, targeting different segments of MSMEs and different facilities that are made available to more MSMEs.

“We will see the introduction of insurance premium financing, asset-backed financing as well as more options of invoice financing,” says Ng.

“For Fundaztic, we will continue to focus on the same segments that we have been focusing on for the last two-and-a-half years and these are the micro, small and new businesses.

“Despite the fact that we have helped more than 800 MSMEs obtain funds (we would likely end the year helping more than 1,000 MSMEs), the market is huge, and we are only reaching a small portion of this segment, which makes up 80% of the total MSMEs base in the country,” she adds.

On the RM50 mil allotment announced under Budget 2020, Ng opines that the MyCIF is a helpful boost to the industry and all parties involved. “For MSMEs, through the MyCIF, the likelihood of their hosted Note receiving at least minimal funding goal is higher, and many would enjoy receiving funds faster.”

For instance, since the deployment of the first batch of MyCIF in September, for Fundaztic, the average speed to full funding goal has dropped by two days for the higher-risk Notes that will otherwise only be able to receive minimum funding of 80% or full funding by Day 10. For investors, MyCIF serves as a boost of confidence for the future and strength of the P2P financing industry and that it is a ‘legitimate’ and ‘legalised’ investment vehicle.

“The first six P2P financing platforms were announced during the time when Bank Negara Malaysia (BNM) was clamping down on the illegal money game operators and many were sceptical as to whether P2P is the same,” Ng recalls.

“With the government co-investing with them, investors would have a better peace of mind and we do see an increase in investors since the announcement.”

Source: SC

As for the platforms, the MyCIF is a timely boost to help spur growth and drive awareness, trust as well as acceptance. “In fact, in the long run, it is forecasted that the funds will be self-replenishing through the interest returns and therefore, enhance access to funding and close the funding gaps – or at least for the viable MSMEs that are hosted by the platforms,” Ng explains.

The only way is up

microLEAP PLT chief executive officer Tunku Danny Nasaifuddin Mudzaffar says the approvals given by the SC for five new P2P operators in May 2019 is a testament to the confidence the regulator has in P2P financing, both as an alternative investment tool and also an alternative financing tool.

“From microfinancing – such as what we do at microLEAP – to asset financing to supply chain financing to insured trade invoice financing and lastly, to insured premium financing, P2P investors have never had such diversified and wide-ranging products for investment such as now,” he discloses.

“The Malaysian P2P financing sector has grown in leaps and bounds. From total aggregate financing of RM37 million in 2017 to RM213 million in 2018 and then to RM587 million in September 2019, this stellar growth will only continue,” foresees Tunku Danny. As to the market outlook for 2020 for the P2P financing sector, there is only one direction for the sector, and that is up, he says.

With further education and awareness, which all P2P operators are carrying out in their own capacity, alongside nationwide roadshows and events organised by the SC, the triple-digit growth the sector is experiencing is expected to continue.

“What I foresee really growing in a big way are Shariah-compliant investment notes. For a country such as Malaysia being a leader in the Islamic capital markets, we can definitely do much better in our disbursement of P2P Islamic financing,” explains Tunku Danny.

“In fact, microLEAP has just been given our Shariah Pronouncement for us to host Islamic investment notes and we hope to be given the green-light by the SC to ‘Go-Live’ with our Islamic product by the end of 2019,” he reveals.

Helping Ordinary People Access Cryptocurrencies

Luno is the latest of the three recognised market operators (RMOs) approved to establish and operate a digital asset exchange or DAX in Malaysia.

With the full approval from the Securities Commission Malaysia (SC), the company is poised to help ordinary people access cryptocurrencies with their local currency, by making it easy to safely buy, sell and learn about Bitcoin and Ethereum.

“We believe that cryptocurrencies are a new technology that holds a lot of promise and hope to be able to upgrade the world to a new and improved financial system,” says Luno Malaysia events & community associate Arif Lee.

Lee says the cryptocurrency sector in Malaysia is still at its early stages, and with regulation coming into the picture, the sector will only further develop as it legitimises the asset class among investors and consumers alike.

“Undoubtedly, regulations will bring clarity and much-needed protection to consumers by ensuring all legitimate cryptocurrency businesses have adequate standards in place to protect investors and their funds,” Lee says.

On what investors can expect from the cryptocurrency sector in 2020, Lee reveals there are some indications the SC will allow Initial Coin Offerings (ICOs) in the country, as they have sought public feedback on a proposed ICO framework in March 2019, which could add a totally new dynamic to the cryptocurrency sector.

“We applaud and support the SC’s efforts because many ICOs have turned out to be scams as they are not structured and those involved focus their efforts on the ‘raising money’ part, rather than use cases, a strong internal team and technological advancements.

“For Luno, we intend to onboard additional coins as we continue to grow. However, any cryptocurrencies that we intend to add will first have to go through the SC’s approval.”

London-based Luno is one of the world’s leading cryptocurrency companies with a team of over 300 technology and finance experts, with more than three million customers operating across 40 countries on three continents.

January 6, 2020