MANY people yearn for financial freedom but at times, they fall short of their goal or get derailed, either due to overspending, not investing wisely, neglecting their health or failing to prepare for a major crisis.
A case in point — a company may be performing well but a flash flood could cause it to incur big losses simply because it had not taken flood damage insurance coverage.
This is where a financial adviser (FA) plays a crucial role. Not just any financial consultant, insurance agent, unit trust agent or financial planner, but a Financial Adviser Representative (FAR) licensed by Bank Negara Malaysia.
One can easily check if a FAR is licensed by going to the Bank Negara or Securities Commission (SC) websites.
Some people buy insurance to show their support for friends or family members who may be agents. But as they represent a particular insurance company, they may promote only the products of the company they represent. And when said agent leaves the company, his clients become "orphan" policyholders.
Alfred Sek, president of the Association of Financial Advisers (AFA), said there were 80,000 life insurance agents nationwide but only about 1,300 were FARs.
"The turnover of insurance agents is high. A client's policy and portfolio need to be reviewed annually. The commission for agents is paid for six years, while a client's policy can be whole life. The client, thus, needs a lifetime of financial advice and services.
"A FA will ask to see all your policies to ensure you have no overlapping policies or recommend others that will better meet your needs. This is done after considering the client's income level when coming up with the quotations.
"FAs are in a 'Blue Ocean' industry. The market for independent and approved FAs is huge. Clients need trusted FAs to give them advice, not someone who only sells them a policy. A FA also tracks fund performance to ensure their clients can minimise their risks."
As for the growth potential of the FA industry, Sek provided a comparison with Singapore. The island republic has 62 financial planning firms with about 5,000 representatives who serve the 3.7 million working population. These firms have captured 26 per cent of the life insurance market share there.
However, in Malaysia to date, there are only 37 FA firms with about 1,300 FARs serving a 15 million working population.
If Singapore needed 5,000 FARs to serve its 3.7 million working population, and using the same ratio, Malaysia should need 20,000 FARs to serve the 15 million (and growing) working population.
Clearly, the financial planning industry's growth potential and career opportunities are huge.
In the early days, there was only the Life Insurance Association of Malaysia and the General Insurance Association of Malaysia. In 2010, Sek lobbied for the setting-up of the AFA to represent FAs and financial planners approved by Bank Negara and the SC.
Two years later, the AFA was born as the umbrella body representing licensed FAs and the industry. At first, it comprised only 10 members. Today, it has 36.
"Bank Negara will not talk with individual firms but will talk with an approved association. So, we approached Bank Negara to have all the insurance companies make their products available to AFA members. It was a breakthrough when Bank Negara supported our proposal and put it in the concept paper.
"FAs must provide at least three life insurance policy quotes for comparison so that the client can make an informed decision. Such a blueprint was already popular in the United States, Europe and Singapore before Bank Negara introduced it in 2005.
"FAs manage people's hard-earned money; therefore, they must be qualified and regulated with strict compliance guidelines.
"In the past, people put their money in property, fixed deposits and gold, and these pretty much summed up a person's investment. Insurance has evolved over the years, and we now have more sophisticated products in the market," he said.
Sek enrolled in an insurance professional course in 1983 with the Australian Insurance Institute and completed the course in 1989. Subsequently, he pursued the Chartered Financial Consultant course at The American College and completed it in 1996.
In 1997, he set up Excellentte Consultancy Sdn Bhd and is its managing director.
Sek has four children, three of whom are working with him at Excellentte Consultancy. His wife, sister and two nephews are also in the industry.
To be a licensed FA, one has to be a graduate and need to complete three modules of the Certified Financial Planner or Registered Financial Planner programme.
The writer was a journalist with the New Straits Times before joining a Fortune Global 500 real estate company. This article is a collaboration between the New Straits Times and Tradeview, the author of 'Once Upon A Time In Bursa'