The pandemic has exposed many individuals and organisations when it comes to their financial resiliencies. COVID-19 has also brought about market turmoil and a global recession and wiped out billions of dollars from financial markets. From large organisations to start-ups and business personalities, many have succumbed to the fact that acquiring revenues and profits alone aren’t enough to be sustainable long-term. Lack of money or wealth management has proven to be risky too. I asked Ikhwan Hafiz of Ikhwan Group Consulting to talk more about this.
Hello Ikhwan. Since last year, the World Bank has given a series of warnings about 2023 and the potential financial challenges tagging along with it. Who should be scared the most here in your opinion?
Hi Azleen. First, thank you for inviting me here. The one that should be scared the most is the one who is less prepared to go into 2023. Specifically in terms of Finances. According to the IMF forecast, 1/3 of the world is going into recession. Particularly US, EU and China. Whereas those who are not going to experience a recession may feel like it is a recession. Due to the economic slowdown. Perhaps by 50% to 2022 performance.
The US due to its stock market plunging. Then causes most companies to retrench workers and freeze recruitment. For instance, Meta.
For EU, they are exposed to the high commodity price. This is due to the fact that they heavily rely on gas feedstock from Russia through the Nord Stream pipeline. The gas is used to generate the EU’s economy. As Russia is currently still in a war, this higher commodity price certainly will affect inflation and therefore increase Interest Rate.
China, they are facing with property bubble at this point in time. The Chinese government intends to control this from affecting the Chinese economy by relaxing its 3 red lines. Particularly overleveraging part by the property developer.
There’s a say out there that there are many people who know how to acquire money, income and revenue for themselves and for the company. Yet not many truly understand how best to manage that wealth. What do you think of this statement?
Yeah. I tend to agree with you. If you look at the survey done by OECD and consolidated by BNM, it shows that most Malaysians are lacking in terms of financial numeracy. This is the most critical part of understanding one’s financial health. For instance, Time, Value of Money. 64% of Malaysians are not familiar with this.
Secondly, most Malaysians did not allocate their asset properly. Many of us love to lump everything into one place. Which is too concentrated and not good from a Financial Planning standpoint. For instance, ASB for investment or perhaps Tabung Haji. That it.
We are also lacking very much in terms of products in the market. For investment, we do have Unit Trust, ETF, P2P, Equity Crowdfunding and the stock market. We only resort to ASB and TH. This is what Financial Planners call, diversification of your asset allocation.
From your observation, what do you see happening in the current personal finance and investment trends in Malaysia right now and 5 years down the road?
The Securities Commission or SC and Bank Negara Malaysia or BNM have played a tremendous amount of initiative to encourage Malaysians in terms of Personal Finance. For instance, in 2017, BNM already raised a flag to notify the public about investing in Takaful. In 2023, we still can see a majority of Malaysians still investing in Takaful! This is certainly not right.
Secondly, SC is trying its best to introduce Financial Planner in the market for mass usage. This is an ongoing effort between SC and related Financial Planning NGOs like FPAM and MFPC. This is what Malaysia and Malaysians really need. Increasing Malaysians’ financial literacy ultimately will expand Malaysia’s market size.
To answer your question, in 5 years times, I think slowly Malaysians will start to engage with Financial Planner to plan for their future. As different people have different circumstances. Therefore, a tailor-made financial plan is necessary.
What about Asia?
Financial planning issue is not only happening in Malaysia. It’s a global issue. Even developed nation is facing the same issue. They need a third party to advise them properly with regard to Finances. As it involves Behavioural Finance. Have you watched Madoff’s The Monster of Wall Street? Even the millionaire falls for the Ponzi scheme!
Ikhwan, being a Certified Financial Planner and licensed by the Securities Commission of Malaysia, how are you making the market understand what you’re offering versus those so many non-licensed financial ‘advisors’ out there, is different?
What made us different from them is that we are client-centric. We did not push for the product. The product comes on the last part if any. We concentrate more on service. Getting to know the client’s financial cash flow, assets, liabilities, net worth, ratios etc. This is not being provided to the public by the non-licensed advisors or better known as Consultants.
In fact, due to the scarcity of Financial Planners in the market, which is currently around 1,420 personnel, the public did not know where to find a professional who is able to guide them with finances. Therefore, we need more Financial Planner in the market right now.
We noticed nowadays, there are firms offering robo-advisory too, and certain financial services are being run by AI or bots. What’s your take on this?
This is interesting. If you look at the diagram that I shared earlier on, the robo-advisor come earlier than us. The hero always comes next right? So in the end we will come out to rescue the heroin. Joke aside, this was also echoed by PNB Strategic Planning in their 2021 Annual Report.
For AI, I’ve tried ChatGPT, it is also advised you look for a Financial Planner to plan for your Financial Planning. As there are lots of variables to take care of. Then different people require different treatment. Human touch is still needed at this point in time.
Let’s talk about Ikhwan Group Consulting. What is it all about, can you share more about it?
Ikhwan Group Consulting is a one-stop centre for individuals, start-ups and SMEs to plan for their finances. We are licensed individuals to look after their finances. We do not sell products, instead, we are on the side of our clients. We help them understand all things financial-related matters so that they can make informed decisions related to their money. Our range of services includes cashflow & net worth analysis, tax planning & zakat planning, risk management planning, asset allocation planning, retirement planning, education planning, estate planning, business planning, equity advisory and valuation, debt consolidation and financing.
What would be your top 3 pieces of advice on wealth management to the high-net-worth individuals out there?
High Net Worth Individuals or HNWIs are the one that needs the most attention than they can imagine. Just look at Jamaludin Jarjis’s estate issue in court. This is a classic example of poor Financial Planning. Specifically on Estate Planning. No succession plan for the asset. This will lead to a fracas between family members. It has been in court for 5 years now. It is a long battle here. Perhaps the government may lose quite a considerable amount of tax revenue from Jamaludin Jarjis’s estate alone. As the assets are worth billion in Ringgit! My message is very clear to any of them (HNWI). Basically, the richer you are, the more important you need to plan for your asset. You need to do it ASAP. As you did not know what is going to happen you next day.
Create your own timeline. How long do you want to work? From here, you may know your retirement numbers already. Contribute more to the nation through Financial Planning. Perhaps by your planning, you may put some food on the table for the less fortunate group.
Any parting words?
Plan your life diligently. By planning, you may live your life worry-free. I am serious about this. As I’ve seen most of the security guards who look after our place are mostly middle-aged people. I do not want this to happen to me. I wanted to play with my grandchild in my 60s. I no longer have a burning desire by that time to look for money. I just want to enjoy my life and live a stress-free life.
How to reach you Ikhwan?
I can be contacted across so many platforms. Just look out for ‘Ikhwan Financial Planner’ on any social media. Particularly on LinkedIn, Facebook, Twitter or YouTube. You can also write me an email to discuss further your own financial planning. Again, no product selling. It’s informative based. Talk soon.
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