Planning: The Missing Word In Personal Finance By: Gunaseelan Kannan

“If you are planning only to make money and nothing else, you’ll be broke” – Haille Gebrselassie (Olympic Gold Medalist)

EVERY year on the first Wednesday in October, World Financial Planning Day is held to raise awareness on the importance of financial planning.

This day also offers an opportunity for financial planners or adviser experts around the world to educate consumers on how to prepare for their financial future.

Awareness especially in financial planning has never been so important as it is now during this pandemic. I think acquiring financial planning knowledge is a continuous process and it’s a lifelong journey as long as we are dealing with money.

Although many steps have been taken by the government and other non-profit organizations, planning is definitely the missing word in personal finance among Malaysians.

A financial plan acts as a guide as you go through life’s journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals in any situation.

Bearing this in mind, below are four important key points to look for before you develop a financial plan:

Financial product is not financial planning

For many of us, the financial plan may consist of an insurance product, unit trust, Robo advisor or stocks. Most people think once you have acquired a financial product, you have developed a financial plan.

Trust me, financial planning is not about acquiring a financial product; financial planning is a comprehensive mechanism for your wealth management and building. Financial planning is more than a number (income, expenses, assets, liabilities, tax, risk management and estate planning).

Financial planning is an aspiration, an endeavour and a motivation for an individual. A true financial plan usually shows authenticity of yourself, portrays your life values and finds your purpose. It’s important to remember that financial planning is a process and not a product.

Agents are not financial planners

Today, there are almost 250,000 agents from financial institutions, consisting of relationship managers, personal bankers, unit trust consultants, insurance agents and others.

As they are paid a commission, they benefit no matter what they suggest. Since they represent certain financial institutions, it will be difficult for them to provide unbiased advice. Sales targets, overseas trips and promotions will never build an ecosystem that emphasises financial planning.

No one to blame, it’s a structural problem in our financial service.

It will take some time for us to adapt to having a financial plan before acquiring a financial product. My suggestion to you as a consumer, stop purchasing products first and planning later; emphasise the plan first and product later. A financial plan should lead to financial products – not the other way around. 

Choosing the right financial planner is important

If you are keen on developing a financial plan, engage a licensed financial planner (by Securities Commission). Remember, financial planning and financial advisory services is a regulated service by the Securities Commission and Bank Negara Malaysia.

Only financial planning companies and their representatives who are licensed by the Securities Commission are permitted to carry the title “Financial Planner” and offer financial planning services. While many people call themselves a financial planner or advisor, not all of them have the best interest to develop a financial plan. 

Fiduciary is the key to financial strategy

The fiduciary is the best word to hear when you are engaging a financial planner or advisor. A planner or advisor that upholds fiduciary seeks unbiased advice, is transparent and lives up to the trust placed in him or her.

Almost all fee-only model planners and advisors will uphold fiduciaries. Generally, they have chosen to work under a fee-only model to put the client’s interest first. Since their revenue is from the client, it’s in their best interest to make sure the client ends up with a financial plan.

Without a fiduciary element, it will be very difficult to develop a financial planning strategy.

In preparing for a battle, I always found that plans are useless, but planning is essential. Likewise, in battle, financial planning must often adapt to unexpected situations encountered on the ground.

But change, as it might, creating the plan, takes you through an invaluable process whereby you get involved in a meaningful journey. I hope the World Financial Planning Day will bring more awareness to the importance of the word planning in personal finance and every one of us will start planning our life journey.

Financial planning is a journey, not a destination!

Gunaseelan Kannan, CFP, a Financial Adviser Representative by Bank Negara Malaysia and a Licensed Financial Planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology.

He also lectures on accounting, finance and business fields at Asia Pacific University of Technology and Innovation (APU). He is the winner of the Malaysian Financial Planner of the Year 2020, from the Financial Planning Association of Malaysia. 

He can be reached at [email protected].

This article has been featured on The Borneo Post, you can check it out here – 
https://www.theborneopost.com/2021/10/23/planning-the-missing-word-in-personal-finance/