Inovatif

Category: Protect Your Wealth

  • Protecting Your Welfare and Financial Interests in The Face of Mental Incapacity

     

    When it comes to personal financial and estate planning, there is one crucial area that many financial advisors often overlook. This area pertains to a situation that can befall anyone, irrespective of their will. Imagine finding yourself in a situation where your mental capacity is gradually slipping away. Making sound decisions becomes increasingly challenging, and managing your financial and business affairs seems nearly impossible. You’re gripped by frustration and depression, and eventually, you lose control over everything.

    The ability to make prudent personal financial and business decisions is what sets you apart as a successful business owner or a competent professional. Now, picture a scenario in which you lose this defining trait, the cornerstone of your self-image and business success.

    As your mental capacity wanes or deteriorates, the dire consequences unfold. You begin to lose control over both your personal financial and business matters. When you reach a point where a significant part of your mental faculties has eroded, you lose control over everything. You find yourself in a distressing situation where your own wellbeing and personal welfare are no longer within your grasp but in the hands of others.

    In the eyes of the law, as outlined in Section 52 of the Mental Health Act 2001, when you can no longer manage your personal affairs due to mental incapacity, your decision-making power is wrested from you and given to a committee appointed by the court.

    ONLY UPON DEATH

    Wills and nominations, typically, only take effect upon death. For example, a written will only become relevant upon your demise. All the nominations you’ve made in your EPF and life insurance policies come into play only after you pass away. Moreover, your life insurance policy’s death benefit remains unclaimed until a death certificate is submitted.

    Whether you’ll receive the total and permanent disability (TPD) cover benefit from your life policy depends on whether your state of incapacity aligns with the policy’s definition and terms and conditions. Most TPD benefits are disbursed six months after the insured individual becomes completely unable to engage in income generating work, with a waiting period of six months from the date of disability.

    It’s crucial to note that any testamentary trust established through your will instrument will not take effect in the event of incapacity. This trust, embedded in your will, can only be activated upon your death.

    DEMENTIA

    Dementia is a pressing concern. According to the World Health Organization, around 8.5% of older adults in Malaysia, roughly 260,000 people, are grappling with dementia. It’s a condition characterized by a loss of cognitive functioning, impacting thinking, memory, and reasoning to an extent that hinders daily life and activities.

    Dementia is not a sudden occurrence; it’s a progressive disease. Over time, individuals afflicted with dementia often require support in managing their affairs and daily activities. What’s worth noting is that dementia is not an inevitable consequence of aging; it’s a syndrome marked by cognitive function deterioration, memory loss, and behavioural changes. While it’s predominantly associated with older individuals, it can also affect younger people, and there’s currently no cure.

    In recent times, the media has reported prominent cases of individuals being subjected to court inquiries to determine their mental capacity and the potential appointment of a committee to oversee their personal, legal, and financial affairs.

    A TRUE STORY

    In December 2019, the son of the late Tun S. Samy Vellu filed a summons in the Kuala Lumpur High Court to ascertain his father’s mental capacity under Section 52 of the Mental Health Act 2001. He sought to determine if his father was mentally disordered, as his father had been unable to access his bank accounts due to his condition, prompting the legal action.

    There was another case involving the son of a 92-yearold millionaire businessman who filed a suit to evaluate his father’s mental health. He claimed that his father’s mental faculties had been declining over the past few years, leading to communication difficulties and memory loss. He applied for a court order to determine his father’s mental capacity to instruct lawyers on his behalf and to appoint a committee to manage his father’s affairs and estate if he was found mentally incapable.

    In conclusion, business owners and professionals who take pride in their ability to maintain full control over their personal and business lives are strongly advised to plan for the unexpected event of incapacity. Losing everything in such a situation can be avoided with proper planning.

    About the Author

    Lee Khee Chuan is a Securities Commissionlicensed financial planner representative. He is passionate about advising business owners and professionals on the importance of a comprehensive approach to estate planning. You can reach him at: leekheechuan@gmail.com

  • ICMR Research Series: Taking a Dual and Systematic Approach to Address Investor Vulnerability in Malaysia

    Before the COVID-19 pandemic, Malaysia was already faced with multiple complex challenges – from the impacts of climate change, and ageing populations, to rising inequalities. The pandemic has only accelerated these challenges and to a large extent, also exacerbated vulnerabilities affecting households and individuals’ levels of financial resilience.

    Given these challenges facing investors today, the burden of financial well-being is too heavy to rest solely on individuals themselves. To move forward beyond the present crisis, responsible finance will require that all stakeholders – government, policymakers, the financial industry, and more – treat individuals’ financial well-being as a shared responsibility.

    Building Financial Resilience

    Firstly, there is a need to build financial resilience across the population. As we explored previously in our series, a lack of financial resilience cuts across all drivers of vulnerability – predominantly linked to poor investment and saving behaviours, as well as an equally important factor when dealing with issues which are out of one’s control, such as unexpected life situations and industry-related issues.

    It is crucial to acknowledge that some individual barriers faced by certain segments of the population to be able to save or invest, involve embedded structural challenges that cannot be solved purely by market-based solutions. These include sluggish wage growth, unemployment especially for youths, mismatches between labour demand and supply, the rise of the gig economy and lack of social safety nets.

    Thus, a whole-of-nation approach which goes beyond the jurisdiction of any single regulator or an agency may be needed for holistic reforms that address both structural and individual barriers. Policymakers and regulators will need to focus their efforts on assisting vulnerable populations to become more financially resilient, such that they are better able to use market opportunities to save and invest.

    Since investor vulnerability is multifaceted, driven by various factors such as personal and financial circumstances, age, geographical location, and investment experience – policy actions need to take a tiered and nuanced approach. This includes a review of incentive structures complemented with behavioural nudges that can help shape and sustain the necessary savings and investment behaviours.

    Nudges are part of a wider toolbox in the behavioural sciences consisting of education and training, subsidies and taxes enable or restriction, and environmental restructuring (physical or social context) which specifically focuses on leveraging behavioural levers to guide people towards making decisions that benefit them the most in the long term, without significantly changing their present incentives.

    Examples of ‘nudge’ initiatives include behavioural interventions like “save more tomorrow” and “sidecar savings”, which encourage saving for retirement in easy, convenient, and painless ways, as well as micro-investing applications that help build an investment habit by investing in smaller amounts of money like the spare change from daily purchases.

    Raiz Malaysia for example is an automated investment service that rounds up each transaction from a user’s Debit Card to the nearest Ringgit and invests the change into a unit trust portfolio based on their financial situation and goals

    (Source: Raiz Malaysia)

    Dealing with vulnerable investors

    Secondly, the building of financial resilience must then be complemented with a targeted approach to improve the protection of vulnerable investors. ICMR’s study identified key trigger points that indicate vulnerability such as discretionary income and perceived financial status, health status, level of retirement savings, level of financial literacy, investment experience and encounters with scams.

    To identify if a possible investor could be vulnerable, the current Know-Your-Client (KYC) process could be further enhanced with the introduction of these trigger points into the process. Also, this assessment should be done on a more regular basis, preferably every 6 to 12 months, as one’s situation is not static and needs to be recalibrated accordingly.

    Emphasis needs to be placed on market intermediaries and agencies to better identify and manage vulnerable investors. Regulators then need to focus on the “duty of care” by providing guidance and overseeing the conduct of capital market intermediaries, including fair treatment of vulnerable customers coupled with investor protection measures.

    Most regulators have general guidelines for financial services that already require service providers to consider factors such as knowledge, experience, financial situation, and risk profile of the individual investor during service provision. At the same time, targeted programmes are being implemented in many jurisdictions to specifically protect certain vulnerable groups, like senior investors.

    In Malaysia, financial regulators have certainly been vocal on issues affecting investors such as unlicensed activities and scams, retirement inadequacy, as well as the inclusiveness of capital markets for retail investors. Given the prevalence of challenges facing today’s investors, considering how investor vulnerability may affect these outcomes would be beneficial for future policy and research.

    In line with this, the Securities Commission Malaysia (SC) launched the third Capital Market Masterplan (CMP3) in 2021, which identified “enhancing focus on protecting investors against vulnerabilities” as a strategic consideration, with the “identification and assessment of vulnerable investors” being one of the priorities over the next five years, as illustrated in the diagram below.

    Source: Securities Commission Malaysia (SC)

    Collaborative and behavioural insights for effective implementation

    Creating policies and initiatives alone may not be enough to address the rising issues of vulnerability. To ensure the effective implementation of these initiatives, financial vulnerability must be viewed across the value chain. Our report highlights that vulnerability drivers are a combination of behavioural and structural issues that fall and cut across the purview and jurisdictions of multiple agencies.

    Behavioural insights should be incorporated into every stage of a policy cycle, from development to all the way to post-implementation. While this may require embedding more rigorous evidence-based approaches to design and evaluation such as Randomised Control Trials (RCTs) into the policy cycle, it could eventually reduce the need for corrective measures once a policy is at the implementation stage.

    RCT is a trial in which subjects are randomly assigned to either a treatment group or a control group. The treatment group receives the intervention being studied, while the control group receives either no intervention or a placebo. The effects of an intervention or treatment are measured by comparing outcomes between the groups.

    Policymakers can also leverage this understanding to evaluate the effectiveness of policy implementation and make necessary adjustments. Behavioural insights can also help uncover unintended consequences or knock-on effects of certain policies, which regulators may not have been measuring or looking out for in the first place.

    Given the delicate environment and crossroads of change, there is a dire need for policymakers to take proactive steps now while we still have the policy space to make reforms and improvements for the long term. With more collaboration with industry stakeholders, policymakers can create a resilient financial ecosystem that safeguards the interests of the most vulnerable investors.

    This article is part of a content series by the Institute for Capital Market Research (ICMR). Follow ICMR’s Facebook page to stay updated on behavioural tips and insights for better investing habits. To learn more about ICMR’s research on new-age vulnerabilities, visit www.icmr.my or download the full report.

  • Property Tussle: Being Left Homeless After Sister’s Death

    Property Tussle: Being Left Homeless After Sister’s Death

    The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about a property tussle, then being left homeless after her sister’s death.

    Chung was unable to get a loan from any financial institution to purchase a house. The easiest way out was to purchase the house under a name of his sister who would be eligible to obtain a loan. Nancy did not mind this arrangement as Chung gave the undertaking to pay the monthly loan payments.

    The arrangement worked well until Nancy passed away suddenly. She had no Will and since the house was under her name, it was considered her asset. Under the Distribution Act, Nancy’s husband, Jay, and children are entitled to her properties, which include the house that Chung bought and is living in.

    Read: Tears In Heaven: Who Protects Your Insurance Money?

    Property Tussle Begins

    Jay, who is not on cordial terms with Chung, would not want to hear anything from his brother-in-law that he had been servicing the housing loan and the house rightfully belonged to him. Chung’s pleas that Jay returns his house fell on deaf ears.

    Chung was left with two choices; either goes to court and fight for an equitable interest which may take a long time and the outcome, uncertain; or to stop making instalment payments which will result in the bank claiming from Nancy’s estate for the loan amount.

    Either way, Chung is at the losing end with a certainty of incurring losses.

    The above scenario of purchasing an asset under another name is quite common, especially among business partners, close friends or relatives for various reasons. Most of them do not realise or appreciate the seriousness of the problem that would occur upon the death of the person whose name is used to register for the asset if no proper estate planning is done – and an ugly property tussle will ensue.

    In the event the entrusted person dies or goes into a coma or becomes of unsound mind, his/her representative may not be as cooperative, especially when something of value is involved – that’s when the property tussle will rear its ugly head.

    Read: Special Needs Trust: I’m Nobody’s Child

    Declaration Of Trust To Prevent Property Tussle

    What Chung could have done was to get Nancy to sign a Declaration of Trust. Under this Declaration of Trust, Nancy will hold the house for Chung as a main trustee and an appointed licensed trust company shall be the substitute trustee in the event of her death.

    All Nancy needs to do is sign a trust deed which is irrevocable power of attorney with the trust company. Upon Nancy’s death, the trust corporation will take over as substitute trustee and follow the terms and conditions of the trust deed to transfer the house to Chung. From this arrangement, Chung has established a legal right to the house, and the problem with Jay could have been circumvented.

    The main benefit of a Declaration Trust is that though the house is under Nancy’s name, the rightful heir to the house would be Chung. Moreover, there is no need to transfer the house to another trustee, and thus there are no transfer fees payable.

    The fees are only payable upon the demise of Nancy. The transfer of the house of Chung’s name is hassle free since there is no need to wait for letters of representation over Nancy’s estate.

    Furthermore, with a trust company, Chung and Nancy will have peace of mind and their rights and obligations are well preserved without any third party interference since a trust company is duty bound to follow the trust provision and therefore more reliable than an individual.

    Moreover, the trust company has continuity compared to a natural person liable to die, fall ill, meet with an accident and be incapacitated, become of unsound mind or go bankrupt. When an individual trustee passes away, his assets are frozen until the necessary legal estate administration processes are completed, which means the asset is frozen too.

    And that’s how you can prevent a property tussle with the right tool, a Declaration of Trust.

    Read: Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    About Rockwills International Group

    Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management, and distribution of wealth. It has done over 300,000 wills and 16,000 trusts and holds more than RM25 billion in assets under trust.

  • What You Need To Know About The Insurance Industry In Malaysia

    What You Need To Know About The Insurance Industry In Malaysia

    Insurance is a means of protection from financial loss where a party agrees to compensate another party in the event of loss, damage, or injury; in exchange for a fee. In other words, insurance is a risk transfer mechanism where you transfer your risk to the insurance company to get coverage for any financial loss you may face due to unforeseen events. The emotional and psychological loss can never be compensated, but at least the financial loss can be compensated with insurance.

    Smart Investor spoke to Fabrice Benard, CEO of Generali Insurance Malaysia Berhad and Country Head of Generali Entities in Malaysia to learn more about the current insurance landscape in Malaysia.

    Fabrice Benard, CEO of Generali Insurance Malaysia Berhad and Country Head of Generali Entities in Malaysia

    Smart Investor: Has the pandemic impacted the insurance industry? What’s the penetration rate for Malaysians?

    Fabrice Benard: Definitely, the pandemic has impacted most economic sectors, with very few exceptions. But I would say there is an advantage in such adversity. It has presented new, emerging protection needs, and accelerated innovation, transformation and sustainability practices within the industry.

    We also noticed a shifting landscape of insurance awareness during and post pandemic – where many Malaysians are becoming more informed, health conscious and aware of the importance of insurance protection. This has given us an opportunity to protect what matters, address the protection gap and actively reach out to a wider range of customers and communities.

    SI: With high inflation, people have less disposable income and might have less to spend on insurance. How can they cope? And is there any help coming from the insurance industry?

    FB: As a lifetime partner to our customers, part of our commitment is to bridge the protection gap and extend our protection far beyond our existing customer base. Financial inclusion is important to us, and we want to engage and educate the communities as much as possible and ensure that everyone can receive the protection they need. For example, providing instalment payment plans via our partner banks for selected products to ensure that our products remain affordable.

    Besides that, it is also essential to create a value-added service ecosystem to address customer needs. This is deployed via our strong distribution network, strategic partnerships and other type of services: information, prevention, protection, assistance. We also continuously find ways to be more inclusive, yet innovative and personalised in our product offerings to target different customer segments.

    For example:

    • We launched SmartTraveller Enhanced ― the first-in-market travel insurance in Malaysia with pandemic illness coverage up to RM350,000 in view of increasing travel protection needs due to reopening of borders.
    • Launched SmartMedi Outpatient ― the 1st standalone outpatient medical insurance in Malaysia that offers standalone outpatient coverage for General Practitioner / Simulated Patient clinic visits which does not require hospitalization.  It is a complementary product to the In-patient coverage. 
    • Launched Multi Medic – the 1st modular Individual Medical insurance that allows consumers to build the coverage to suit their life stages and financial needs.
    • The Multi Biz Protector Enhanced – a customisable and comprehensive insurance plan designed for owners of small and medium-sized businesses (SMEs) to cover their key business risks. It is a comprehensive product where most of the risk exposures are covered in this ‘one stop’ package. Customised to their needs, business owners can select their preferred protection needs.

    SI: Post-Covid or Long Covid symptoms are considered chronic diseases that insurance might not cover; why is that so?

    FB: Post-Covid or long Covid symptoms are common exclusions in the insurance industry. Usually, when it comes to health or medical claims, there needs to be objective medical proof to support the claim. It goes without saying that health insurance only covers conditions where medical attention is absolutely necessary. Long Covid symptoms usually develop after the original Covid infection has cleared, and they can be tricky to measure or assess, especially when it comes to the treatment duration and standards of care.

    But beyond claim coverage, we are committed to extend our best support to our customers struggling with long-term Covid symptoms. It is important for us to provide our customers with the care they need, while ensuring our panel medical partners implement appropriate clinical guidelines and practices.

    SI: Company insurance only covers you until the age of 60. Is there any insurance for those approaching retirement age and those with disease

    FB: While company insurance typically covers up to 60, it is recommended to have a complementary individual comprehensive insurance plan that can keep you protected up to a higher age limit. For example, our comprehensive critical illness plan – CritiCover, do cover up to age 100 with protection against 194 critical illnesses and any future unknown illnesses. This plan will help to ease your financial burden while allowing you to focus on your recovery. Besides that, we also have various other products such as the SmartPA Enhanced and other Individual Health Plans such as SmartCare Optimum Plus that provides coverage up to age 100.

    For individuals with health conditions, insurance companies may still offer insurance plans that have additional restrictions or exclusions for certain pre-existing conditions. The type of plans, coverage and premium offering may differs depending on the person’s health status.

    SI: Any medical insurance for pregnant ladies and babies? Is it necessary to take such a policy?

    FB: Complications such as cardiovascular disease, hypertension etc. may be contracted by pregnant or postpartum ladies, and such diseases may lead to unexpected medical expenses. Having an insurance plan is recommended to ensure you receive the necessary care and support on your recovery.

    Though most individual insurance plan do not cover the cost of delivery or normal hospitalisation bill, there are several critical illness insurance plans that cover pregnancy complications.

    Aside from the importance of a pregnant lady being insurance protected, having medical insurance for your child is equally important too. Children, especially infants, are susceptible to illnesses and accidents. Medical Insurance can provide peace of mind and security to the parent, knowing that their child will have access to the necessary medical attention when they need it most. For as young as 15 days old, your child can be covered under our comprehensive medical insurance plan – OneMedic Elite, which covers hospitalisation bills incurred should your child requires medical treatment.

    SI: Education is getting more expensive. Is education insurance important?

    FB: An education savings insurance plan is a type of insurance policy that provides a combination of insurance protection and savings elements, specially designed to help families to save aside for the future cost of education. Such plans allow you to save aside over a period of time, and such savings will be further invested to grow over time and, at the same time, provide regular bonuses to your insurance savings fund. You can access your savings fund to pay for your children’s education expenses. The amount required to set aside for such an insurance plan depends on your target education fund.

    Such insurance plan also provide a lump sum payment to the beneficiaries in the event the insured person’s death, disability or diagnosed with critical illness, where such event may prevent your children from completing or paying for your children’s education. This will allow you to focus on their education goals without having to worry about the financial consequences of life’s unexpected events.

    To help you to achieve your desired education for your child, our insurance savings plan – Wealth Saver, is designed to help you diversify your savings and achieve your financial goals. With just a short-term commitment of only 4 years, you can enjoy a guaranteed annual income of up to 18% of the sum insured. You will continue to be payable to you or your loved ones in the event of death or Total and Permanent Disability (TPD).

    SI: What’s the reason people are not buying insurance? And what can be done to increase awareness of the importance of having insurance?

    FB: Many think that insurance is expensive and an unnecessary expense. There are also some who merely see insurance as an investment rather than a form of protection. But insurance works on the principle of risk transfer and pooling – the whole intrinsic idea of insurance is to protect against uncertainties and unexpected risks.

    Increasing awareness of this takes a collective effort from all insurers. While continuous educational campaigns are important, we are also looking at providing better insurance experiences as a whole by transforming our role beyond just selling products to providing more value-added, personalised services. Our guiding principle is to make the entire purchase, service, claims, assistance, and renewal effortless and care while ensuring that our customers receive personalised, phygital advice with a human touch for complex matters. We believe this will help bring a better experience and create more avenues for new protection.

  • Tears In Heaven: Who Protects Your Insurance Money?

    Tears In Heaven: Who Protects Your Insurance Money?

    The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about who protects your insurance money.

    Heng could not help but feel emotional as he saw little Tim at the playground without a care in the world. His thoughts were how Tim meant the world to his late sister and that she is weeping in heaven now that all the insurance monies meant for him is gone.

    A cruel twist of fate had robbed Tim of what is rightfully his.

    Being a single parent, June is ever careful of making sure that there is something for Tim in the event that something happens to her. She dutifully took up a life insurance policy which will serve to provide for Tim’s living expenses and education when she is not around.

    Putting Ownself As Trustee, Who Protects Your Insurance Money?

    But little did she realise that by naming herself as trustee in the insurance policy, she started a chain of events that made Tim an innocent victim of circumstances. Poor Tim.

    Not well versed in insurance matters, she just followed the norm to name herself as trustee. June who had come to terms with her terminal illness and had got Heng’s consent to be Tim’s guardian, was at peace in her final days thinking that Tim’s welfare would be well taken care of, financially as well.

    After the funeral, Heng set about to handle June’s financial matters. It was only after submitting for insurance claims did Heng learn of an oversight by June which turned out to be a costly mistake.

    Heng was told that since the policy owner had passed away, the nominee in the policy will be the trustee. However, for that to happen, the nominee must be at least 18 years old and not incapacitated mentally.

    Read: The Amazing Reconciliation Of Father And Son, And This Reflected Inside The Will

    Who Protects Your Insurance Money, When The Nominee Is Not Yet 18?

    Then comes the hard question of who protects your insurance money? Since Tim is not 18, the trustee will be his surviving parent, which is in this case is his father, who left both mother and child some time ago.

    Heng knows that once the money reaches his hands, Tim would never see it again. If she had known, June would have appointed a new trustee – an individual or a trust company who can hold this insurance money for Tim until he grows up.

    This is reaffirmed by the new Financial Services Act (FSA) which repealed the Insurance Act and made it invalid for the policy owner to be trustee of the insurance policy. Those who named themselves as trustee even prior to the FSA coming into force would have to change trustees for complete protection of the money.

    As this is a common situation, the best solution for a single parent to protect their insurance monies from ending up with an unintended person or used for unintended purpose would be through the setting up of a Single Parent Trust.

    In June’s situation, she can easily set up this trust by assigning the life insurance policy to the licensed trust company. This will enable the trustee to claim the insurance proceeds upon her death or disability.

    Read: Special Needs Trust: I’m Nobody’s Child

    Setting Up A Trust Deed

    She could provide instructions to the trustee through a trust deed, for example; to cover her medical expenses if she is critically ill, for scheduled payments for Tim’s living expenses and education, thus ensuring that his needs will be provided for as she would have wished for him.

    In this manner, she is also rest assured that another problem is averted – an inheritance being squandered away in the hands of a young heir who is inexperienced in handling a large sum of money so early in life.

    A trust is indeed a viable approach to ensure total protection of insurance monies to be utilized according to one’s wishes. It is also an advantage to have a trust company as trustee instead of an individual as the trust company is impartial and is duty bound to follow the terms and conditions in the trust deed whereas an individual may not be so compliant with regard to other people’s money.

    The perpetuity of a trust company is also another advantage as a natural person is liable to die, fall ill, meet with an accident and be in capacitated, become of unsound mind or go bankrupt. At least you will have a peace of mind, knowing that there’s an organisation who protects your insurance money.

    Read: Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    About Rockwills International Group

    Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has done over 300,000 wills and 16,000 trusts and holds more than RM25 billion in assets under trust.

  • Special Needs Trust: I’m Nobody’s Child

    Special Needs Trust: I’m Nobody’s Child

    The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about special needs trust and how it works in the real world.

    Elsie thought she had it all when she walked down the aisle with her beau and then to be blessed a year later with a beautiful bouncy baby, Ann.

    Little did she reckon that life would be cruel. It all started one afternoon when little Ann turned blue. It was heart-wrenching for her to see the baby so sickly with her life hanging on a thread. But Ann was a fighter. She survived but became mentally handicapped.

    A much relieved Elsie prepared herself for the long haul of bringing up a special needs child. Her whole life was now dedicated to Ann, which took a toll on her relationship with her hubby. They grew more and more apart, and it eventually led to a divorce.

    Read: Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    As a single parent of a child whose condition requires special attention, Elsie juggled between work and caring for her child. We were always overhanging and worried that Ann should not be around to care for her.

    A friend advised her to set up a Trust for her daughter, but she brushed off the idea, mistakenly thinking that it was something in the League of the Rich. She took comfort that she had many siblings and started to set aside money for her brother to use for Ann’s maintenance, just in case.

    Unfortunately, Elsie and her brother both died in a car accident. The money kept by the brother for Ann was frozen in his bank account, pending a letter of representation from the courts. In the meantime, the immediate needs of the special child were left unattended while the uncles and aunties bickered about who should take care of her and who should advance the money for the maintenance costs. Ann became nobody’s child.

    Read: How A Buy-Sell Agreement Can Help Business Partners In The Future

    Special Needs Trust Comes Into The Picture

    Elsie could have averted such a situation by setting up a Special Needs Trust with a trusted company to take care of her medical needs and maintenance. With increasing awareness and understanding, more people now know it is not true that a Trust can only be set up by wealthy people.

    In this case, she could have started by using her life insurance policy, unit trust investments, or even money in her bank account as the source to fund her Special Needs Trust instead of placing it in her brother’s account. Even if the sum is modest, she could set it up first and then increase it over time. In fact, the cheapest and fastest way to set up a trust is to fund it with a life insurance policy.

    Through the Special Needs Trust, she can also instruct the trustee to use the trust properly to pay for the upkeep of the house where her child is staying and maintenance costs for supporting the child. Instead of relying on help from relatives, she could also have instructed the trustee to make regular maintenance payments out of the income earned from the trust property.

    Read: The Amazing Reconciliation Of Father And Son, And This Reflected Inside The Will

    Generally, it is also better to appoint a licensed trust company instead of an individual to be the trustee because an individual is liable to die, fall ill or meet with an accident, become incapacitated, or even become bankrupt.

    Besides these problems, other possible risks may arise, such as monies being handled dishonestly or incompetently and failing to cater to the child’s care. For those parents who have children, whether with special needs or not, give them a good head start in life by planning and setting a special needs trust specifically for them, especially if you are a single parent.

    Read: Money Caused Breakup Among Four Close Friends, That’s Why it Is Important To Plan For The Succession Of A Business

    About Rockwills International Group

    Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in trusts, succession, management, and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and holds more than RM25 billion in assets under trust.

  • Be A-Z Ready For Tomorrow With Allianz Malaysia

    Be A-Z Ready For Tomorrow With Allianz Malaysia

    Allianz Malaysia Berhad recently launched ‘Be A-Z ready for tomorrow’, an educational  campaign to help Malaysians secure the retirement lives they dream of.

    Planning for retirement is more than just ensuring you have adequate finances. The Campaign, will look to help Malaysians understand the importance of retirement planning, with a keen focus on protection and types of insurance coverage that is vital at every stage of life for a sound retirement life.

    Allianz Malaysia believes that planning for retirement should encompass overall protection including medical, personal accidents, protection of assets, and having a good support system, in addition to having sufficient savings. Adequate protection is necessary as rising medical costs and unexpected events are likely catalysts for financial setbacks during one’s golden years.

    Allianz Malaysia Chief Executive Officer, Sean Wang said a general rule of thumb is that a retiree would need two-thirds of their last drawn salary to retire comfortably.  

    “When we were studying the market, we learned that Malaysians’ top priorities for retirement are to live debt-free, have sufficient funds for medical emergencies for themselves and family, whilst maintaining their pre-retirement lifestyles. These things will be hard to achieve if people are only leaning on passive savings to finance their golden years.“

    A study conducted by YouGov, a global public opinion and data company, showed that only 38 percent of Malaysians have taken proactive steps to plan for their retirement. In fact, when it comes to retirement planning, most are heavily dependent on passive modes such as saving accounts and EPF.

    The study which focused on understanding Malaysian retirement priorities found that those intending to plan for their retirement were receptive to protection plans like Life and Medical insurance.

    “When planning for retirement, you need to tick as many boxes as you can. Allianz Malaysia through our life and general insurance business offer the best of both worlds, and have crafted a complete suite of solutions to help Malaysians fully realised their retirement dream with no worries,“ he added.

    For a Total Retirement Plan, that ticks every box, Allianz Malaysia recommends having sufficient protection such as critical illness coverage and medical coverage to safeguard yourself from events which may deplete your retirement funds and lead to financial catastrophe.

    For example, our medical plan HealthInsured offers the most comprehensive medical coverage and comes with an option which many are not aware of. Customers can opt for a suitable deductible level to save insurance costs while being covered by an employer and remove the deductible upon retirement when there is no more employee benefit.

    Besides that, an individual that has a significant other and/or has children should also consider a robust protection plan that protects the family like Allianz PrimeCover with high death benefit coverage or leaving a legacy with certainty to the loved ones with our Allianz Legacy Plus.

    Malaysians should also consider having Personal Accident plans like Allianz Shield Plus to safeguard themselves in the event of injuries, disability or death, with Cashless Hopsital Admission and Discharge Benefit to further optimise their retirement protection.

    In addition, Allianz Malaysia will also provide additional support to its customers through the Allianz We Care Community.

    Via the We Care initiative, the Company collaborates with several partners from different sectors such as home care, pharmaceutical, and home medical devices among others, in offering our customers the complete retirement support they will need.

    For more details on our ‘Be A-Z ready for tomorrow’ campaign, or realising your retirement dream, please visit allianz.com.my

    About Allianz in Malaysia

    The investment holding company, Allianz Malaysia Berhad, a subsidiary of Allianz SE, has two insurance subsidiaries – Allianz General Insurance Company (Malaysia) Berhad (“Allianz General”) and Allianz Life Insurance Malaysia Berhad (“Allianz Life”). Allianz General is one of the leading general insurers in Malaysia and has a broad spectrum of services in personal lines, small to medium enterprise business and large industrial risks. The GWP for general insurance business for financial year 2022 reached a mark of RM2.66 billion. Allianz Life offers a comprehensive range of life and health insurance and investment-linked products and for the financial year 2022, Allianz Life recorded a GWP of RM3.37 billion and is one of the fastest growing life insurers in Malaysia. Allianz Malaysia has 32 branches nationwide. In 2021, Allianz Malaysia won The Edge Billion Ringgit Club (BRC) Financial Services (below RM10 billion market capitalisation) award for the highest growth in profit after tax (PBT) over three years. The Company also bagged the Malaysia International Business Awards 2021 (Life Insurance category) and three awards at the Global Banking & Finance Awards: Insurance Brand of the Year Malaysia 2021; Best General Insurance Product Malaysia 2021; and Best Insurance Social Media Engagement Malaysia 2021.

    To learn more about Allianz Malaysia, visit allianz.com.my 

    Facebook: facebook.com/AllianzMalaysia/ | Instagram: instagram.com/allianzmalaysia/

    LinkedIn: linkedin.com/company/allianzmalaysia/

    About Allianz

    The Allianz Group is one of the world’s leading insurers and asset managers with more than 122 million* private and corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life, and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 683 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.6 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2022, over 159,000 employees achieved total revenues of 152.7 billion euros and an operating profit of 14.2 billion euros for the group.

    *Including non-consolidated entities with Allianz customers.

    ** As of December 31, 2022

  • Financial Planning Firms Clone Scams

    Financial Planning Firms Clone Scams

    The public is advised to be wary of dubious investment schemes that use the name of legitimate financial planning firms. Please check the Securities Commission Malaysia website for the latest Alert List.

    The current modus operandi of the scammers are:

    1. Use financial planning companies key names on bogus companies to confuse the public,
    2. Add members of the public to social media chat groups while pretending to be represent legitimate financial planning firms,
    3. Offer dubious investment schemes that promise high returns,
    4. Post bogus investor testimonials to show proof of transfer receipts and making profits to gain the confidence of potential victims.

    It has also come to the attention of the Financial Planning Association of Malaysia (FPAM) that nine financial planning firms who are FPAM’s Corporate Members had their names cloned to promote illegal schemes. Their actual names are:

    1. Wealth Vantage Advisory Sdn. Bhd. (eCMSL/A0349/2018)
    2. Genexus Advisory Sdn. Bhd. (eCMSL/A0338/2017)
    3. Excellentte Consultancy Sdn. Bhd. (eCMSL/A0320/2013)
    4. Alpine Advisory Sdn. Bhd. (eCMSL/A0362/2020)
    5. UOB Kay Hian Securities (M) Sdn Bhd (eCMSL/A0018/2007)
    6. CC Advisory Sdn. Bhd. (eCMSL/A0342/2017)
    7. Harveston Wealth Management Sdn Bhd (CMSL/A0275/2010)
    8. iFast Capital Sdn. Bhd. (eCMSL/A0229/2008)
    9. Kenanga Investors Berhad (eCMSL/A0227/2008)

    To protect yourselves from being scammed, please do the following before making any payments or investments:

    Anyone who have fallen victim to these scams should do the following:

    1. Immediately report to the National Scam Response Centre’s (NSRC) by calling their hotline 997
    2. Report to Securities Commission Malaysia (SC)

    This article is brought to you by Financial Planning Association Of Malaysia (FPAM).

    FPAM is a non-profit organization with a vision and mission to establish the global CFP CERT TM mark as the leading symbol of excellence for personal financial planning and to promote its recognition as a profession to benefit all Malaysians. We also strive to promote Financial Literacy across the breath of the population of Malaysia.

  • Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about how to convert highly illiquid assets to more liquid and easily realisable.

    Bob and Leonard were the best of buddies. They did everything together in school and through university, including courting the same girl until she decided on Leonard, whereupon Bob graciously withdrew.

    After graduation, Bob worked as a lawyer while Leonard became an engineer. After several years, Bob made a name for himself in law practice, while Leonard decided to leave his job and strike out as an entrepreneur.

    With some inheritance capital and savings, Leonard bought a small but profitable boutique hotel in Kuala Lumpur. At the same time, he embarked on some small development projects building shophouses, small industrial lots and housing schemes in the Klang Valley.

    Five years later, he had the opportunity to purchase a piece of land to build a 200-room resort hotel in Penang, and as this needed a substantial amount of money, he approached Bob to help arrange to finance. Bob recognised the project’s viability and managed to help him secure financing, as well as personally putting up 40% of the capital required by Leonard.

    The hotel was completed and began making money consistently. The company that developed the hotel soon embarked on the construction of an adjoining tower of 150 apartment suites, which units were slowly released for sale.

    No dividends were paid as profits generated from the hotel were ploughed back into the company to finance the apartment tower. Sales of the units had been strong, reaching 70% until the pandemic hit.

    By this time, Bob was in his 50’s and thinking of retirement. During the pandemic, he started thinking a lot about succession. What if he passed on suddenly? How would his family access his assets?

    Read: How A Buy-Sell Agreement Can Help Business Partners In The Future

    Estate Planning Is Crucial: Learn How To Convert Highly Illiquid Assets To More Liquid

    He reached out to me and got an estate plan worked out for when he was not around – some assets to be distributed through his will while some substantial ones were put into a living trust to be distributed in stages to avoid overspending by the beneficiaries. We didn’t discuss yet on the topic of how to convert highly illiquid assets to more liquid.

    But what niggled him was the 40% stake he had in Leonard’s company. His family was unfamiliar with Leonard or his business. Bob realised that after his demise, the close relationship, trust and understanding between the two shareholders would be gone. Which was like saying the two shareholders would be strangers to each other.

    He was worried that his stake, which was now substantial in value, may become worthless after his death in that his family, as minority shareholders, would not be able to influence dividend pay-out, if any, and the company’s direction. And no one other than Leonard would buy a 40% stake at a fair price.

    He felt it would be difficult to impose on Leonard to buy his stake at a time when he needed to fund his business expansion. Hence he felt the need to convert highly illiquid assets to more liquid.

    Read: Money Caused Breakup Among Four Close Friends, That’s Why it Is Important To Plan For The Succession Of A Business

    Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    He talked to me about his dilemma and wondered whether I had a solution. I inquired about the details of the company assets and realised that his solution lay on how to convert highly illiquid assets to more liquid.

    So, I suggested that he propose to Leonard to swap his shareholding with unsold units that Leonard held. He gave a bit of a stunned reaction and said: “I should have thought of that.” And we both worked out what we thought was a fair exchange ratio, using cost instead of profit element (avoiding the need to revalue the hotel and apartment suites).

    We then brought the idea to Leonard, who liked the idea of being free from pesky shareholders if Bob was no longer around, and at the same time, getting rid of unsold stocks. A buy-sell with a trust was set up with our trust company based on the transaction carried out according to the agreed exchange ratio upon Bob’s death or mental incapacity.

    As it turned out, the solution worked after Bob had multiple strokes last year and had to be taken care of by his family, using proceeds from the sale of the apartment suites. Sometimes, I think the best solution is the simplest one.

    In this case, it is about how to convert highly illiquid assets to more liquid and easily realisable.

    Read: Hard Facts About The Executor Of A Will In Malaysia

    About Rockwills International Group

    Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and holds more than RM25 billion in assets under trust.

  • Oyen Pet Insurance: Not Just Another Insurtech

    If you were to ask a random person on the street if they own a pet and a personal insurance policy, there is a decent chance of the answer being yes. However, if you were to ask if they have pet insurance, the chance of an affirmative response is very likely to be low.

    Although many Malaysians still do not have any form of insurance, the average family is still likely to be covered with a medical or life insurance policy. But when it comes to insurance for pets such as cats and dogs, that is a whole other matter.

    Kevin Hoong Michelle Chin Oyen
    Oyen co-founders (l-r): Kevin Hoong, Michelle Chin

    This is where Oyen  comes into the market, with the company aiming to carve up a niche for themselves in the insurance sector. While the pandemic may have wreaked havoc on the economy, if it was not for this black swan event, the insurtech firm may never even have come to life.

    Michelle Chin, the co-founder of Oyen, recalls seeing almost everyone in her social circle introducing a pet into their lives as a result of the pandemic.

    “One of our friends adopted a second cat, and the cat was found to be suffering from liver disease and she spent a lot of money on treatments,” recalls Chin.

    This resulted in the other co-founder of Oyen, Kevin Hoong, wondering why there was a lack of pet insurance as a product. With a family background in insurance spanning 40 years, he was certainly well-placed to gauge the feasibility of spearheading the growth of a niche vertical.

    “We found out that there was one insurance company offering it in Malaysia – MSIG,” she remembers.

    “We then indicated our interest to launch a unique product offering with a niche focus on pet health, and the rest was history!”

    As for their friend’s cat, Chin shares that she has made a full recovery and is now insured with Oyen!

    How it works

    Claiming to be the “best pet insurance in Malaysia”, Oyen certainly works to live up to that tagline. It pays up to RM8,000 towards the cost of pet veterinary bills, which includes consultation, diagnosis, and treatment at the clinic and hospital.

    The more premium coverage plans also covers third-party injury; that is when your pet causes damage to the property of others or even other pets! This will include any legal fees, compensation and related medical costs up to RM30,000 for cats and RM50,000 for dogs.

    In addition, even the funeral expenses for your pet are covered under the premium coverage, which includes the burial plot and columbarium.

    Oyen is also transparent about what its pet insurance plan does not cover, listing all of these restrictions on its landing page; this includes aids and prosthetics, congenital conditions and surgical implants to name just three.

    Like many other insurtechs, it also strives to use simple language to convey the extent of coverage that your pet will receive. Such simplicity is at the heart of Oyen, which like all insurtechs, ultimately aims to simplify the process of purchasing insurance coverage, even for a segment like pets.

    Market challenges

    Running an insurtech company is never a walk in the park, let alone in such a niche like pet insurance, and with it comes a specific set of challenges.

    According to Chin, the biggest obstacle that Oyen faces is the lack of insurance knowledge in Malaysia. This often results in the company having to deal with and educate customers that cannot make head or tail of the insurance or claims processes.

    “We were surprised that 80% – 90% of those who enquire with us, have very limited knowledge of how insurance works,” she shares.

    “For example, we have had a lot of people who ask if they can claim for a vet bill that happened yesterday. Or they may be at the vet right now and they would like us to reimburse the cost!”

    She adds that customers also often ask about covering preventive and routine treatments, the responsibility of which lies with pet owners themselves.

    “Once people understand how the industry works, it is rather straightforward for them to consider getting their pets insured,” says Chin.

    Although the concept of pet insurance is still fairly new and relatively unknown to the wider public, it is not a new product in Malaysia, having been in the market since 2010. Chin says this is proof that insurance companies have already established that the market is big enough for them to introduce such a product.

    “We determined that there is a fast-growing demand segment through a few avenues,” she explains, adding that the pet care market in Asia-Pacific is growing, and is projected to continue growing at a compound annual growth rate (CAGR) of about 10% until 2028.

    “Pet humanisation has been rampant – people no longer treat their pets as pets, but as a family member, and even children.”

    This means that the way that people care for their pets is more extensive than ever before, with many now receiving home-cooked diets or even food prescribed specifically by pet nutritionists. Such pets also receive better healthcare treatments in general which could include pet hydrotherapy, physiotherapy and acupuncture to name a few. Some even go to the extent of conducting DNA tests on their pets to ensure proper lineage!

    “As the cost of pet healthcare increases, due to higher demand for better services and more advanced equipment, the need for pet insurance will increase as well,” predicts Chin.

    As for their future expansion plans, Oyen aims to provide “a holistic ecosystem in pet healthcare”. This means that any growth will be within the confines of the pet healthcare system first and foremost, instead of branching out to other insurance verticals.

    “If there are opportunities that arise from our pet healthcare focus, we will be happy to explore them.”

    When asked about what the long-term game is for Oyen, Chin is very clear as to what her ultimate goal is.

    “Becoming the pet healthcare super app in Asia Pacific!” she says unequivocally.

    Industry thoughts

    As part of the insurtech industry, Chin is certainly building something special in Oyen. However, she believes that there are still some industry blind spots that often get overlooked.

    “There is too much focus on the sexy parts of technology and digitalisation, and not enough on building empathy and simplicity into the user experience,” she notes.

    Her deft observation is that the space is awash with technological innovation, so that is not a weak point that needs to be addressed. However, many insurtechs end up chasing new breakthroughs and often ignore the human element that is required to quickly grow a loyal customer base. Rather than cutting-edge features, ease of use should be prioritised.

    “We need to identify how these technologies or innovations help improve the experience for customers both from a registration and quote journey, as well as claims,” she adds.

    With its customer-first approach, it will be of no surprise to anyone if Oyen continues on its current growth trajectory!

    By Caleb Khew

    A version of this story was published in Smart Investor March/April 2022; issue 372.

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