Study: One third of Malaysians have more debt than assets

KUALA LUMPUR – Malaysian Financial Planning Council (MFPC) has released their longitudinal study report with the Capital Market Development Fund (CMDF). The Financial Capability and Utilization of Financial Advisory Services in Malaysia study was conducted in partnership with academic and industry professionals, and the Council hopes it will serve as a stepping stone to further enhance literacy in financial education and capital market investment in Malaysia.

The main objectives are still primarily to investigate the general financial literacy and financial capability of Malaysians; to determine Malaysians’ literacy of the capital market; and to understand Malaysians’ preferences with regards to financial planning advisory services. The academic industry partnership allowed for the best rigour and high quality methodology to be used in the process of the study.

In the initial survey in 2018, they gathered a wide section of the population in Malaysia and the respondents was separated into several targeted categories which are public sector employees, SME/private sector employees/general public; FELDA/rural area residents and also youths in institutions of higher learning.

In this 2020 findings, they have included repeat respondents who had responded in the 2018 survey to analyse if they have improvements in their financial capability and understanding of financial advisory services since they first participated.

This research revealed the following:

1) One third of Malaysians have more debt than assets.

2) On perception towards financial planners, financial plans and companies; 44% of the respondents concluded that the financial plan is the most important factor when selecting a financial planner while 33% value the professionalism of the financial planner; and 30% trust the reputation of the firm.

3) When it comes to choosing a financial planning company, 45% of the respondents trusted the advice of people they know in the financial industry; 27% relied on the media; 22% had faith in the recommendations of their family and friends; and 7% listened to colleagues.

4) On people’s selection of financial plan and products; 54% responded that it must satisfy and suit their needs; 27% preferred capital guaranteed; 15% suggested return on investment is acceptable; 13% said risk level is acceptable; then followed by 12% informed fees and commissions are reasonable.

5) The preferred quality in a financial planner – the top four quality measures are firstly, trustworthy (62%); secondly, proven good track record (18%); thirdly; compatible (easy interact) (18%) and fourthly, can provide independent advice (17%).

6) With regard to financial planner’s recognition in the market place; persons considered to be financial planner are AKPK Counsellor (39%); Unit Trust Consultant (29%); Independent Financial Adviser (24%); Insurance Adviser (23%); Wealth Manager (22%).

University Putra Malaysia’s Deputy Dean of Human Ecology Faculty Prof Dr Mohamad Fazli Sabri, who was the research head remarked that “this study highlighted a fair amount of concerns such as Malaysians not saving at all and the admission of a large number of respondents stating that their income is not sufficient.”

While this is alarming, this is a call to action for the industry to find ways to help Malaysians to make better financial decisions.

President of MFPC, Vincent Kwo Shih Kang hopes this study could aid policymakers to understand current scenario and study the trend over some years so as to be able to design and implement relevant policies to serve the needs of the market.

“The findings will benefit all Malaysians considering that financial literacy equips us with the knowledge and skills we need to manage money effectively,” he added. He is confident that poor financial choices can be prevented if people understand how money related frameworks work.