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Financial Stability Begins With Financial Literacy And Planning

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Each year in October, the global financial planning profession comes together to help raise awareness of financial literacy, the importance of having a financial plan, and working with a trusted financial planner to formulate plans towards one’s long and short-term financial goals for financial stability.

Smart Investor takes a look at the current state of financial literacy in Malaysia, how the past two pandemic-fueled years have impacted Malaysians, and why a financial planner is an invaluable ally in working towards your financial goals.

Tough Times Called For Financial Stability

Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC)

“The recent pandemic drove home the fact that financial planning and literacy are essentials, not options. This came about as many people lost their income unexpectedly and matters were made worse for those who did not have a comprehensive financial plan. Unfortunately, financial literacy is very low among Malaysians,” says Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC).

Furthermore, Kwo reveals that, “Various studies, including the Capital Market Development Fund (CMDF) report on Financial Literacy and Utilisation of Financial Advisory Services in Malaysia, reveal that Malaysians generally have a worrying low financial capability, do not know how to manage their money, and do not plan ahead. This does not bode well for their financial sustainability, making them prone to falling into the bankruptcy trap, and becoming prey to loan sharks and get-rich-quick scams. The problems arising from the low level of financial literacy have been magnified by the recent pandemic, which greatly affected the financial well-being of many Malaysians.”

As the body representing financial planning and service providers, MFPC’s objectives – along with developing and enhancing the financial planning
profession in the country – include elevating financial literacy among Malaysians with various initiatives for the public at no cost.

One of the initiatives of note to promote financial planning and literacy, observed globally on 6 October each year, is World Financial Planning Day (WFPD). This year’s theme, ‘Live Your Today, Plan Your Tomorrow’, is very relevant to Malaysians as we continue to face various challenges requiring better financial literacy and planning for a better financial stability.

Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM)

“As we live with post-COVID challenges, many are now faced with uncertainties as they might have drained their EPF savings, facing difficulty in servicing their loans again after the end of the moratoriums, dealing with rising healthcare costs, and overall inflation causing cost of living to rise. Adjustments must be made to our current personal finances to adapt to these challenges for us to achieve our future goals,” explains Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM).

As an affiliate of the Financial Planning Standards Board (FPSB), the global organizer of WFPD, FPAM has rallied its stakeholders and financial planners to take part in this year’s WFPD2022 to promote financial literacy and the financial planning industry.

Licensed Financial Planners Are Here To Help

In the forest of questions about money, a licensed financial planner is an invaluable guide in finding the best path for your life’s journey. No one
path is alike, and a financial planner will be able to chart the best roadmap for each individual as they aim for financial stability.

“Malaysians are dealing with many pressing issues related to inflation that may derail their life goals. Plans for retirement or their child’s education
fund may not seem feasible anymore. Will they have to push back their retirement age by working longer? Will their child still be able to afford tertiary education overseas? These are pertinent questions that one should sit down with a financial planner to hash out a plan together,” says Ooi.

He further adds that, “Financial literacy is a life skill that if not picked up early on, may result in personal finance mistakes that may have lifelong repercussions. The earlier one engages a financial planner in their life, the better, as they will have a proper financial road map of where they are headed in life. With a proper financial plan, one is much more prepared in facing the variables and uncertainties of the future as opposed to someone stumbling along, making knee-jerk reactions to major changes in their life. Should they encounter adversity, the financial planner will be there to guide them through the storm.”

Kwo concurs, saying, “A licensed financial planner can help one establish a personal financial plan, set measurable goals to work towards, track progress, reduce doubt and make better financial decisions. This will help one manage cash flow and debt efficiently. Planning can be tailored to suit every personality type and meet different needs, at different times of one’s life stages. A licensed financial planner can provide the necessary advice on changes and adjustments to support one’s lifestyle, resulting in peace of mind and general wellbeing.”

If one is looking to engage a financial planner soon, make sure that the financial planner is licensed under Securities Commissions Malaysia (SC)
to practice as a Licensed Financial Planner (LFP). This can easily be done by going to SC’s website (https://easy.seccom.com.my:8222) and searching for the full name of the LFP under Licensed and Registered Persons.

The result should show their license number and the name of their financial planning firm. As for the other qualities in a financial planner, Kwo suggests the following should be considered: trustworthiness, ability to provide evidence of a good track record of success, ability to provide independent advice, compatibility with the client, the ability to provide up-to-date information, and the ability to refer to other specialists if required.

“In short, one should look for professionalism in a financial planner,” he concludes.

It won’t be easy to achieve financial stability, but it is also not impossible to do so.

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