Vol 12, No 2 - Financial Planning Association of Malaysia

“Money worshipers areconvinced that moremoney will solve all oftheir problems, there willnever be enough money,and that money bringspower and happiness.”behaviours based on an assessmentof their money scripts. To further assistplanners in identifying problematicmoney scripts and behaviours amongtheir clients, we tested the associationamong respondents’ profession and theirfinancial psychological profile.Money scripts, a term coined by financialpsychologists Brad Klontz and TedKlontz (Kahler and Fox 2005), are corebeliefs about money that drive financialbehaviours.Money scripts are typically unconscious,developed in childhood, passed downfrom generation to generation withinfamilies and cultures, contextually bound,and often only partial truths (Klontz andKlontz 2009).When money scripts are developed inresponse to an emotionally charged,dramatic, or traumatic personal, family,or cultural financial flashpoint, suchas significant losses during the GreatDepression, parental abandonment, orfinancial bailouts by a family member,money scripts can become resistantto change, even when they are selfdestructive(Klontz and Klontz 2009).Recent research (Klontz et. al. 2011)has identified four categories of moneyscripts, three of which are associated withpoor financial health:1. Money Avoidance2. Money Worship3. Money Status4. Money Vigilance“Money avoiders believethat money is bad, richpeople are greedy, andthat they don’t deservemoney. “Money avoiders believe that money isbad, rich people are greedy, and that theydon’t deserve money. Money worshipersare convinced that more money willsolve all of their problems, there willnever be enough money, and that moneybrings power and happiness. Moneystatus scripts equate self-worth to networth and put a premium on buying thenewest and best things. All three of thesemoney script profiles are associated withpoorer financial health, including lowernet worth and lower income. In contrast,money vigilance scripts include themesof frugality, the importance of saving,being discreet about how much moneyone has or makes, and nervousness aboutmaking sure money is saved in case ofan emergency. As previously reportedin Klontz et. al. (2011), younger, nonmarriedindividuals with lower levels ofeducation, income, and net worth weremore likely to identify with the moneyavoidance scripts. This is nearly the samepattern for the money worship scripts,except that money worshipers are alsolikely to revolve credit from month tomonth. Individuals identifying withthe money status scripts tended to beyounger and non-married with lowerlevels of education, income, and a lowersocioeconomic status in childhood. Notcarrying credit card debt from month tomonth was positively associated withthe vigilance scripts. Gender was notsignificantly related to any of the moneyscript patterns identified.A second assessment tool developed bythe authors, the Klontz Money BehaviourInventory (KMBI), assesses disorderedmoney behaviours seen by financialplanners and mental health professionals,including:1. Compulsive buying:Irresistible urges to shop withnegative financial and emotionaloutcomes.2. Pathological gambling3. Compulsive hoarding:fear-basedexcessive accumulation of objects ormoney with negative psychologicaland / or health consequences.4. Workaholism:Excessive preoccupation withwork, accompanied by negativerelationship, emotional, and/orhealth consequences.5. Financial dependence:Relying on non-work income, withaccompanying resentment, fear, andamotivation.6. Financial enabling:financial “help”that hurts giver and/or recipient.7. Financial denial:Attempting to cope with moneyanxiety by rejecting/avoiding one’sfinancial reality.8. Financial enmeshment:Inappropriately involving minorchildren in adult financial matters.Research by Klontz et. al. (2012) foundthat compulsive buyers tend to have alower net worth, as might be expected.Compulsive buyers and those withfinancial denial tended to be younger,non-married females with lower levelsof education and income who grew upin wealthier households and currentlycarry credit card balances. Financialenablers tended to be younger, nonmarriedindividuals with lower levels ofeducation and lower net worth. The sameassociation was found for those withThe 4E Journal 5

Table 1:Correlation Matrix with Cronbach AlphasScale (items) a 1 2 3 4 5 6 7 8 A B C1. Compulsive Buying (11) 0.922. Path. Gambling (7)3. Comp. Hoarding (11)4. Workaholism (11)5. Fin. Dependence (5)6. Financial Enabling (6)7. Financial Denial (6)8. Financial Enmeshmens (3)A. Avoidance (15)B. Workship (11)C. Status (13)D. Vigilance (12)***p

the variance in financial enmeshmentwas explained by a positive associationwith money status scripts and a negativeassociation with money vigilance scripts.Predicting Money Scripts andFinancial Behaviours Based onProfession Based on existing literatureand the professional experience of theauthors, it was hypothesized that choice ofprofession can play a significant role in theprediction of money scripts and financialbehaviours. To test this hypothesis, amultiple analysis of variance (MANOVA)was conducted with the following groupsof professions: (1) financial advisers (n =45), (2) business professionals (n = 85), (3)mental health professionals, includingpsychologists, counselors, and socialworkers (n = 64), and (4) educators (n =50). All “other” professions (n = 178) werenot included in the analysis because of theincongruent distributions in comparisonto the identified categories.Results for money script differencesbased on occupation indicated thatmental health professionals (M = 43.06)score significantly higher on avoidancescripts compared to financial advisers(M = 38.42) (F = 2.81, p < 0.05), andbusiness professionals (M = 44.49) scoresignificantly higher on vigilance scriptscompared to financial advisers (M = 40.93)(F = 3.56, p < 0.05). While “money vigilance”includes scripts associated with savingand frugality, it also reflects a heightenedsense of anxiety and need to be secretivearound money. Financial advisers mayhave scored lower in “money vigilance”because they are less anxious andsecretive around money than the averagebusiness professional.The only statistically significant differencebased on profession for financialbehaviours was with financial denialbehaviours. Business professionals (M =7.05), mental health professionals (M =7.56), and educators (M = 7.26) all scoredsignificantly higher than financial advisers(M = 4.84) on financial denial behaviours(F = 7.34, p < 0.001). As such, financialadvisers are significantly less likely toavoid thinking about money, try toforget about their financial situation, andavoid looking at their bank statements.Our results show that financial advisersappear to have the healthiest relationshipwith money when compared to the otheroccupations studied, which is certainlygood news for the profession.Predicting Financial Infidelity Oneitem within the compulsive buyingbehaviour factor (“I hide my spendingfrom my partner/family”) has implicationsfor couples even if individuals did not scorehighly on the compulsive buying scale.Acts of financial deception, also known asfinancial infidelity, can have devastatingeffects on relationships (Klontz and Klontz2009). Therefore, a separate regression3(F = 25.32, p < 0.001, Adjusted R2 =0.59) was conducted to determine whatdemographic characteristics, moneyscripts, and financial behaviours predictmoney secrecy. Not surprising, the mostpredictive construct in relational moneysecrecy was compulsive buying disorder(b = 0.08, p < 0.001).Individuals who buycompulsively also hide their spendingfrom their significant others and families.When controlling for compulsive buyingbehaviour, the next most predictiveitem was respondent income, with thosewith lower levels of income being morelikely to hide their spending (b = –0.16,p < 0.001). Individuals identifying withfinancial enabling behaviours were alsomore likely to hide spending (b = 0.02, p

Money Worship At their core, moneyworshipers are convinced that the key tohappiness and the solution to all of theirproblems is to have more money. At thesame time, they believe that one cannever have enough money and they willnever really be able to afford the thingsthey want in life. The tension betweenbelieving that more money and things willmake one happier and the sense that onewill never have enough money can resultin chronic overspending in an attemptto buy happiness. Money worshipers aremore likely to have lower income, lowernet worth, and be trapped in a cycleof revolving credit card debt. Moneyworshipers are also more likely to spendcompulsively, hoard possessions, putwork ahead of their family relationships,try to ignore or forget about theirfinancial situation, give money to otherseven though they can’t afford it, and befinancially dependent on others.Money Status People who hold moneystatus scripts see net worth and self-worthas being synonymous. They may pretendto have more money than they do, andas a result are at risk of overspending, inan effort to give people the impressionthat they are financially successful. Theybelieve that if they live a virtuous life, theuniverse will take care of their financialneeds, and that people are only assuccessful as the amount of money theyearn. They have lower net worth, lowerincome, and tend to grow up in familieswith a lower socioeconomic status. Peoplewith money status beliefs are more likelyto be compulsive spenders, be dependenton others financially, and lie to theirspouses about their spending. Holdingthe money status scripts is also predictiveof pathological gambling, indicatingindividuals may gamble in an attempt towin large sums of money to prove theirworth to themselves and others.Money Vigilance The money vigilantare alert, watchful, and concerned abouttheir financial welfare. They believe itis important to save and for people towork for their money and not be givenfinancial handouts. If they can’t pay cashfor something, they won’t buy it, and theyare less likely to buy on credit. As a result,the money vigilant have higher incomeand higher net worth. They also have atendency to be anxious and secretiveabout their financial status with peopleoutside of those closest to them, but areless likely to lie to their spouse aboutspending behaviours. Money vigilanceappears to be a protective factor, in thatthe money vigilant are significantly lesslikely to spend compulsively, gambleexcessively, enable others financially,and ignore their finances. While such anapproach encourages saving and frugality,excessive wariness or anxiety could keepsomeone from enjoying the benefits andsense of security that money can provide.ConclusionMoney scripts typically operate outside ofconscious awareness, are often developedin childhood, and drive financialbehaviours (Klontz and Klontz 2009). Formany clients, developing an awareness oftheir automatic thoughts around money,and their origin, can be a profoundlytransformational experience. Bringingto conscious awareness and linking, forexample, money avoidant scripts suchas “rich people are greedy” and “peopleget rich by taking advantage of others”to the experiences and teachings ofa parent or grandparent can be quitefreeing. Recognising that this belief waspassed down through the family, has hada negative impact on the family’s financiallegacy, may have had a negative impacton the client’s income and net worth, anddoes not accurately depict a significantnumber of wealthy people, opens thedoor to helping the client create moreaccurate and functional money scripts.Clinical trials have shown that financialtherapy interventions aimed at identifyingand changing money script patternshave been associated with significantimprovements in financial health, moneyattitudes, and psychological distress,although more research in this area isneeded (Klontz et. al. 2008). Planners whoendorse a “life planning” approach mightfind tools such as the “Money Script Log”(Klontz 2011; Klontz, Kahler, and Klontz2008) or the “Healthy Money Mantra”(Klontz and Klontz 2009) useful in helpingclients recognize and rescript self-limitingmoney scripts.Sometimes, insight into money scriptpatterns and their potentially self-limitingor self-destructive effects may not beenough to change financial behaviours.This is often true when money scriptswere developed in response to anemotionally charged or traumatic eventor series of events. When money scriptsare locked in place by intense emotion,they can become very resistant to change,even when they are self-destructive, theclient has insight into their dysfunction,and the client is motivated to change(Klontz and Klontz 2009). When the clientknows better but can’t do better, repeatedattempts at change fail, and advising andcoaching are not successful in sustainingchange, a referral for financial therapymay be indicated.Being able to accurately diagnose thecognitive basis of a financial problem canhelp the therapist develop a treatmentplan and interventions. A financial plannercan use the Klontz Money Script Inventory(in the appendix) to help identifyclient money scripts; educate clientsregarding the impact of money scriptson financial behaviours and outcomes;and refer, collaborate, or consult with afinancial therapist to address underlyingpsychological issues associated with thebehaviour, such as addiction, a historyof trauma, family dynamics, anxiety, ordepression.The 4E Journal 9

Money AvoidanceMoney Worship Money Status Money VigilanceNumber1Points Number2Points Number3Points Number4Points5 6 7 89 10 11 1213 14 15 1617 18 19 2021 22 23 2425 26 27 2829 30 31 3233 34 35 3637 38 40 3942 43 44 4146 47 4548 495051TOTAL TOTAL TOTAL TOTALMoney Avoidance: Scores greater than 31 indicate the respondent may exhibit avoidance beliefs and warrants further inquiry.Money Worship: Scores greater than 23 indicate the responden: may exhibit avoidance workship beliefs and warrants further inquiry.Money Status: Scores greater than 27 indicate the respondent exhibits money status beliefs and warrants further inquiry.Money Vigilance: Scores greater than 25 indicate the respondent exhibits money vigilance beliefs and warrants further inquiry.(For futher interpretation, see Klontz, Bradley T, and Sonya L.Britt. 2012. “How Clients’ Money Scripts Predict Their Financial Behaviors”Journal of Financial Planning 25, 11.)References1. Beck, Judith. 1995. Cognitive Therapy: Basics and Beyond. New York: The Guilford Press.2. Dunleavey, M. P. 2010. “What Purchases Spouses Hide from Each Other.” CNN Money.3. Elmerick, Stephanie A., Catherine P. Montalto, and Jonathan J. Fox. 2002. “Use of Financial Planners by U.S. Households.” Financial ServicesReview 11: 217–231.4. Furnham, Adrian. 1984. “Many Sides of the Coin: The Psychology of Money Usage.” Personality and Individual Difference 5, 5: 501–509.5. Kahler, Rick, and Kathleen Fox. 2005. Conscious Finance: Uncover Your Hidden Beliefs and Transform the Role of Money in Your Life. Rapid City,South Dakota: FoxCraft Inc.6. Klontz, Brad. 2011. “Behaviour Modification: Clients May Need Your Help Discovering the Childhood Beliefs Affecting Their FinancialDecisions Today.” Financial Planning (April).7. Klontz, Brad, Alex Bivens, Joni Wada, Richard Kahler, and Paul T. Klontz. 2008. “The Treatment of Disordered Money Behaviours: Results of anOpen Clinical Trial.” Psychological Services 5, 3: 295–308.8. Klontz, Brad, Sonya L. Britt, Jennifer Mentzer, and Ted Klontz. 2011. “Money Beliefs and Financial Behaviours: Development of the KlontzMoney Script Inventory.” Journal of Financial Therapy 2, 1: 1–22.9. Klontz, Brad, Rick Kahler, and Ted Klontz. 2008. Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists. Cincinnati:The National Underwriter Company.10. Klontz, Brad, and Ted Klontz. 2009. Mind Over Money: Overcoming the Money Disorders That Threaten our Financial Health. New York: BroadwayBusiness.11. Tang, Thomas Li-Ping. 1992. “The Meaning of Money Revisited.” Journal of Organizational Behaviour 13, 2: 197–202.12. Trachtman, Richard. 1999. “The Money Taboo: Its Effects in Everyday Life and in the Practice of Psychotherapy.” Clinical Social Work Journal27, 3: 275–288.13. Yamauchi, Kent T., and Donald J. Templer. 1982. “The Development of a Money Attitude Scale.” Journal of Personality Assessment 46, 5: 522–528.Reprinted with permission from the November 2012 issue of the Journal of Financial Planning.The 4E Journal 11

INDUSTRYJuly - December 2012The Key to the ProfessionBy Rick Adkins, CFP®, ChFC, CLULet’s say that you’ve noticed a tenderspot on your neck that has gottena bit larger and more sensitive overthe past few weeks. It has concernedyou enough that you’ve scheduled anappointment with a doctor to get itevaluated. The doctor listens to yourconcern and, to your surprise, responds: “Ijust read an article in Men’s Health aboutpeople who have had similar conditions.Most of the time it’s just an infection thatwill clear up. Here’s a prescription for anantibiotic that should take care of it. Youcan pay on your way out.”Even though that wasn’t the responseyou expected, you take the antibiotic, butdon’t seem to be better after a few weeks.This time you go to a doctor who has beenroutinely calling you for the past few yearsand taking you to lunch on your birthday.The doctor briefly listens to your concernsand responds: “Most of my patientsactually die of heart disease. In fact,actuarially, 63 percent of men your agedevelop heart disease and 100 percent die.So, here’s a contract with my company’sFederal Arrhythmic Restoration Clinic(FARC), which will cover you for life. Juststop at the bank draft window down thehall and they’ll get you covered.”Over the next few weeks your heart rategets lower and you experience a muchneeded weight loss, but your neck getsworse. A friend at work heard about adoctor who uses the newest, innovative,cutting-edge (NICE) treatment options.This doctor listens to your concerns andsays: “I’ve been working on a proprietarytreatment protocol over the past fewmonths that incorporates the latest innew-age, alternative care. Here’s a poulticethat you should put on your neck twice aday. You can pay for it on your way out.”After a week of using the poultice theskin on your neck is breaking out andthe tenderness has only gotten worse.Based on the commercials you’ve seen onTV, you go to a doctor at a clinic ownedby one of the large, well-known drugcompanies. Once you get in to see thedoctor, she listens to your concerns andsays: “Our company has developed a drugto treat precisely what you seem to have.I’m not going to charge you for my time,just stop at our drugstore window downthe hall. It’s the only place where this new,proprietary drug is available.”You never have a chance to finish theentire bottle of this new proprietary drugbecause before you can do so, you die ofthyroid cancer. Whose fault was it? Whichdoctor was to blame? When the FederalDoctor Oversight Commission (FDOC)reviews their work, which doctor shouldbe punished for your death?Fortunately, that’s not how things work inmedicine. Hopefully, any medical doctorwho sees you would take your medicalhistory, perform an examination, run tests,and refer you to a specialist, if appropriate.Most importantly, they would followa systematic process that would likelyresult in a diagnosis of thyroid cancer,not heart disease. While not all doctorswould prescribe the same treatment,they would try to follow a course ofaction that has been proven to generatethe optimal outcome for your condition.That’s because they’re in a profession;they apply a systematic body of theory(which they’ve spent years learning andpracticing) in the best interest of theirpatient.Practice StandardsSadly, the four scenarios above captureways in which it still does work for somepractitioners in financial services. It willcontinue to work this way as long asanecdotal, adviser-focused, newnessdriven,or conflicted methods areemployed. It will continue to work thisway to the extent that we persist in havinga transactional approach to regulation.The transactional model has been usedby insurance and securities regulators forover 70 years. It’s what we all know andlove. It’s objective. It’s based on rules thatcan be proven to have been followed, ornot. But financial planning is not merelya transaction; it is data gathering, it isanalysis, it is advice, it is experiencedjudgment, it is a professional relationship.Medicine is messy. That’s why regulationand legal recourse tends to focus on astandard of care. What standard of careshould have been applied? What processshould have been in place? Was thatprocess followed?Financial planning is messier. For financialplanning to ever actually be regulated, thefocus also will have to be on a standardof care and on process, not merelytransactions. Ironically, that was theoriginal intent almost 20 years ago whenFinancial Planning Practice Standardswere conceived. They took seven yearsto develop, but were then pretty much“put on the shelf.”All the anxiety thataccompanied their introduction wasunnecessary. The Practice Standards areall about process. They deal with keyissues of:1. Making sure you and your client areon the same page from the beginning2. Developing a data-gathering processappropriate to the engagement3. Using appropriate analytical toolsand process to solve the client’sproblems4. Prescribing an appropriate course ofaction, based on items 1–35. Carrying out your part in theappropriate course of action6. Monitoring progress toward the goalso that adjustments can be made toachieve successIn retrospect, CFP Board may have justbeen a couple of decades ahead of thecurve. I was pleased to learn that CFPBoard is reviewing the Practice Standardsand their role in helping the CFP mark tobe recognised by the public as the sourceof sound, client-centered financial advice.I believe these standards hold the key tomoving forward with any meaningfulregulation of financial planners and, moreimportantly, in causing financial planningto be recognised by the public as aprofession.The greatest challenge in making thisso will be scale. Any system will work ifyou’re only regulating a few thousandpeople. Will your regulatory scheme stillwork when you have 500,000 certificants?What combination of “rules-based,transactional” regulation plus “principlesbased,process” regulation should beused? What role might true peer-reviewplay? What staffing from within theprofession, in addition to professionalstaff, will be required? Here’s where Ihope the Financial Planning Coalition—comprising Certified Financial PlannerBoard of Standards, the Financial PlanningAssociation, and the National Associationof Personal Financial Advisors—can beeffective. Membership organisations canhelp provide the “staffing muscle” and CFPBoard can provide the “standards muscle”to create strong professional oversight.I don’t know precisely how it will allhappen, but I look forward to watchingthe next installment of our profession’sleaders move the ball forward. We’re stillthe best chance the American public hasto receive sound, unconflicted adviceabout how they can best achieve theirhopes and dreams.Rick Adkins, CFP®, ChFC, CLU, is president andCEO of The Arkansas Financial Group Inc. inLittle Rock, Arkansas. He served as the 2003chair of the Board of Governors of CertifiedFinancial Planner Board of Standards.(ricka@ARfinancial.com) Reprinted withpermission from the November 2012 issueof the Journal of Financial Planning.12 The 4E Journal

ISLAMIC FINANCEJuly - December 2012Asset Allocation in IslamicFinancial Planning:Beyond the Efficient FrontierBy Munawir Mohammad,FIPA, CFP, RFP (Shariah)Asset allocation is the most importantdecision in financial planning. Howan investor channels his wealth intovarious asset classes will determine themagnitude and volatility of returns.Asset allocation decision is a factor ofinvestment objectives, horizon and riskpreference. The underlying rationale ofasset allocation is to combine assets withlow price correlations in an investmentportfolio. Hence, a properly diversifiedportfolio would have lower risk profile,measured in terms of expected variation,compared to the risk of its individualcomponents. An investor’s investmentportfolio when properly structured shouldbe somewhere on the Efficient Frontier,which depicts the most optimum returnfor a given risk level. See Diagram 1 belowAverage Annualized Historical RetumAsset Class Portfolio:8000 portfolios generatedVolatility (axes displayed in fractions)The importance of asset allocation hasbeen cited in many studies. Ibbotson andKaplan found that about 90 percent of thevariability of returns of a typical fund overtime is due to asset allocation policy.Thisarticle will address how asset allocation isportrayed from Islamic perspectives.In Islamic financial planning, objectives,investment horizon and risk are still themain criteria for consideration, but theyare defined from spiritual perspectives.The Prophet, PBUH, said: “A person couldnot move his feet in the Hereafter until heis asked about: his age, where he expendedit; his knowledge, where he practiced it; hisproperty (wealth), from where he obtainedit and where he spent it; his body (strength),for what he struggled for.” At TirmidhiDiagram 1: Asset Allocation and Efficient FrontierAsset Allocation – The IslamicPerspectiveA Muslim is governed by the Holy Quranand As Sunnah. As a vicegerent of God,there are principles to be followed inmanaging his wealth and assets, and indetermining his asset allocation decision.The major principles in the context offinancial planning and asset allocation areas follows:ObjectivesMen are created to worship God. Hisactions are all entirely directed towardsreceiving blessings from God. Hispurposes in life are to achieve al-Falah(success) in this world and hereafter. This isclearly stated in Surah Az-Zariyat (51:56):“And I did not create the jinn and mankindexcept to worship Me.”Investment horizonA Muslim believes in Alam Barzakh andThe Day of Judgement. His investmenthorizon surpasses death and he mustprepare himself for the ultimate journey.A hadith narrated by Imam Muslim onthe authority of Abu Hurairah sums thisup: “When a man dies, nothing lives on afterhim except for three things: sadaqah jariah(continuing charity), knowledge which canbenefit others or virtuous offspring whowill pray for him.” Hadith of Muslim on theauthority of Abu Hurairah.WealthHow a person allocates his assets alsodepends on his attitude towards wealth.The following are major principles thatgovern wealth in Islam:i. All wealth belongs to God. Man isonly a trustee. This is clearly stated inSurah An Nur (24:64)The 4E Journal 13

Unquestionably, to Allah belongswhatever is in the heavens andearth. Already He knows that uponwhich you [stand] and [knows] theDay when they will be returned toHim and He will inform them of whatthey have done. And Allah is Knowingof all things.MODERATEProp5%Cash10%ii.Wealth is a test, not a purpose“You will surely be tested in yourpossessions and in yourselves. Andyou will surely hear from those whowere given the Scripture before you andfrom those who associate others withAllah much abuse. But if you are patientand fear Allah - indeed, that is of thematters [worthy] of determination.” AliImran (3:186)Equities50%Bonds35%iii.Wealth is to be shared with others“So give the relative his right, aswell as the needy and the traveler.That is best for those who desire thecountenance of Allah, and it is theywho will be the successful.” Ar Rum(30:38)Syariah ComplianceA Muslim’s wealth management must bein compliance to the syariah. Allah hasforbidden income that arises from briberyand extortion (Al Baqarah 2:188), makingand selling of idols, gambling, wine,divination of arrows (Al Maidah 5:90), theft(Al Maidah 5:38), fraudulent dealings onweights and measures (Al Muthaffifin 83:1-3), depriving the orphan of his property(An Nisa 4:2-3), spreading of obscenematters (An Nur 24: 19), prostitution (AnNur 24: 33) and dealings of interest/usury(Al Baqarah 2:278). These parameters donot affect investment performance. Wehave seen many instances where syariahcompliantinvestments deliver betterperformances than their conventionalcounterpart.Diagram 2: Asset allocation (Moderate, Age

Asset Allocation with SPFIn this case, the benefactor’s portfolioprofile will be different from that ofthe SPF’s. The benefactor may be aconservative investor, but the SPF will bemanaged as an aggressive portfolio.The objective is to earn maximum returnsfor the SPF and have them subsequentlydistributed.Principals and income proceeds from theSPF will be channelled to the course ofGod such as donating to those in need(remember to take acre of those dearerto you first), giving out interest-freeloans, assisting new business set-upsthrough formation of joint ventures andsponsorships of students.Muslims are encouraged to mobilisetheir wealth instead of leaving them idle.An SPF helps those in need, encourageseconomic activities and improvement inthe standard of living.This is reflected inSurah At-Taubah (9:34-35) which says: Oyou who have believed, indeed many of thescholars and the monks devour the wealthof people unjustly and avert [them] from theway of Allah. And those who hoard gold andsilver and spend it not in the way of Allah –give them tidings of a painful punishment.The Day when it will be heated in the fireof Hell and seared therewith will be theirforeheads, their flanks, and their backs, [itwill be said], “This is what you hoarded foryourselves, so taste what you used to hoard.”1. How much should be allocated to theSPF? There are no fixed rules on this,but there are a couple of guidelinesin the Holy Quran and Hadith.They ask you about wine and gambling.Say, “In them is great sin and [yet,some] benefit for people. But their sinis greater than their benefit.” And theyask you what they should spend. Say,“The excess [beyond needs].” ThusAllah makes clear to you the verses[of revelation] that you might givethought. (Al Baqarah 2:219)Narrarrated by Sa’d bin Abi Waqqas:I was stricken by an ailment that ledme to the verge of death. The Prophetcame to pay me a visit. I said, “O Allah’sApolstle! I have much property to giveand no heir except my single daughter.Shall I give two thirds of my property incharity?” He said, “No.” I said, “Half ofit?” He said, “No.” I said “One-Third of it?”He said, “You may do so, though onethirdis also too much, for it is betterfor you to leave your offspring wealthythen to leave them poor, asking othersfor help.” (Sahih Al-Bukhari)“ The best form of investment for a Muslim is tospend in course of Allah now and leave behind aninvestment which acts as “continuous charity.” Also,an SPF should be a component in every Muslim’sasset allocation.“The above surah proposes to spend inthe course of God anything in excessof one’s needs. A person’s needs differaccording to age and social status.However, we are encouraged todistant ourselves from extravaganceand waste, as evident in the hadithbelow:Amr ibn Shuaib, on his father’sauthority said that his grandfatherrelated that the Prophet said: Whenyou eat, drink, give charity and wearclothes, let no extravagance or pride bemixed up with what you do. (Ibn Maja,Nasai).Nevertheless Prophet MuhammadPBUH suggested only a third to begiven away to charity and to leavebehind the rest to family members.2. When is the best time to start an SPF?Start now because you never knowwhen death approaches. A hadithby Prophet Muhammad S.A.W. saidthat “A Muslim should prepare himselffor the next world as if he is going todie tomorrow, but at the same timework hard to improve all his worldlycomforts as if he is going to liveforever”(Narrated by Al- Dailami).3. An SPF will be turned into a waqforganisation in a fully executedwasiyah. A waqf is an irrevocablededication, made expressly or byimplication, of a property or givingit away in charity for the purpose ofacquiring merit in the eyes of Allah.Waqf in Malaysia is administered bystate religious bodies and bodiesapproved by the same. There aremany such organisations in Malaysia,for example,Yayasan Waqf Malaysia,Perbadanan Waqf Selangor, SahamWaqf Johor, Iqra Foundation anduniversities.4. A waqf asset will be a preservedcapital and only the income fromit will be given away for charitablepurposes. As such, an SPF’s portfoliomanagement strategy will beconverted from “growth” to “income.”Some kind of portfolio restructuringwill be involved. This will ensurecontinuous income, albeit lesser inthe longer term.It is important that the restructuringprogramme be approved by thebenefactor in advance and in writing.This will avoid future complicationsas the rules governing the conversionof waqf assets are quite stringent.ConclusionA Muslim’s investment horizon surpassesthis world. He believes in Alam Barzakhand Hereafter. He must prepare for theultimate journey. His wealth should beproperly structured to provide for hisneeds and to ensure continuous charityupon his demise.The best form of investment for a Muslimis to spend in course of Allah now andleave behind an investment which acts as“continuous charity.” Also, an SPF shouldbe a component in every Muslim’s assetallocation. It encourages systematicsavings for noble courses and facilitatesdevelopment of the waqf industry. Islamicfinancial planners should promote thisnew asset allocation component to theirclients.17. The reward from spending is theway of God is clearly stated in Surah Al-Baqarah (2:62) “The example of those whospend their wealth in the way of Allah islike a seed [of grain] which grows sevenspikes; in each spike is a hundred grains.And Allah multiplies [His reward] for whomHe wills. And Allah is all-Encompassing andKnowing.”18. An investment with “700 times rewards”(equals to 70,000 percent, i.e. 700 x 100percent) potential return and more isbeyond the Efficient Frontier.Munawir Mohammad is a director ofEfficient Frontier Capital Advisors SdnBhd. The company offers Islamic financialplanning services through its Islamicdivision, Ar-Rayyan Wealth Management.He can be reached at:munawir@efficient-frontier.com.myThe 4E Journal 15

ISLAMIC FINANCEJuly - December 2012By Azman IsmailThe Role of Waqf in Financial PlanningThe word waqf () literally meansto halt, to pause or to hesitate.1 Inthe early days of Islam, waqf is knownas habs () and habs literally means toconfine, to restrict, to limit, to keep in, toprevent from escape, to keep close, tokeep within certain bounds or limits, toshut up, to imprison, to hold in custody, todetain, to retain, to arrest, to restrain, towithhold, to debar, to hinder, to impede orto prevent.2 The jurisprudential meaningof waqf is to retain its principal and todedicate its produce ( ).3The word waqf is used in Islamicjurisprudence to mean charities thathave permanence and continuity, sothat people can benefit from them forgenerations. This means that a waqfproperty is kept intact and only theresidual income derived from it is used fora specific objective.The waqf institution has played animportant throughout the centuriesin many countries. From Morocco toMalaysia, from Andalusia to Indonesia, thewaqf institution has not only helped thefaithful in general, but the inopportunesectors of the ummah such as the poorand uneducated, the orphaned, the ailing,the wayfarer, the bachelors and spinsters,as well as unwanted animals have allbenefited greatly from it.Sheikh Mustafa Zarqa’ claimed that theMasjid Quba’ which was built by theProphet s.a.w. at the place where hewas guest of Kalthum Bin al-Hadam, thechief of the Amru bin c Auf clan, was thefirst mosque built on the basis of waqffollowed by the Masjid Nabawi in MadinahDar al-Hijrah.4 The waqf institutionsalso supported students and sustainedschools and universities such as Universityof al-Qurawiyain in Fez, the NizamiyaMadrasah in Baghdad and the al-AzharUniversity in Cairo which provided freeeducation to their students. In addition,it has funded graveyards, hospitals,orphanages, warehouses, bakeries, millsand other charitable, educational orreligious foundations.The institution of waqf has contributedsignificantly to the foundation of Islamiccivilisation and has great economicsignificance. The institution of waqfis based on the principles of Islamicjurisprudence. In this respect, a hadithof the Prophet s.a.w says, “Retain itsprincipal and give charity from it.” Sinceits first inception, the institution of waqfhas contributed significantly to the socioeconomicand political infrastructure ofMuslim communities. Many mosquesand artistic architectures were financedby the waqf institution. Several studieshave established that the waqf systemsustained sanctuaries, hospitals,orphanages, orchards, utilities, charities,infrastructure, pensions, facilities, foodand fruit aid, transportation systems,animal shelters as well as hundreds ofsocially significant services.The above has been made possible due tothe nature of waqf; it is viewed as a sacredinstitution because it not only preservesall the khamsah dharuriyyah (fiveindispensibilities), but can be viewed as asadaqah jariah, because of its permanency.Furthermore, the Quran argued that itcannot be easily appropriated by theauthorities without appearing wickedand sinful; thus prompting them to give afree hand to the waqf institutions whichprovided these institutions not only relieffrom unnecessary pressures but bolsteredtheir significance and importance.1. Hans Wehr 10912. Lane,3. Al-Mughni 6:2064. According to Maulana Shibli Numani,the first waqf was the Masjid Nabawi.(Rashid, 2002 : 14)16 The 4E Journal

Furthermore, the institution of waqf mayeither be done through hibah or wasiyyahand therefore, is one of the most dynamictool in legacy planning since hibah, unlikewasiyyah, allows one to give more thatthe one-third limit. Indeed, a waqf that iswell managed will be more popular andwill obtain more support.There is a general consensus amongMuslim scholars that no waqf donationcan be re-appropriated by the donor orhis heirs, or otherwise alienated from itsoriginal purpose, nor used as collateral formortgages or loans.5 In this respect, Umarr.a. who was a companion of the Prophet(peace be upon him) once asked:“Oh Prophet of God, I obtained a land inKhaibar. I never obtained a property moreprecious to me than this. What do youadvise me” He said: “If you want, you canretain its principal, and give charity with it;provided that it should not be sold, bought,given as gift or inherited.”Then Umar gave it as charity to the poor,relatives, slaves, wayfarers and guests. Thewords of the Prophet basically mean thatonce a property is dedicated as waqf, itremains waqf forever. As such, the benefitis continuous and waqf is considered alasting charity. In this respect, the Prophetsaid:“When a human being dies, his work for Godcomes to an end except for three: a lastingcharity, knowledge that benefits others, anda good child who calls on God for his favour.”Waqf has a special place in Islam and Islamregards the act of creating waqf as an actof piety. The Quran says, “You will not attainunto piety until you spend of that which youlove.” Another companion, Abu Talha whowas the richest man in Madinah and havelots of properties went to the Prophetand said, “God says in His Book: “You willnot attain unto piety until you spend of thatwhich you love,” and the most cherishedproperty I have is Bir Ha’e (a palm treeorchard near the Prophet’s mosque). I amgiving it as charity, wishing goodness andpreservation; thus, O Prophet of God, useit the way you want.”During the time of Umar r.a., every realestate owner made a certain kind of waqfas it is considered spending in the way ofGod. In this respect, the Quran says:“The parable of those who spend theirsubstance in the way of Allah is that of agrain of corn: it groweth seven ears, andeach ear hath a hundred grains. Allah givethmanifold increase to whom He pleaseth:And Allah careth for all and He knoweth allthings.”Waqf is a form a legacy as it is still existyears or even centuries after we die. Anexample of waqf property is the worldrenownedAl-Azhar University in Egyptthat was founded in the year 972 AD. Atone time the Sheikh (Head) of Al-Azhar isconsidered the top most Islamic authorityin the world. In Stephen Covey’s SevenHabits of Effective People, we were told to“live, learn and leave a legacy.” On legacy,the Quran has this to say:“Verily We shall give life to the dead, and Werecord that which they send before and thatwhich they leave behind, and of all thingshave We taken account in a clear Imam(Book of Records or evidence).”In this regard also, a Malay proverbsays, “Harimau mati tinggalkan belang,manusia mati tinggalkan nama.” (A tigerdies leaving its stripes, a man leaving hisname). Since waqf plays an important partof a Muslim’s life, how can one incorporateit into one’s estate planning? If we haveabundant wealth, there would not beproblem since we could just allocate oneof our properties to waqf.Islamic financial planners should explainand encourage the creation of waqf as partof an overall estate planning programme.These waqfs need not be limited to purelyreligious purposes, but can be for thepoor, needy, orphans, prisoners, etc. Otheruses of waqf revenues can include healthservices which cover the constructionof hospitals and the salaries of hospitalemployees as well as subsidising patients.An example of a health waqf is the ShishliChildren’s Hospital in Istanbul which wasfounded in 1898. One could also waqffor animals such as the waqf on cats andunwanted riding animals. Other types ofwaqf (for philanthropic purposes) thathave been created are for helping peopleto go to Makkah for their pilgrimage andfor helping girls to get married. All theseventures show that waqf has always playeda major role in Islamic estate planning. It isup to Islamic financial planners to reviveit and apply the practice in the moderncontext.Waqf can be created either throughwasiyyah or hibah. If it is created throughwasiyyah, then the shariah rules onwasiyyah applies. Similarly, if the waqf iscreated through hibah, then the shariahrules on hibah applies. Under wasiyyah,the waqf value cannot be more than athird of the total value of the estate. Onthe other hand, if the waqf is createdthrough hibah, then the waqf creatorcannot revoke it.5. Al-Kabisi, Muhammad Abid Abdullah.Hukum Wakaf:Kajian KontemporerPertama Dan Terlengkap TentangFungsi Dan Pengelolaan Wakaf SertaPenyelesaian Atau Sengketa Wakaf.Translated from the Kitab Ahkam al-Waqf fi al-Shariah al-Islamiyah, 2004.IIMAN and Dompet Dhuafa.This article is extracted from a forthcomingbook, Inheritance Planning 101. Theauthor, Azman Ismail, is an Islamicfinancial consultant, shariah adviser,lecturer, as well as the president of IIFINConsulting Sdn Bhd.The 4E Journal 17

COVER STORYJuly - December 2012Ensuring a MoreSecure RetirementAhh … the private retirement scheme(PRS). Will it be the panacea toMalaysia’s growing concern for thewelfare of its rapidly graying population?For decades, those in their golden yearswere duly taken care by governmentpensions and the contributions they madein the Employees Provident Fund (EPF).But that is changing. EPF contributionsare no longer adequate as cost of livinghas skyrocketed over the years andthe growing civil service is putting asignificant strain on government coffers.An EPF survey in 2003 revealed that morethan two-thirds of retirees use up all oftheir EPF savings after only 10 years ofretirement.That clearly is bad news when you take intoaccount that the average life expectancy ofMalaysians has increased to 71 years for menand 76 for women. Simply, a person whoretires at 55 could go on living for another20 years or more on a retirement fund thatwould just about last half that time.18 The 4E Journal

In a research conducted by the NationalCouncil of Senior Citizens OrganisationsMalaysia (NACSCOM) in 2007, Malaysia isexpected to have a population of about46 million in 2035 of which 6.9 million or15 percent will be over 60 years.The United Nations, in its guidelines,classify any nation with 10 percent of itspopulation above the age of 60 years asan aging nation. The country will likely betagged as an aging nation by then.These daunting demographics havepossible dire consequences for nationalfinancial stability and growth.A graying and weakening labour forcecertainly does not augur well for thecountry as it chokes economic dynamism.Household spending will decrease whilerising medical/healthcare costs willbecome a burden to not just householdsbut also the nation.Several measures have already been takento confront these challenges.Among them: the government’s proposalsto enact the Minimum Retirement Age Actto introduce a statutory retirement ageof 60 years for employees in the privatesector and PRS, a voluntary, retirementscheme governed by a trust, and offered tothe public for the sole purpose of buildingup long-term savings for retirement.“What sets Malaysia apart from the other countriesin Asia is its high savings rate. It is the engine thatis getting the economy going. ”First question, why the privateretirement scheme (PRS)?The PRS is part of the EconomicTransformation Programme (ETP)to complement the objective oftransforming Malaysia into a high-incomeeconomy. I think it’s important for us toprovide an avenue for the people to planand invest for their future. As you knowthere are a lot of stories where peopleretire and don’t have enough to go on.The PRS, as you will see, is meant for thepeople to have something additionalto the Employees Provident Fund (EPF),which is a statutory contribution. It hasbeen proven that EPF alone may not beenough for one to retire on.When you retire, you will need about twothirds of what you earn while you wereworking in order to maintain the samestandard of living. To do that, you willhave to invest around 33 to 35 percent ofyour income. Assuming you are alreadycontributing to EPF (12 percent by theemployer and 11 percent by the employeewhich totalled up to 23 percent), theadditional 10 to 12 percent is the avenuewhere people can plan and make a choiceas to how they want their money to bemanaged, hence the PRS.Putting the money in EPF is verystraightforward. EPF will invest the moneyfor you. You do not have a say in howthey invest it, whereas in PRS you actuallyhave a say. There are currently eight PRSproviders out there, and out of the eight,there are many funds that you can choosefrom. So depending on your risk appetiteand depending on the time frame thatyou are looking at, you are basically incontrol as to how the funds are managed.But being in control basically meansthat you actually know how to invest.This is precisely why we have come upwith the three default funds. If you are notthat savvy in choosing the funds, thereare at least three basic funds – growth,moderate and conservative – to choosefrom. For people who don’t choose thefunds they want to invest in, they willautomatically be put into the defaultfunds depending on their age group.Why is the system different for the PRS(when you compare it with the EPF) – asin one being statutory, and the otherone is basically voluntary?Well, it’s very simple actually. The EPF is setup as a statutory body. It’s a governmentFor the PRS, the amount of the benefitswill be determined solely by reference tothe contributions made to the schemeand any declared income, gains and lossesin respect of such contributions.Each PRS will include a range of retirementfunds that individuals may choose from toinvest in based on their unique retirementneeds, goals and risk appetite.To find out more about what the PRSwill do in terms of helping the generalpopulation to be better prepared forretirement, the managing editor of the 4EJournal, Steven K C Poh recently spoke toZaiton Mohd Hassan and Datuk Steve Ong,the chairman and CEO respectively of thePrivate Pension Administrator (PPA), theentity approved to perform the functionof record keeping, administration andcustomer service for members andcontributors in relation to contributionsmade in respect of a PRS and such otherduties and functions as may be specifiedby the Securities Commission (SC). Beloware excerpts of the discourse.Ong: CFP professionals will be playing a key role in informing and educating their clients on the PRS funds theyhave chosen for their retirement plans.The 4E Journal 19

ody. So it has one manager, oneadministrator and EPF does everything.And that’s one way of managing pensionfunds. But if you look at the Australianmodel, they don’t have a centralised EPFbody. They have a diversified portfolioof managers and fund managers whoare approved by their trustees to offersuperannuation funds. Likewise, HongKong does the same as well. As you cansee, there are many types of systemsto manage pension funds. So while theEPF has been doing very well for theemployed sector, let’s not forget we havethe informal sector as well – the selfemployedsector – which is not under anycompulsion to contribute to the EPF. So ifyou make it mandatory, they will say youare directly increasing their cost of doingbusiness; increasing payroll and all that.So how do you encourage the selfemployed,who could be a taxi driveror a hawker to save and invest for hisretirement? How do you reach thissegment of society that also needsretirement planning? The PRS was setup for exactly this purpose. Two (EPFplus PRS) is going to be better than onebecause you now have a choice; you canalso diversify your risk in terms of yourpension.Also, as part of becoming a high-incomeeconomy, I think we are looking at apopulation that is getting smarter. Andsmart people want choices. People aremore educated these days and they arealso more exposed to what is available outthere. So rather than create another EPF, itis better to have it this way where peoplehave the options on how they want themoney to be invested.How are the current eight PRSdistributors picked by the SC?It’s all in the Act. It’s a separate licenseunder the Capital Markets and ServicesAct 2007 (CMSA). So it is, by all intentsand purposes, the retirement servicesindustry’s regulation. As such, you havegot to be licensed as a provider as well aslicensed as a distributor to distribute PRSproducts. The criteria is pretty straightforward – 10 years in the industry, RM20million in the shareholders’ funds, trackrecord in offering investment funds anda commitment to grow the pensionindustry, in this case, the PRS industry.We had more than 20 applications, butonly eight were selected. And rightly sobecause we want to make sure that thepioneers spearhead and drive the earlydevelopment of the PRS industry. Yes,it will be an industry by itself. It will bedeveloped and it will grow.There is a huge need to educate thepublic on the pros and cons of variousinvestment classes and vehicles thatwill be used in any pension plan.What would the PPA like the financialplanning community to do in helpingto fulfil this on-going educational role?The PPA would like to actively engageall stakeholders involved with thedevelopment of the private pensionindustry to promote the PRS schemesand educate the public on the need toadequately plan for their retirement. As“Defined contribution plans allow workers to makepre-tax contributions to their own retirementaccounts. It is the workers’ responsibility to managetheir own investments.”Zaiton: Smart people want choices.such, the PPA would like to work withFPAM on raising the need for the publicto plan and manage their retirementfunding, to ensure that they will haveadequate income replacement upon theirretirement and also sufficiency to lasttheir retirement years. In this regard, wewould be pleased to work closely withFPAM in the areas of public seminarsand conferences on retirement planning,coordinating or joint promotionalactivities and events with FPAM andengaging your members to market thePRS to their clientele base.FPAM members, in particular CFPprofessionals, are well positioned toprovide investment advice on the selectionof retirement funds options, to ensuretheir clients choose asset allocationsand underlying investment assetsappropriately based on their retirementneeds. Furthermore CFP professionalsproviding on going account servicing willserve to deepen clients understanding oftheir asset growth and fund performance.As such, CFP professionals will be playinga key role in informing and educating theirclients on the PRS funds they have chosenfor their retirement plans.20 The 4E Journal

FINANCIAL PLANNING CENTREBe a Star.Be a Financial Planner.A star brightens the evening, lighting up the darkness.Call us for aBUSINESS SHARING Sessionand redeem a specialThe 2011 Jobs Rated Alnanac ranks financialplanning as one of the top career choices in the US.PREMIUM GIFTfrom us!It is easy to see why.The growing number of people concerned with beingcomfortable in their golden years has spurred demand for thisrapidly growing profession.From Kepong/AmpangMiddle RingRoadJoin us as a Financial Planner for a personally andprofessionally rewarding career.Be a STAR to brighten the path to people’s financial freedom.The Financial Planning Centre provides a professionalplatform for aspiring Financial Planners.We will enable you to charge advisory fees in exchange foryour valuable assistance in helping people plan their lives tolive their dreams.Qualifications:RESOURCEFUL HELPFULCHEERFUL ENTERPRISINGwww.cwealthadvisors.com.myFinancial Planning Centre3-2 Jalan PJU 8/3B, Damansara Perdana, 47820 Petaling Jaya.Tel : 03 7726 2000 Email : cwa.fpc@cwealthadvisors.com.myThe 4E Journal 21Create Protect Preserve

If PRS is a “product” just like insuranceand unit trust, then a properly donepersonal financial plan will put inplace a “road map” of the individual’sfinancial needs and aspirations (lifegoal) and with proper advice andguidance from a licensed financialplanner, help the individual makebetter informed choices therebyhelping him chart his financial life. Inthis sense both financial planning andPRS are totally complimentary. What isthe PPA’s view on this?As mentioned earlier, the launch ofthe PRS is expected to spearhead theestablishment of the private pensionindustry. Financial planners stand readyto benefit from the expected increasein public awareness on the need forretirement planning from PRS advertisingand promotion campaigns as well as thetax incentives given for both individualsand corporate PRS contributionsThe PPA is focused on promoting,educating and developing the privatepension industry, which fits nicely intothe retirement planning component offinancial planning. The PRS schemesprovide an excellent platform for financialplanners to offer retirement adviceand solutions for their clients to selectappropriate and suitable PRS funds tomanage their retirement risks and returnsexpectations. The long-term tenure ofretirement savings and investing wouldalso require the financial planners to assisttheir clients in monitoring and reviewingtheir retirement portfolio and rebalancing“The PRS is part of the Economic TransformationProgramme (ETP) to complement the objective oftransforming Malaysia into a high-income economy.”it to meet their clients changing needsand expectations.Further, the PRS also offers financialplanners a continuing opportunity toprovide on-going advice and servicing totheir clients, which will serve to enhancetheir clients’ relationship managementleading to further opportunities toprovide other financial advice andsolutions to their clients.The 2011 Melbourne Mercer GlobalPension Index examined retirementplans in 16 countries spanning Asia,Europe, North America and LatinAmerica. The Netherlands, Australiaand Switzerland secured the top threeslots, while Japan, India and China tookthe bottom three slots. What can we inMalaysia learn to emulate from the toprankedcountries? What does the PPAplan to do in terms of benchmarkingglobal standards within our newlyborn private pension industry? Thedesign of the PRS framework was basedon broadly-accepted internationalprinciples for private pensionregulation and supervision and did takeinto account a review of the variousoptions within the pension landscapeincluding considering the experiencesof other countries that have a successfulprivate pension industry.The implementation of the PRS isexpected to be the key component inthe establishment of Pillar 3 in our socialsecurity structure.As such, careful consideration has beenmade to ensure that the private pensionscheme will meet its objective to establishPillar 3. Whilst Pillar 2 (a mandatorycontribution scheme like the EPF) hasbeen successful in helping the formallyemployed sector in accumulatingretirement funds, the PRS is designed toexpand its coverage to include the selfemployedsector as well as provide analternative voluntary retirement scheme(for everyone) to increase their retirementsavings. Pillar 1, meanwhile, has beengenerally viewed as the government’spension scheme.The Mercer Global Index providesa benchmark for evaluating theeffectiveness of pension systemsworldwide. The three key measures of theMercer Global Index are:Adequacy, to focus on ensuring thatthe pension contributions provideadequate retirement benefitsSustainability, to ensure that PRScontributions are affordable, to reachand cover all the formal and informalemployed sectors Integrity, to ensure a robustregulatory and governance structureis in place for the safeguardingand protecting the interests of themembers of the PRS schemeAs per noted in the 2011 Mercer Report,there is no perfect system that can begenerally applied around the world andevery system is different as a result of eachcountry’s unique economic, social, cultural,political and historical circumstances. ThePRS framework has taken into account thevarious factors measured by the MercerGlobal Index.Ong: PRS consultants should look at the life-time value of their PRS clients as their remuneration for marketing PRSfunds to their clients.In addition, the framework has alsoincluded broadly-accepted internationalprinciples for private pension regulationand supervision, international bestpractices and lessons learned andexperiences of other countries that havea successful private pension industry.As such, we now have a robust PRSframework which is expected to developand establish Pillar 3 for our social securitystructure.22 The 4E Journal

Ong: The remuneration structure of the PRS is regulated by the SC and the competitive offerings of the providers.The global investment arena is morevolatile than ever before. Whatsafeguards does the PPA have in mindto ensure the likelihood that the PRSin Malaysia stand to do what they arecommissioned to do?The SC has established a robust dedicatedregulatory framework for the PRS that isespecially designed to safeguard investorsof the PRS, with prudent investmentregulation, protection of assets via a truststructure and detailed reporting anddisclosure requirements. The permittedasset allocation and investment limitsare all prescribed in Guidelines on PrivateRetirement Schemes (PRS guidelines). Allfunds would also be defined contributionin nature to ensure that they are fullyfunded.PRS providers as licensed fund managersmust also comply with other guidelinesapplicable to licensed fund managers,including the Guidelines on ComplianceFunction for Fund Management Companywhere it is required for the board ofdirectors to establish a risk managementframework that commensurate with thecompany’s business.The PPA, as the independent centraladministrator for all investors of the PRS,will also play its role in safeguarding andprotecting PRS investors’ interests. ThePPA will provide electronic accounts foreach investor to enable them to easilyaccess and monitor their contributionsand transactions and also monitor andreview the performance of their PRSfunds. PRS investors can also contactand seek the assistance of the PPA toresolve their complaints and issues withtheir respective providers. The PPA willalso provide investors with on-goingeducation and communication to helpthem better manage their PRS accounts.The financial planning community canalso contribute towards the safeguardingof investors’ interests by giving fit andproper advice as well as ensuring thatinvestors select funds that are suitableand appropriate for the retirement needs.Proper advice and recommendation onfund selection, asset allocations andportfolio diversification to match investors’retirement objectives will go a long wayto ensure that investors make intelligentand conscious investment decisions.Does the PPA believe there is a way tostructure a genuine “win-win” scenariovia private pension funds for bothconsumers and providers of financialservices? If so, presumably this mustinclude a fair remuneration system forthe providers What guidelines doesthe PPA have in structuring such aremuneration system?The remuneration structure of the PRS isregulated by the SC and the competitiveofferings of the providers. One of theobjectives of the PRS is to make retirementplanning and management affordable tothe public, which will also serve to ensurethat the PRS reach its intended coverageobjective. Whilst there is a socio-economicobjective behind the establishment of thePRS, it nonetheless requires the providersand distributors to drive the marketing ofthe PRS. As such, all the key stakeholders– investors, providers and distributors –must derive a “win-win-win” propositionfrom the PRS.Investors as the central stakeholder inentrusting their monies to PRS must havea “win” in terms of deriving expectedreturns required to build their retirementfunds. As such, investors will be lookingat the PRS fees and charges which wouldhave an impact on the rates of returnsgenerated from their funds. The publicis already well aware of the high feesand charges from alternative investmentproducts and will be sensitive to whatproviders charge for front end and annualmanagement fees.The long-term nature of PRS requiresa different remuneration model that isfocused on building trailing remunerationrather than front end remuneration.This will require a change in mind setfor registered PRS consultants involvedin the marketing PRS funds versus unittrust consultants which are used tohaving high front end remuneration. Thelong-term investment tenure from theinvestors’ asset accumulation years andthe compounding size of the funds andthereafter pension income withdrawalsmeans that PRS distributors are set toderive long-term passive annual incomecompensation. PRS consultants should,therefore, look at the life-time value oftheir PRS clients as their remuneration formarketing PRS funds to their clients.What would the PPA like to seeincorporated in the PRS to increase theodds of achieving adequacy, meaningthat an appropriate range of benefitsaccrues to the consumer?The PRS has been designed to offerthe public a well regulated, robust andincentivised scheme that provides achoice of providers and funds for thebenefit of participating members. Fromproviding investors with a choice of agedefault funds for easy fund selection to acomprehensive range of non-default, selfselectionsolutions that provide accessto a variety of asset allocation strategies,underlying investment assets and local“The PRS schemes provide an excellent platform forfinancial planners to offer retirement advice andsolutions for their clients.”The 4E Journal 23

“From the perspective of an employer who isoffering a retirement scheme to his employees,defined contributions help him fix his costs.There are no added costs.”and offshore investment opportunities,which may require professional advicefrom financial planning community.In addition, the public will stand to benefitfrom the marketing and competitivestrategies, adopted by the eight providersin reaching their target segments. Asthe PRS is a voluntary scheme, providersand distributors will have to positiontheir PRS offerings to attract investors totheir schemes. The competition betweenvarious providers and distributionchannels to acquire PRS investors willprovide investors with added benefitssuch as competitive front end loads,annual management fees, to providingvalue added services, education andelectronic account management.One of the intangible benefits for PRSinvestors is the learning experience to bederived from investing in PRS funds. Thelong-term tenure of savings through PRSpresent investors with the need to payattention to their fund accumulation andperformance. Over time PRS investorsshould at least be conversant with theproviders that they have chosen tomanage their monies and to monitor andevaluate their fund performances, dealwith market volatilities and changingretirement needs. PRS investors will haveto be actively engaged with their fundsto ensure that they are on track towardshelping them retire.As highlighted, the PRS is a well thoughtout voluntary retirement scheme that isdesigned to provide a variety of benefitsto members participating in it. As it is,there is no lack of benefits offered by thePRS. Overtime, PRS investors will onlystand to gain from product and serviceinnovations to be added by the providersto offer more value added benefits to theirinvestors. What is needed now is to havethe respective providers and distributorspromote and educate the public on theneed to embrace the PRS and the manybenefits that it offers to investors whoparticipate in it.So the PRS is about giving peoplechoices?Yes indeed. What makes the PRS differentis that the people have choices. They getto choose the provider and the types offund they want to invest in to grow theirretirement nest egg. We (the PPA) willsend them statements. We will give themtheir consolidated performance reports.If they are not happy for whatever reasonwith their provider or the funds thatthey have invested in, they can alwayschange. But their accounts will still beconsolidated under the PPA. So theyknow exactly where their money is; theyknow what returns they are getting, andall this information will be on our securedwebsite.You mentioned the three pillars earlier.Can a retired civil servant, a person whohad earlier worked for the governmentand now draws a pension, invest in thePRS?Yes, of course. It’s a question of adequacy.Do you have enough, to replace the twothirds of your last drawn income? This is astandard set by the World Bank. It basicallysays we need at least two thirds of our lastdrawn income to live the way we havebeen living prior to retirement. Surely youdon’t want a drop in your living standardswhen you retire, right?Now would be a question of how to getthere. The first question I said earlier wasone of adequacy. The second question isof sufficiency. Can you last the next, say, 10,15 or 20 years? And generally, our life spanhas increased. These are the things that weneed to seriously look into. Certainly, theEPF is not sufficient, because the averageEPF member has only accumulated aboutRM170,000 or less when they retire. Asyou can see, that’s hardly enough. Clearly,it’s not the lifestyle anyone of us want forourselves, post-retirement. That would bea disaster. Life should be better than that,don’t you think?You mentioned earlier about the PRSbeing complementary to the ETP’sagenda – the creation of a high-incomesociety. How do you actually do that?How is PRS tied to the creation of ahigh-income society?Zaiton: The launch of the PRS is expected to spearhead the establishment of the private pension industry.The PRS complements the ETP’s agendain that it creates a high-income societywhile the people are working – while theyare making high-income, they should besaving and investing their high-income.The World Bank defines high-incomenation as one with an annual gross24 The 4E Journal

“FPAM members, in particular CFP professionals, arewell positioned to provide investment advice onthe selection of retirement funds options, to ensuretheir clients choose asset allocations and underlyinginvestment assets appropriately based on theirretirement needs. ”national income (GNI) per person or GNIper capita of US$15,000 and above. Ourcurrent GNI per capita is US$6,700. Wehave quite a bit to catch in this regard,but the government has plans in placeto get there. Also, what’s important in ahigh-income economy is the generationof value. The essence of achieving highincomeis the creation and addition ofvalues into all products and services. Thebigger the value being created and added,the higher is the national income.There is no doubt we need to get ourselvesup the income scale. Our per capitaincome has got to go up. The projectedper capita income is RM16,000 in 2015.But earning more does not necessarilymean having more. Earning more andspending everything equals zero. That’swhy retirement planning education forthe public is crucial. We also need to put analternate retirement pension platform inplace so that you save the 10 percent outof your increase in income in a PRS fund,while at the same time also contributing23 percent to EPF. This way, you will havea higher probability of making sure thatwhen you retire, you do not lose yourstandard of living.But the ETP actually calls for a grossdomestic product (GDP) growth of atleast 6 percent for Malaysia to reachthe status of a developed country in2020. And we are not achieving thatrequired 6 percent. So what happensfrom here?These tough times. When you are getting5.1 percent versus less than 2 percent inthe U.S. and Europe is in the negativezone, we’ll take it. Any time you havea positive economic growth, it simplymeans more wealth is created, more jobsare available, and hence more incomeis generated. Because your GDP is rising(from) 4 to 6 percent. And we have alwaysbelieved what sets Malaysia apart fromthe other countries in Asia is its highsavings rate. It is the engine that is gettingthe economy going. You see, the highsavings rate is there. The PRS is helpingto protect that (savings) because if youdon’t do something about it, it’s going togo away. As you can see, the cost of livingthese days is getting higher. So if we don’teducate the public that they have got tosave for their golden years, then the safetynet will not be there.There is a lot of money in the system.But this money has not been placed ina mechanism for it to generate enoughreturns. At the very least, you have got tobeat the inflation rate. Otherwise inflationwill rob you of a comfortable retirement.So, this PRS initiative is really timely. It’s anational social agenda. It’s not just aboutselling a product called a PRS fund. At theend of the day, you have got to reach allMalaysians. Otherwise they will never getto retire as they do not sufficient fundsto retire comfortably. It then becomes asocial problem, and we (the taxpayers)will all have to pick up the tab. Every timethe government gives a handout, it is aRM100 million or more.In other words, instead of the governmentalways intervening on a need-tocontributebasis, why don’t we educate;why don’t we encourage; and why don’twe create and develop this industry soZaiton: The financial planning community can also contribute towards the safeguarding of investors’ interests by giving fit and proper advice as well as ensuring that investorsselect funds that are suitable and appropriate for the retirement needs.The 4E Journal 25

that as demographic shifts to an agingsociety, we actually have the means tolook after the retired population?In this regard, what is PPA doing interms of public awareness and financialliteracy education – letting peopleknow how to go about doing this? Whatis FPAM’s and the financial planners’role in this whole thing?This is where I think we need to simplygo out there and give people the rightmessage. We, at PPA, are talking to FPAMand the likes of FPAM and the Press aswell as appearing in a lot of articles inour effort to generate awareness. Part ofour job here at the PPA is to aggressivelypromote the PRS industry. We hope FPAMwill assist us in this endeavour sinceretirement planning is an integral part offinancial planning.We believe FPAM can really help us here.If people are not sure about the PRS, theywill call up their financial planner and askwhat PRS is all about. So we need yourmembers (CFP professionals) to be onboard with us to point people to the rightdirection. And the one other thing westress with the providers is the way PRSis marketed. PRS should not be marketedthe way unit trust is marketed.Let’s talk about this – the way PRSshould be marketed. How different willthe approach be?To date, unit trusts have been marketedvia the returns maximisation approach.For PRS however, the investors mustunderstand that they will be lookingfor sustainable returns for the long haul.That’s why we have the three funds. If youare younger, you will be recommendedthe growth fund, where there is a biggerportion of equity, for an example. So therewill be more volatility.Why the growth fund with a higher portionof equity? The simple answer is you canprobably live through the economiccycles. If you older, you will most probablybe recommended a more conservativefund (probably more in money marketand income instruments), again clearlydepending on what your risk appetiteis. So there’s a whole range of funds tochoose from and financial planners needto educate their clients on this.Aggressively promoting anddeveloping the retirement planningindustry seem to be high on PPA’sagenda.Yes indeed. Clearly one of theresponsibilities of the PPA is industrydevelopment. So anything that has gotto do with industry education, promotionand joint seminars will fall under our“jurisdiction.” We want to be positioned asthe retirement specialist. That’s our role.We handle retirement. That’s what we willdo. Financial planning is broader – youhave risk management, investments andestate planning. You are more holistic. Wefit into that particular model of financialplanning because pensions are a very bigsubject. That’s where we will be positioned.The only thing we don’t do is fundmanagement, and this basically givesinvestors options. So you can say theadded benefit is that choice element,which I believe most of us would like tohave – in terms of who we want to investwith and what we want to invest in. Soover time, protecting investors’ interests isgoing to be the core objective of the PPA.If they have issues, we will be the first portof call for them. They will call us and wewill try to resolve their issues.We are already setting up our call centresand we have an interactive website. Weare pushing out a lot of information,for example, daily valuation prices andperformance prices. And that’s justto make the process as transparentas possible – giving investors moreinformation and making it clearer so theymake better investment decisions.The objective is to grow the industry – tohelp Malaysians to fend for themselves,especially folks from the lower incomegroup. Even though it is a social objective,the spin-off effects will be tremendous ifthe industry grows.But the lower income folks don’t havemoney to set aside because whateverthey earn will always be used up.Not necessarily. We have to starteducating them. Otherwise, this viciouscycle will continue on and on and on. Theminimum investment is RM1,000 for PRS.And PRS investors get a tax relief of up toRM3,000. Employers are also provided taxdeduction on contributions to PRS madeon behalf of their employees above thestatutory rate and up to 19 percent of theemployees’ remuneration. That’s not all.Tax exemption is also provided on incomereceived from the PRS funds.26 The 4E Journal

What does the PPA plan to do in termsof benchmarking global standardswithin our PRS?We are already doing it.Any market in particular?We are looking at some of the moresuccessful models, and Hong Kongand Australia are some good models tobenchmark against. Poland and Chile area few other good ones to follow. Actually,a lot of benchmarking studies have beendone and a lot of work has been put inbefore we actually roll out the PRS.Retirement plans generally fall intotwo basic classifications: definedbenefit plans or defined contributionplans. The PRS falls under the definedcontribution plan I presume?Yes indeed. They are all definedcontribution plans. Just to give yousome background …. a defined benefitplan, traditionally known as the pension,was provided by many employers but isincreasingly uncommon today, especiallyin the private sector as most of them arerunning into problems because of funding.Simply, it pays a retiree a certain benefitbased on years of service and salary leveluntil they die. In some cases, the payoutswill continue for a spouse (as in the caseof government pensions in Malaysia) orother beneficiary.Defined contributionplans allow workers to make pre-tax“The PRS framework has also included broadlyacceptedinternational principles for private pensionregulation and supervision, international bestpractices and lessons learned and experiencesof other countries that have a successful privatepension industry.”contributions to their own retirementaccounts. It is the workers’ responsibilityto manage their own investments.Most defined contribution plans offerparticipants a choice of mutual funds orother investment vehicles through a thirdparty that holds the account.As you can see, defined benefit plans aresignificantly more costly for employersthan defined contribution plans, andas such, most private sector employershave considerably cut back or completelyaxed these plans. But that’s better than,for instance, waking up one fine day, likeEnron Corporation employees, to discoverthat their defined benefits (pension funds)are gone, because they invested in theirown company shares.There’s a lot of bad publicity of companiesusing their own pension funds andinvesting in their own shares, and theyget into trouble. And these peopleunfortunately lose a lot of their retirementsavings in that manner.Why do employers increasingly like theidea of defined contributions?From the perspective of an employerwho is offering a retirement scheme tohis employees, defined contributionshelp him fix his costs. There are no addedcosts. If he pays 12 percent of payrollto a defined contributions scheme, it’s12 percent of payroll. If he decides topay 19 percent, it’s 19 percent. And hedoesn’t take investment risks. So that’s thedifference between defined contributionsand defined benefits schemes. Everybodyis moving towards defined contributionsschemes these days because marketvolatility will negatively impact definedbenefits schemes.Is there an Islamic perspective to PRS?Yes, there are shariah funds. All theapproved providers are already shariahcompliant in the three default funds.What about the hibah element?We will only deal with the Islamicbeneficiary nomination at a later stage.This is something we will work with SC.And if it requires enforcement, it will callfor a change in the Act, like in the EPF. ForEPF you nominate, so it’s enforceable.At the moment, we don’t have that inthe PRS. But once that is done, we candeal with nominations, and in the eventof death, the benefits go straight intothe estate. Where hibah is concerned, itis more complex because the shariahdistribution is complicated. Hibah iseffectively a transfer of property withoutexchange of consideration with a definiteproposal on the part of the person whogives the gift and acceptance on the partof the person to whom the gift is given.Ong: We want (the PPA) to be positioned as the retirement specialist. That’s our role.Hibah simply means you are going to givesomething away. It is a gift instrument. Sothe question is: how are you going to giveyour retirement funds away when youneed it? You will be giving it away whileyou are still alive. That’s the concept ofhibah. Personally, I don’t think hibah willwork in this case because you cannot giveaway something that you will need in thefuture. There are, however, other assetswhich you can hibah.The 4E Journal 27

INDUSTRYJuly - December 2012Irrational Behaviours &Index-Beating InvestmentsBy K P Bose DasanHaving spoken to a large number ofcapital market services participants– from remisiers, financial plannersto fund managers – I had the grimrealisation that the investment acumen ofour investors leaves a lot to be desired. Asa matter of fact, I would even venture tostate that we are in the backwaters, as faras investments are concerned.This audacious comment is backed bythe finding that there is a general lack ofadoption of major economic discoveriesof Nobel Prize winners, namely HarryMarkowitz and Daniel Kahneman. Theirfindings and conclusions have beenlargely ignored in the general scheme ofthings.Markowitz, an American economist, wonthe Nobel Prize for his modern portfoliotheory. He introduced this model ofinvesting in a 1952 article and a 1959book. What this model does is it attemptsto maximise a portfolio’s expected returnfor a given amount of portfolio risk, orequivalently minimise risk for a given levelof expected return, by carefully choosingthe proportions of various assets. In anutshell, the model assists investors in theselection of the most efficient portfolioby analysing various portfolios of thegiven securities. By choosing securitiesthat do not ‘move’ exactly together, theMarkowitz model shows investors howto reduce their overall portfolio risk. TheMarkowitz model is also called the ‘meanvariancemodel’ due to the fact that it isbased on expected returns (mean) andthe standard deviation (variance) of thevarious portfolios.Markowitz, of course, made severalassumptions when he developed themodel. They were: Risk of a portfolio is based on thevariability of returns from the saidportfolio An investor is risk averse An investor prefers to increaseconsumption The investor’s utility function isconcave and increasing, due tohis risk aversion and consumptionpreference Analysis is based on single periodmodel of investment An investor either maximises hisportfolio return for a given level ofrisk or maximum return for minimumrisk An investor is rational in natureThere are many criticisms to hisassumptions, especially that man isrational in nature. While observedbehaviours show evidence of irrationalityin man, we must not forget its applicabilityin general. Asset diversification certainlyreduces portfolio risk. No one can denythe cycles we have seen in just the lasttwo decades. We saw the large increasesin interest rates in the early to late 1980s.Bonds have delivered superior returns asinterest rates fell from its height to verylow levels.We also saw the ascendency of gold pricefrom US$400/oz in 2004 to US$1,800/ozin 2011. And we saw stocks rise from KualaLumpur Composite Index (KLCI) levels of280 in 1998 to 600 in 2004 to 1,600 in 2012.Imagine if we had put together a portfolioof different asset classes, we would be ‘inthe money’ with different asset classesriding the wave at different times in theeconomic cycles.Therefore, with a portfolio of differentasset classes, I would be earning returnsall the time, thus reducing risks associatedwith volatility or fluctuation of returns.As such, risk-averse investors shouldadopt asset allocation and diversificationwholeheartedly. Real property as an assetclass also has low correlation with stocks,bonds and money markets. Therefore, itwould be a great investment vehicle to be28 The 4E Journal

added to any investment portfolio.From a behavioural angle, it wouldbe expected that assets should beallocated according to risk profiles, butdiversification can allow a mix of evenriskier assets because together theyreduce the overall risk of the portfolio. Thequestion I would then raise is: “Why isn’tthis, a pre-dominant thought or practice?”A lot of reasons can be offered to explainthis lack of adoption.Among them: people have limited meansand therefore are unable to invest in arange of different asset classes. Peoplemay also have limited knowledge of thedifferent asset classes, and therefore, tendto only focus on assets they are familiarwith or have some level of understanding.But my own take on the matter is perhapswe do not have an understanding of theefficacy of portfolio investing.We currently have singular productemphasis with tied agents peddlingproducts from just one asset class toinvestors. Clearly, a concerted holisticapproach to investing is missing. Financialplanners must stamp this understandingon their clients, and of course, make theirpresence felt in the marketplace. But aslong as the emphasis is on tied agentsand singular product offerings, portfolioinvestment strategy will remain as anobscure content buried in the annals ofeconomic theory.The randomness of markets is a factwell known. There have been plenty ofstudies made to assert that it is difficult topredict markets as to its timing, and evenmore, to pick individual assets from eachasset class that will consistently providesuperior returns. There have been toomany research reports that assert the factthat 80 percent of the fund managers areunable to beat the market averages orreturns. Even Warren Buffett has opinedthat for most ordinary investors who arenot very sophisticated, it is better to investin the market index. In other words, theseinvestors should invest for market returnsand not chase individual fund managerreturns.Most fund managers I have asked havesadly admitted to not beating the marketindex and concur with the 80 percent ofthe time study. This being the case, whythen are we all following the active fundmanagement strategy of trying to pickindex-beating fund managers and payhigh fund management fees, when thereis only a 20 percent probability of pickinga winning fund manager? I have also seenfund management houses advertise thefact that their funds do better than fixeddeposits. Are we comparing apples withtarts? Does this even make sense at all?With asset allocation and diversificationwe would indeed be walking the betterpath. We cannot blame the regulators fornot promoting this concept as it is stillcaveat emptor ideology that is prevailingwith very little investor education to thepublic substantiated with local research.In a recent seminar which I attended, I wastold by some market players that the retailinvestors are leaving the stock marketscene and the game is now mainly withinstitutional players. Many young peoplehave no clue about investing in stocksand the older investors are also exitingthe scene. We will have to see how thissituation affects stocks as an investmentasset class for the common people.Furthermore, dividend is about the onlyinvestment income that is taxed at sourceand that too at the corporate tax rate of25 percent while bonds and fixed depositinterest are tax free.I can painfully see stocks in Malaysiamaking the exit from individual portfolioswhen it should have been the mostimportant asset class to look into. I wouldadvise all those with differing opinionsto cite evidence and not just makepronouncements about the way thingsshould be, ought to be, and want it tobe. Instead, they should state things asthey actually are, with transparency andintegrity. Someone even ventured to statethat there is a conspiracy to get individualinvestors out of the scene. How true this isI would never know. Hopefully the publiccan figure out soon enough if this is thegame plan, and of course I would like toknow who is actually doing this and why.Also, if there is any truth to this, remisiersshould be looking for another job. No?Okay … enough of Markowitz for thetime being. The next Nobel laureateI want to talk about is Kahneman, anIsraeli American psychologist who is wellknownfor his work on the psychologyof judgment and decision-making,behavioural economics and hedonicpsychology. Kahneman put forward the‘prospect theory’ in the late 1970s whichearned him the Nobel Memorial Prize ineconomic sciences in 2002.He articulated the presence of lossaversionand its impact on investors. Hebasically stated that investors view gainsand losses differently, and as a result,when faced the prospect of a gain, theywill take the sure profits early and will dothe opposite when they face the prospectof a loss. In this case, they would nottake the sure loss, but would instead letit ride in the hope that the price wouldeventually recover to its original purchaseprice; their anchor point.Realising the loss would only confirmtheir bad decision and they would feel asense of regret. The pain of loss is deeperand more than the joy of gain. Evidently,investors are loss averse. They have apre-disposition to sell winners too earlyand hold on to losers for too long. Thatis clearly not rational behaviour. Oneshould ride the winners and learn to cutlosses. Associated with this is momentuminvesting where smart investors buy intostocks that still have some momentum leftin them. They can exploit this momentumin either direction. They buy into winningstocks that still have momentum andsell stocks artificially kept up by thosenot willing to liquidate their positionor unwilling to take an actual loss. Thehardest thing to do in investment is to cutlosses. Our brain is hard-wired to avoidlosses. As you can see, this psychologicalbias is affecting investment performance.My question therefore is how widespreadis this loss-aversion bias? We should learnfrom both Markowitz and Kahnemanand apply some emotional disciplineto do the right thing when confrontedwith the prospect of loss. This researchhas led many to heed this new field ofbehavioural finance. It would be crucial forfinancial services professionals to increasetheir knowledge of behavioural finance asthere is much to be learned and I wouldpersonally advise financial planners toimprove their knowledge and make theirpresence felt in the marketplace. Just likeremisiers, transaction-based work is notgoing to cut it in the long-term. Peopleneed good financial guidance and adviceand who better to do it than CFP-trainedfinancial planners.The writer, in addition to being a CFPcertificant, holds an economics degree fromthe University of Malaya and an MBA fromEngland’s Cranfield University. He advisesclients in general wealth accumulation andretirement planning using salient tax ideas.He is also a counselor in personal financialmanagement and behavioural finance. Hecan be reached at: kpbose@gmail.comThe 4E Journal 29

INDUSTRYJuly - December 2012The Final Piecein theRetirement JigsawBy Linnet Lee, CFP, IFPLately, there has been much buzzaround retirement and rightly so. Ifyou look at the statistics below onRetirement in Malaysia, 44 percent ofMalaysians expect to continue workingwhilst another 56 percent wants to retirebefore the age 60. And of this 56 percent,majority are either not financiallyprepared to retire or unsure of whetherthey are able to comfortably retire at theage 60.44%continueworking56% Malaysiansretire/want toretire before 6035% notfinanciallyset to retire21%financiallyready toretire44% unsurewhether can retireSixty, it seems, has become the magicnumber for retirement. Meanwhile,Parliament is still deciding on whether toofficially declare it in 2013 for the privatesector. The public sector retirementage is currently set at 58 years old. Theimplication is that more people willhave a longer working life and a shorterretirement. This augurs well for thosewho need the crucial few years to boosttheir retirement savings so that theirgolden years can, well … shine!todayYOUage 47EPF lumpsum +contributionMy RetirementIncome stopsIncomeExpenses:- Fixed- Variable- EmergancySavings:- House- Education- RetirementRetire 55 Death 76How do I plan for my retirement?While there are those who are not ableto comfortably retire, there are also manydiscerning and affluent Malaysians whomay already have their plans in placewith investments put in private equitylocally or even offshore. Some may haveexisting businesses and foundations tofund their retirement, and these are runby fund managers working together withtheir financial planners.In retirementExpenses:- Fixed- Variable- EmergancyHowever, for a regular Malaysian, thescenario is different. Let's look at a personaged 47 retiring at age 55, who only haseight years to retirement. If he were toexpire at age 76, he still has 21 years tolive in retirement. That is all very dandyif you have enough nest egg to retire. Ifyou don't, it can be a total nightmare!Even if you factor in the extendedretirement age of 60, you will have 13years more before you go into retirementfor the next 16 years. It is still shorterproductive years in comparison to yourconsumption years in retirement, but itis certainly better than retiring at age 55.Now let's have a quick crunch ofretirement numbers to see how it all addsup. This is only a quick calculation and ifyou are planning your own retirement,please consult a financial planner for apersonalised calculation which will bemore accurate and relevant to you.30 The 4E Journal

From the quick calculation above,assuming the person is totally dependenton his Employees Provident Fund (EPF) toretire on, it is definitely insufficient.He will definitely need to put inadditional savings of RM3,150 at a rateof return of 10.55 percent to make up forthe shortage if he intends to retire at age55 and enjoy the same lifestyle before hisretirement. To make up for the shortage,retiring Malaysians will have to look atalternative investments.Enter the Private Retirement Scheme(PRS).EPF alone is not enough for retirment :Case StudyCalculationsIncomeRM60,000 per yearEstimated annual increment3% per yearCurrent Age47 years oldInflation rate6% per yearRetirement age55 years oldIncome required after retirement (today’s value) RM60,000 per yearAmount needed at age 55Rm1.1millionLess: current EPF account 1 balanceRM300,000EPF contribution (employee & employer) 23%total value of contributionRM73,500Shortage at age 55 yearsRM485,000The PRS is a voluntary contributionscheme in addition to the compulsorycontribution scheme by EPF. This maywell be the final piece of jigsaw for theretirement puzzle for most Malaysians.The candy in this scheme is theadditional RM3,000 personal tax relieffor contributions to PRS approved by theSecurities Commission (SC).So how does the PRS work? I spoke toCIMB Principal Asset Management Bhd(CIMB-Principal) and its CEO CampbellTupling graciously shared how its schemeworks. Below is the discourse:What is the PRS SchemeStructure?Under CIMB-Principal PRS Plus andCIMB Islamic PRS Plus (PRS Plus), itscontributors are able to choose the fundsaccording to their respective risk appetiteand investment profile (do-it-yourselfapproach). Alternatively, a default fundwill be selected for them according totheir age, after choosing either schemes– CIMB-Principal PRS Plus or CIMB IslamicPRS Plus. Below are the options:CIMB-Principal PRS PlusHow will CIMB-Principal Workwith EmployersThe scheme may require more manpowerby a company’s human resources to runit for its employees, CIMB-Principal haspositioned itself strategically to supportthe PRS so that the company can offerbetter benefits to its employees.CIMB-Principal’s PRS Plus PartnerProgramme services are providedwith no subscription fee or chargeto the employer. In addition, CIMB-Principal will provide on-site visits tothe employers’ premises to reviewadministrative procedures and issues.It also has a designated client relationsmanager for employers’ enquiries and adesignated administrator to handle dailyadministrative issues.CIMB-Principal will also provide onlinesupport services for employers, andthey include reports and statistics ofthe employees participating in theprogramme. Some of the informationincluded in the statistics are averageCIMB Islamic PRS Pluscontribution per employee and theschemes/ funds opted by the contributors.In short, CIMB-Principal will ensure thatits services are well structured, efficientand cost-effective for the employers.It is stated that the contributorcan change PRS providersonce a year. Will there be anyadditional charges to do so?CIMB-Principal may charge a maximumof RM100 “Transfer PRS Provider Fee.”This fee includes the transfer fee ofRM25 charged by the Private PensionAdministrator.Is the service charge anydifferent from the regular funds,if yes, in what way?Similar to existing unit trust fundsoffered by CIMB-Principal, there are salescharge, management fee and trustee feeattached to PRS Plus funds. However, thefees may differ for each class*.For instance, the maximum sales chargefor PRS Plus funds under Class A is 3percent of net asset value (NAV) whilethe maximum sales charge for PRS Plusfunds under Class C is 0.5 percent of NAV.CIMB-Principal PRS Plus Conservative*CIMB-Principal PRS Plus Moderate#CIMB-Principal PRS Plus Growth@CIMB-Principal PRS Plus EquityCIMB-Principal PRS Plus Asia Pacific ExJapan Equity*Default fund for individual age 50 and above# Default fund for individual age between 40 and 50@ Default fund for individual age 40 and belowRefer to footnotes for 2funds’ disclaimerCIMB Islamic PRS Plus Conservative*CIMB Islamic PRS Plus Moderate#CIMB Islamic PRS Plus Growth@CIMB Islamic PRS Plus EquityCIMB Islamic PRS Plus Asia Pacific ExJapan EquityClasses (Class A, Class C and Class X)are created to provide more choices tomembers. Generally, all the three differentclasses created for each fund in PRS Plusare available to the public. However, onemust meet certain terms and conditionsbefore they can contribute into class X.Does the scheme cater for theShariah needs of the Muslimcontributors? Please elaborate.CIMB-Principal has both conventionaland Islamic PRS. Therefore, if end-to-endShariah compliance is a priority for you,you can choose CIMB Islamic PRS Plus.The 4E Journal 31

2 Funds’ Disclaimer:The following are the specific risksassociated with the funds in the schemes: CIMB-Principal PRS PlusConservative (Investments in theFund are exposed to stock specificrisk, credit/default risk, interest raterisk and counterparty risk.)CIMB-Principal PRS Plus Moderate(Investments in the Fund areexposed to stock specific risk,credit/default risk, interest raterisk, counterparty risk, country risk,currency risk and risks associatedwith investment in warrants/options.)CIMB-Principal PRS Plus Growth(Investments in the Fund areexposed to stock specific risk,credit/default risk, interest raterisk, counterparty risk, country risk,currency risk and risks associatedwith investment in warrants/options.) CIMB-Principal PRS Plus Equity(Investments in the Fund areexposed to stock specific risk,risk associated with temporarydefensive positions, risks associatedwith investment in warrants/options, and concentration risk.)CIMB-Principal PRS Plus Asia PacificEx Japan Equity (Investments in theFund are exposed to risks associatedwith investment in the Target Fundand Concentration risk. TargetFund’s risks include stock specificrisk, credit/default risk, interestrate risk, counterparty risk, countryrisk, currency risk, risk associatedwith temporary defensive positionsand risk of investing in emergingmarkets.)CIMB Islamic PRS Plus Conservative(Investments in the Fund are exposedto stock specific risk, credit/defaultrisk, interest rate risk*, counterpartyrisk and reclassification of Shariahstatus risk.)CIMB Islamic PRS Plus Moderate(Investments in the Fund areexposed to stock specific risk,credit/default risk, interest raterisk*, counterparty risk, country risk,currency risk, risks associated withinvestment in warrants/options andreclassification of Shariah statusrisk.) CIMB Islamic PRS Plus Growth(Investments in the Fund areexposed to stock specific risk,credit/default risk, interest raterisk*, counterparty risk, country risk,currency risk, risks associated withinvestment in warrants/options andreclassification of Shariah statusrisk.) CIMB Islamic PRS Plus Equity(Investments in the Fund areexposed to risks associated withinvestment in the Target Fund andConcentration risk. Target Fund’srisks include stock specific risk andreclassification of Shariah statusrisk.)CIMB Islamic PRS Plus Asia PacificEx Japan Equity (Investments in theFund are exposed to risks associatedwith investment in the Target Fundand Concentration risk. TargetFund’s risks include stock specificrisk, counterparty risk, country risk,currency risk, risks associated withinvestment in warrants/options andreclassification of Shariah statusrisk.)CIMB-Principal is one of the eightproviders of the PRS. If you are planningto invest in one, do check out the schemewith the other providers as well anddecide which one suits you best. Youmay want to consider the fee structureover the returns of the fund itself, andthe qualification of the agent or financialplanner servicing you, if don’t alreadyhave one.Do give your retirement plan a goodthought and if you already have one,please review it to ensure that it is ontrack. Remember also to protect yourplan in the event of uncertainties suchas permanent disability or critical illness,to ensure your smooth transition intoretirement.32 The 4E Journal

MARKET OUTLOOKJuly - December 2012A Year ofPolitical ParalysisBy Bernard ChingHead of Research, Alliance Research Sdn BhdElection uncertainty draggeddown performanceThe year 2012 has been a year plaguedby continued uncertainty over the timingof the 13th General Election (GE13)which needs to be held latest by May2013. This has, in part, been a drag onthe performance of the Malaysian equitymarket which has underperformed theregional markets.The benchmark FTSE Bursa Malaysia KualaLumpur Composite Index (FBMKLCI)posted a gain of 5.2 percent for the first 11months of the year when compared withthe 15.2 percent gain posted by the MSCIAsia ex Japan index. It is also the secondworst performer in the region after China(-10 percent).Nevertheless, the FBMKLCI still managedto hit an all-time high of 1,679.37 onOctober 29. Despite the record intra-dayhigh, the market was in a cautious moodas the rally has not been broad base. Thiscan be seen from the decline in FBM SmallCap index, which represents the top 98 ofBursa Malaysia Main Market excluding thetop 100 constituent stocks, by 1.8 percentfor the first 11 months. Despite theuncertainty, what have been supportingthe market were defensive stocks.We have observed that out of the 142.34points gained by FBMKLCI for the first10 months of the year, more than 110.4percent of that was contributed bydefensive stocks with beta less than onewhile cyclical stocks, which typicallyhave beta more than one, contributed-10.4 percent. Of the defensive stocks inthe FBMKLCI, telecommunication stocksalone contributed 72.51 points or 51percent of total gains by FBMKLCI.Nevertheless, the market retreated by62.24 points in November, potentiallydue to profit taking activities as morethan 81 percent of the loss was attributedto defensive stocks which have run upconsiderably year to date (YTD).Defensive stocks chasing hascompressed yieldsAmong the defensive stocks, consumer,telecommunication and real estateinvestment trust (REIT) stocks haveperformed very strongly YTD. TheConsumer Product Index gain of 5.3percent has marginally outperformed the5.2 percent gain in FBMKLCI. While thereare no indices for telecommunicationand REIT sectors, we noted that selectivestocks within these sectors have gained20 percent to 30 percent YTD. This has ledto yield compression.Foreign investors are still netbuyersYear to date, foreign net equity flows intoMalaysia remain positive although foreigninvestors turned net sellers in Novemberfor the first time since June 2012. Basedon the latest data compiled by BursaMalaysia, foreign institutional investorswere net sellers of RM0.3 billion Malaysianequities in November 2012.Cumulatively, net equity flows fromforeign institutional investors haveamounted to RM13.2 billion whencompared with the RM0.8 billion netoutflow over the corresponding periodlast year. Such persistent inflow has ledto the increase in foreign shareholdingin Malaysian equities from 22.7 percentin December 2011 to 23.6 percent inSeptember 2012.Despite uncompelling valuation vis-àvisregional markets, Malaysian equitiescontinue to attract foreign equity flows.This, we believe, is primarily due to: (1)flush liquidity in domestic and globalmarkets as central banks around the worldhave maintained easy monetary policyfor an extended period to spur economicgrowth, (2) investors seeking high yieldinvestments in emerging markets, and (3)better economic prospect in Asia whencompared with advanced economies.1H2013 Market Outlook:Uncertainty to ContinueGE13 remains a key concernJust like in 2012, the Malaysian equitymarket is expected to be dogged bycontinued uncertainty of the domesticpolitical landscape in view of theimpending GE13, which must be heldlatest by May 2013. Such uncertaintyhas resulted in widespread risk aversionamong investors who have largelyavoided cyclical stocks in favour ofdefensive stocks in 2012.Investors may recall that when the 12thGeneral Election (GE12) was called in2008, the FBMKLCI tumbled 8.9 percentbetween the date of dissolution ofParliament (February 13, 2008) and dateof polling (March 8, 2008).We also observed in 2008 that marketprice earnings ratio (P/E) valuationcompressed to the 13x level post-GE12before compressing further to 10x dueto the global financial crisis. This suggeststhat political risks actually knocked off 2xP/E from the FBMKLCI mean valuation of15x. Therefore, based on existing CY2013earnings forecast, the FBMKLCI maypotentially see a 10 percent downside riskto the 1,470 level (13x P/E).The 4E Journal 33

Figure 1: Past Market Performances Upon Calling of General ElectionsGeneralElectionDissolution Date ofParliamentPolling DatePercentage of VotesWon by BNPercentage of SeatsWon by BNFBMKLCI performanceduring the period5th Jun 12-78 Jul 8-78 57.2% 85.1% 16.6%6th Mar 21-82 Apr 22-82 60.5% 85.7% 6.4%7th Jul 19-86 Aug 3-86 57.3% 83.6% -0.8%8th Oct 5-90 Oct 21-90 53.4% 70.6% 1.4%9th Apr 5-95 Apr 25-95 65.2% 84.4% -2.4%10th Nov 11-99 Nov 29-99 56.5% 76.6% 2.9%11th Mar 4-04 Mar 21-04 63.9% 90.4% 2.5%12th Feb 13-08 Mar 8-08 50.3% 63.1% -8.9%Simple average 2.2%Incidence of positive return (%) 62.5%Source: Election Commission of Malaysia, Bloomberg, Alliance ResearchPolitically-linked stocks willcontinue to underperformGiven expected risk aversion amonginvestors in the run up to the GE13, weexpect stocks perceived to be politicallylinkedto be shunned by investors. Pastobservation in 2008 has shown us that theselldown of these stocks can be a lot moresevere when compared with the overallmarket correction.On a positive note, valuations ofthese stocks now are by and large notdemanding when compared with theirrespective historical mean price-to-book(P/B) valuation, indicating that investorsmay already have avoided or pared downtheir stakes in these stocks ahead of theGE13.Trend of corporate earningsdowngrade may continueMalaysia corporate earnings growthmomentum has been waning. Over thecourse of 2012, we have observed thatthe percentage of negative earningssurprises among stocks monitored byAlliance Research has increased from24 percent in 4Q2011 to 39 percent in3Q2012. This streak of disappointingresults has been pretty broad base withautomotive, aviation, plantation, shippingand timber sectors among the consistentunderperformers.As a result, we have also observed thatthe free float weighted CY2013 consensusearnings of FBMKLCI have been cut sinceAugust 2011 by 8.1 percent. We wouldnot be surprised to see the continuingtrend of this earnings cut going into2013. Of particular concern is the factthat 39 percent of CY2013 earningsgrowth comes from the finance sectorwhich may face downside risk due to:(1) weaker loans growth, (2) net interestmargin compression, and (3) dissipatingeffect of low loan loss provision due to fullimplementation of Financial ReportingStandards (FRS)139 in 2012.U.S. fiscal cliffOn the external front, the politicalwrangling in the U.S. Congress to avoidthe fiscal cliff on January 1, 2013 remains aconcern to investors. The U.S. fiscal cliff is aproduct of the failure of the U.S. Congressto reach a consensus on the federal budgetduring the debt ceiling negotiationstwo years ago which culminated in theenactment of the Budget Control Act of2011 as a stop-gap measure.Now, both sides of the political divide inthe U.S. Congress have to sit down againto iron out any disagreement over themanner in which federal budget shouldbe cut. Failure to reach a consensus willresult in automatic spending cut and taxincreases.Among the major components of thetax increases are the expiration of theBush era tax cuts (US$180 billion) andthe reversion of the Alternative MinimumTax (AMT) thresholds to their 2000 taxyear levels which will cause an increaseof US$120 billion worth of tax increases.On the spending side, a major reductionis seen for both defence and non-defencediscretionary spending with cuts totallingto US$110 billion.While we expect the fiscal cliff will beavoided as both political parties iron outa deal before the expiry date, there stillremains the possibility that continuedpolitical wrangling will lead to a failure toresolve the pressing matter.If this were to be the case, with a fiscalshock amounting to around US$720billion or approximately 4.6 percentof total gross domestic product (GDP),the U.S. economy will likely fall into arecession in 2013.In a recent research report, the nonpartisanCongressional Budget Officeestimated that U.S. growth would likelycontract by 0.5 percent in 2013 (asmeasured by the change from 4Q2012 to4Q2013) if the full fiscal cliff is not averted.Needless to say, a significant slowdown inthe U.S. bodes ill for an export-dependenteconomy such as Malaysia.34 The 4E Journal

x3025Figure 2: Market P/E May Compress to 13x on Election FearMarke t P/Ecom pres sed to 13 xpos t GE1220151051990199119921993199419951996199719981999Global fin ancial crisiscom pres sed mar ketP/E furthe r to 10x20002001200220032004Source: Alliance Research200520062007200820092010201120122H2013 Market Outlook: Backto Fundamentals Post-GE13Return of cyclical play post-GE13Although the outcome of the GE13 isanybody guess and the market maystill be affected by any “surprises” in theelection results, we are optimistic thatfundamental play will return post-GE13as we believe investors will look pastpolitics and focus on macro and microfundamentals going forward.Based on our observation of the “shock”election results in GE12, the FBMKLCI hasindeed been sold down by investors. Here,we compared the relative performanceof the FBMKLCI with the Morgan StanleyCapital International (MSCI) Asia ex Japanindex. We noted that the FBMKLCI hasunderperformed the MSCI Asia ex Japanindex by 4.9 percent for the first threemonths post GE13. After three months,the relative performance of FBMKLCInormalised, indicating that stock marketperformance over the medium andlonger term is not affected by politicalshocks, though policy change as a resultof political shock may have a lasting effect,for example, the deadlock in the Selangorwater sector consolidation.For the upcoming GE13, we believeexpectation levels are much lower nowand investors are a lot more cautious.While the incumbent governmentcontinues to strive to recapture thecustomary two-thirds majority in theParliament, we believe failure to do so willnot be a shock to the market due to thelow expectation now.On the other hand, we believe the marketmay react negatively in the short-termin the event of: (1) the loss of a simplemajority in the Parliament by the rulingBarisan Nasional (BN) coalition, and/or(2) the loss of control over more stateassemblies by BN beyond Kelantan,Kedah, Penang and Selangor.As such, regardless of the electionresults, we believe investors will switchfrom defensive stocks to cyclical stockspost-GE13, though timing depends onthe GE13 results. A status quo electionresults or a better showing by BN maysee market re-rate immediately post-GE13. On the other hand, should therebe any “surprises,” the market may tumblebut we expect this to last no longer thanthree months. Thereafter, the marketwill normalise and investors will focuson market fundamentals and may alsoswitch to cyclical stocks which offer bettervaluation and growth potential.Domestic economy will remainresilient amid a two-speedglobal economyWith the GE13 done and dusted by 2H2013,investors will focus on fundamentals andthe picture is certainly promising here.Despite a two-speed global economywhere growth in advanced economiesis expected to be anaemic due to fiscalconsolidation and high unemployment,emerging economies including Malaysiashould be growing at a decent pace,underpinned by resilient domesticconsumption.We estimate Malaysia to grow at 5 percentin 2013, a marginal slowdown froman expected 5.2 percent GDP in 2012.Growth is expected to come from bothprivate consumption and investment,brought about by the various incentivesannounced during Budget 2013 as wellas other factors such as a healthy labourmarket, steady income growth as well asan accommodative monetary policy.Figure 3: Impact of Shock GE12 Results on Relative Market PerformanceFBMKLCI MSCI Asia ex Japan12011010090807060Under p erfo rm edduring first 3 monthsafter 12GENormalisedafter 3monthsOutper for m ed in duringglobal financial crisis dueto defe n sive natu re ofMalaysian equities5040Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Source: Bloomberg, Alliance ResearchThe 4E Journal 35

CompanyCallTargetPrice(RM)Share Price(RM)MarketCapitalisation(RM million)EPS Growth (% ) P/E (x) P/BV (x) ROE (% )Net DividendYield (% )CY12 CY13 CY12 CY13 CY12 CY13 CY12 CY13 CY12 CY13Deleum Buy 2.39 1.78 267.0 41.6 6.5 6.5 6.1 1.0 0.9 15.5 15.2 7.4 7.9Kim LoongResourcesNeutral 2.65 2.30 709.9 -7.1 -8.5 8.2 8.3 1.3 1.3 16.4 15.9 6.6 6.7MCIL Buy 1.43 1.13 1,906.6 3.8 3.3 9.8 9.5 2.3 2.6 23.5 27.5 6.4 6.3StarPublicationsNeutral 2.74 2.89 2,134.4 -20.4 13.6 14.4 12.6 2.0 1.9 13.7 15.1 6.2 6.2Maxis Neutral 6.70 6.44 48,303.6 -21.4 8.4 24.3 22.4 6.8 7.8 28.1 34.6 6.2 6.2MPI Neutral 2.90 2.56 537.3 -94.1 2,198.4 465.6 20.3 0.7 0.7 0.2 3.7 3.9 5.9Maybank Neutral 8.71 9.06 76,466.1 11.3 -1.4 12.5 12.7 1.8 1.8 14.5 13.8 5.9 5.8BerjayaSports TotoUnisemNeutral 4.13 4.43 5,985.1 9.0 3.7 14.1 13.6 10.5 8.9 74.5 65.0 5.6 5.8TradingBuyFigure 4: Stocks under coverage with CY2013 yield of more than 5 percent1.32 0.87 583.2 -157.0 407.1 -51.8 16.9 0.5 0.5 -1.1 3.3 2.9 5.8Media Prima Neutral 2.52 2.24 2,418.3 3.1 4.8 11.2 10.7 1.7 1.6 14.8 14.6 5.4 5.6Carlsberg Neutral 13.12 12.86 3,961.9 12.6 8.1 19.6 18.2 16.3 16.0 85.0 90.4 4.9 5.4Source: Alliance Research Share price date: December 7, 2012While weak trade-related sectors mayhave been impacted by the poor externalenvironment, we remain confident thathigher levels of domestic consumptioncould still help support any shortfalls inthe near term. In this regard, we expectdomestic demand to expand by 7.8percent year-on-year (y-o-y) (2012e:11.6 percent). This will be supported bya domestic consumption growth of 6.4(2012e: 7.7 percent) while continuedimplementation of the EconomicTransformation Programme (ETP) projectsis expected to support investment growthof 10.9 percent (2012e: 22.1 percent).Therefore, we expect the domesticeconomy to either bottom-out by 1Q2013or mid-2Q2013. In anticipation of a pickupin trade activity and a calmer sentimentafter GE13, we expect the rebound to gaintraction from 3Q2013 onwards, but stillbelow the pre-crisis levels. Unsurprisingly,the construction sector will likely benefitthe most from the ETP investments, withan expected growth rate of 11.5 percentin 2013 (2012e: 19 percent).While construction itself constitutes arelatively small 3.6 percent of total GDPcompared to services and manufacturingsectors, the multiplier effect attained fromthis sector is high given its linkages toother major sub-sectors of the economy.CompanyCallTargetprice (RM)Shareprice (RM)Fiscal reform to resumePost-GE13, we expect a slew of fiscalreform to be implemented in orderto address growing concern over thenation’s budget deficit and growing debtlevels. Some of the reforms which will beimplemented include: Minimum wage plan Subsidy rationalisation Implementation of goods andservice tax (GST)The implementation of these measureswill put the nation’s fiscal position in abetter shape and aid the transformationof Malaysia into a high-income nation overthe long-term. But these measures willraise inflation rate to 2.5 percent (2012e:1.8 percent) as well as dampen consumersentiment in the short-term.Sectors which may be negativelyimpacted by these reforms are thosewhich are labour intensive (glove,plantation, and construction), energydependent (building materials) andconsumer sentiment driven (consumer,property, and automotive).StrategyEnd-2013 FBMKLCI target at 1,700Assuming that Felda and Astro will beFigure 5: Top Picks for 2013MarketCapitalisation(RM million)CY2013 P/E(x)CY2013 P/B(x)included into the FBMKLCI in place ofMalaysia Marine & Heavy Engineering(MMHE) and AirAsia at the December 13index review, we estimate the free floatweighted net profit of FBMKLCI to growby 11.6 percent in 2013 vs 8.4 percent in2012.The projected earnings growth ismainly contributed by finance (39percent), utilities (17 percent) andtelecommunication (17 percent) sectors.Based on mean market P/E of 15x, ourend-2013 FBMKLCI target will be 1,700,implying a 4 percent upside from currentlevel.Prefer bottom-up stock pickingGiven near-term downside risk of 10percent to the 1,470 level in view of theGE13 and an unexciting broad marketupside of 4 percent to the 1,700 level,we believe stock picking is important foroutperformance in 2013. Therefore, weprefer to adopt a bottom-up approach inour equity strategy.While defensive stocks remain a focusof investors in the run up to the GE13,we believe the upside potential is notcompelling. We set out in Figure 4 stocksunder coverage which are projected tohave net dividend yield of more than 5percent in CY2013.CY2013 Yield(% )SapuraKencana Strong Buy 4.07 2.79 13,962.2 19.3 2.1 1.0 √Perisai Strong Buy 1.39 1.07 911.4 10.0 1.6 0.0 √Rationale for Stock SelectionValue Growth ThematicRHB Capital Buy 9.05 7.55 18,831.3 8.6 1.1 2.7 √ √Gamuda Buy 4.77 3.57 7,441.8 11.8 1.7 4.2 √ √Kossan Buy 4.09 3.29 1,051.9 8.7 1.6 3.0 √ √AirAsia Buy 3.40 2.76 7,672.5 9.6 1.3 1.8 √ √Multi-Purpose Strong Buy 4.21 3.62 5,204.7 12.4 1.5 4.6 √Source: Alliance Research Share price date: December 7, 201236 The 4E Journal

Using our bottom-up approach, we lookfor stocks which have value, growth and/or thematic propositions in 2013. In thisregard, our top picks are SapuraKencana,Perisai, RHB Capital, Gamuda, Kossan,AirAsia and Multi-Purpose.Top BuysSapuraKencana Petroleum (Strong Buy,TP: RM4.07)SapuraKencana is our top pick for the oiland gas sector. With a recent RM6 billiondeal announced to purchase Seadrill’stender rig fleet, its four-year earningscompound annual growth rate (CAGR) isgoing to be close to 50 percent. Valuationwill also become extremely palatable atas low as 13.7x on FY2014 prospectiveearnings per share (EPS) (assuming theacquisition to drilling rigs from Seadrill iscompleted) especially when comparedto large cap listed oil and gas serviceprovides trading in excess of 20x. Armedwith the industry’s largest order book ofRM20 billion, we have a STRONG BUY callon SapuraKencana with a TP of RM4.07.Perisai Petroleum Teknologi (StrongBuy, TP: RM1.39)Perisai is our top small cap pick for the oiland gas sector. FY2012 is set to see recordy-o-y core EPS growth of 114 percent andthis will bring the P/E valuation down to anattractive 9.6x. For future growth, Perisai isinvesting in a floating production, storageand offloading (FPSO) facility which isbacked by a RM830 million contract anda new rig to be delivered in 2QFY2014.Inclusive of share dilution from theFPSO deal and also an upcoming privateplacement, growth will still be strong atmore than 30 percent in FY2014 onwards.We have a STRONG BUY recommendationon Perisai with a TP of RM1.39. We expectthe group to continue on its acquisitiontrail. A second rig might be purchased in1Q2013.RHB Capital (Buy, TP: RM9.05)Given RHBC’s (1) significantunderperformance on YTD basis, (2) lowforeign shareholdings, (3) compellingvaluation, and, (4) strong earningsprospects, we believe that the group isemerging as a solid defensive yet attractiveplay. With the removal of implied cap priceof RM7.95 post the completion of OSKInvestment Bank acquisition, we believethat the low valuations attached to thegroup are no longer justifiable. We aremaintaining our BUY recommendationwith a target price of RM9.05. Our targetprice implied a 1.4x FY2013 P/B and 13.6percent return on equity (ROE) basedon our Gordon Growth valuation model.RHBC remains our top pick for exposureto the domestic banking sector.Gamuda (Buy, TP: RM4.77)Earnings momentum for the mass rapidtransit (MRT) tunnelling works shouldpick up in FY2013 before hitting full steamin FY2014. We believe that Gamuda is ina prime position to bag the tunnellingcontracts for the remaining two lines as ithas a cost advantage over its competitors.Another potential job is the SouthernDouble Track. Property sales could verywell hit another record year in FY2014.Maintain BUY with RM4.77 TP. Gamuda iscurrently trading at FY2013 P/E of 12.8x,almost half its long-term historical meanP/E. We believe share price performancehas been affected by GE13 uncertainty.In view of the impending GE13, latest byMay 2013, we believe Gamuda will be reratedthereafter.Kossan Rubber Industries (Buy, TP:RM4.09)Kossan is our top pick in the glove sectoras we anticipate multiple re-ratingcatalysts to crystallise in 2013 amidimproving sector fundamental. Theseinclude: (1) turnaround of its cleanroomdivision which is expected to startcontributing positively to the groupbottom line in FY2013 (4-5 percent ofprofit after tax (PAT), (2) potential businessventure (glove and/or technical rubberproducts) in Indonesia with a strong localpartner, (3) potential corporate exercise(for example, bonus issues, free warrants)that could improve its shares tradingliquidity, and (4) higher dividend payoutvia better capital management. Hence,we reiterate our BUY call on Kossan andexpect it to outperform its peers in 2013,underpinned by its attractive valuationand laggard performance in 2012.AirAsia (Buy, TP: RM3.40)We remain positive on the fundamentalsand growth prospects of AirAsia, despiterecent hiccups. While competition willintensify going forward with the entryof new players and industry capacityexpansion, AirAsia’s cost leadershipand low breakeven load factor providesufficient buffer during such challengingtime.Various growth opportunities lie aheadfor AirAsia, including: (1) more ancillaryincome streams and (2) the opening ofnew KLIA2, which will accelerate AirAsia’spassenger growth. As such, we reiterateour BUY call on AirAsia with an unchangedTP of RM3.40. We see opportunity forlong-term investors to accumulate AirAsiaat an undemanding core CY2013 P/E of9.6x now.Figure 6: Sector WeightingOverweight Neutral UnderweightConstruction Automotive PropertyGamingAviationGloveBanksOil & Gas Building MaterialsConsumerMediaPlantationREITTechnologyUtilitiesSource: Alliance ResearchMulti-Purpose Holdings (Strong Buy,TP: RM4.21)We are maintaining our STRONG BUY onMulti-Purpose Holdings (MPHB) with atarget price of RM4.21. We applaud themanagement’s initiatives to undertakethe proposed demerger exercise sinceit serves to crystallise the shareholder’sfunds through unlocking the deep valueof its assets.Despite the relatively outperformanceof the group’s share price since unveilingits demerger exercise, we observe thatthe valuation gap between the currentshare price and its intrinsic value hasnot closed significantly, which providesaccumulation opportunities.As our top pick for the gaming sector,MPHB provides thematic plays to thepotential domestic gaming liberalisation,capital management and crystallisation ofhidden asset values.The 4E Journal 37

CFP CERTIFICATIONGLOBAL UPDATESJuly - December 2012FPSB Joins IOSCO As Affiliate MemberWales: The Financial Planning StandardsBoard (FPSB), owner of the internationalCERTIFIED FINANCIAL PLANNERcertification programme, announced todaythat it has been approved as an affiliatemember of the International Organisationof Securities Commissions (IOSCO), theinternational standard setter for securitiesmarkets. FPSB submitted its applicationfor membership for consideration by theIOSCO Board of Directors at its October2012 meeting in Madrid.“As an international standards organisationfor the securities sector, IOSCO is makingdecisions on various issues that couldimpact the practice of financial planningand the role of financial planningprofessional bodies around the world,” saidNoel Maye, CEO of FPSB. “As the non-profit,professional standards-setting body forthe global financial planning community,FPSB will bring the perspective of over140,000 CERTIFIED FINANCIAL PLANNERprofessionals to the debate on issues suchas investor protection and standards ofconduct for financial intermediaries.”“We are pleased to welcome FPSB as anAffiliate member of IOSCO,” said DavidWright, Secretary-General of IOSCO. “FPSBwill bring a global professional financialplanning body perspective on the issuesfaced by the consumers of financialadvisory services and financial planning toIOSCO debates.”In 2011 and 2012, FPSB representedthe interests of consumers of financialplanning in its responses to IOSCO’sTechnical Committee Standing Committee3, which sought comment on proposedsuitability principles for the regulation ofcomplex financial products.In 2010, FPSB published a position paperentitled Regulation and Oversight of theFinancial Planning Profession, in which itproposed four major tenets for overseeingfinancial planning around the world.In its successful bid for IOSCO membership,FPSB noted that it could serve as a globalresource for regulators and professionalfinancial planning bodies seeking toestablish recognition for, and regulationor professional oversight of, financialplanners. Along with its memberorganisations, FPSB shares a publicinterestmission with governments, andis ready to work collaboratively to designappropriate regulation, oversight modelsand standards for the financial planningprofession.Austrian and German CFP Professionals ReportIncreases in Compensation and Client Base AfterReceiving CFP CertificationWales: A joint research project by FPSBand Cerulli Associates, a financial servicesresearch firm with offices in the U.S.,Britain and Singapore, shows that CFPprofessionals in Austria and Germanyare overwhelmingly satisfied with theircertification.In addition, the research found that CFPprofessionals in those countries increasedboth their compensation and their clientbase after receiving their CFP certification.The studies in Austria and Germany are thefirst results of a global research project nowunderway by FPSB and Cerulli Associates.In Austria, 60 percent of the CFPprofessionals surveyed reported beingsatisfied, or significantly satisfied, withtheir certification. In Germany, the numberwas higher, at nearly three quarters (72percent). CFP professionals in both Austriaand Germany reported increases in theircompensation (62 percent for Austria and70 percent for Germany), as well as anincrease in their client base (55 percent forAustria and 42 percent for Germany), in the12 months following CFP certification. Atotal of 178 Austrian CFP professionals and599 German CFP professionals participatedin the surveys. Further results can be foundat www.fpsb.org.“We wanted to determine the extent towhich CERTIFIED FINANCIAL PLANNERcertification helped advance careers andincreases job satisfaction among financialplanning professionals,” said FPSB CEONoel Maye. “With Cerulli Associates, wehave a partner whose deep knowledge ofthe global financial services industry willhelp us gather data and develop insightsthat will allow us to clearly communicatethe value and benefits of CFP certificationin a variety of financial planning practicesettings around the world.”FPSB and Cerulli formed their globalresearch partnership to understand theimpact of CFP certification on the careersof more than 140,000 CFP professionalsworldwide. The research, which beganin July with FPSB member organisationsin Austria, Germany and Britain, providesterritory-specific data that will beaggregated eventually to provide anunprecedented global snapshot of the CFPcertification program. The British surveyclosed on October 5, 2012 and the resultsare still being analysed.“This project marks the first time Cerulli orany firm has studied the impact of the CFPcredential at the global level,” said BingWaldert, Director at Cerulli Associates. Weare very interested to learn more aboutthe practice of financial planning aroundthe world, and the influence of CFPcertification on the careers of professionalsin many different adviser markets.”FPSB and Cerulli Associates will continuea phased approach in conducting theresearch, and will include FPSB Memberterritories as they are ready to execute thesurveys among their CFP professionals. Thenext round of research, which will takeplace in Q42012, will likely include CFPprofessionals in Ireland, the Netherlands,Brazil and South Africa. The research willto continue well into 2013, with a globalanalysis done by the end of next year.38 The 4E Journal

Why CanadiansFail to PlanToronto: Most Canadians know thatfinancial planning is good for them, yetfar too many fail to act on their bestintentions. Why is that? Financial PlanningStandards Council (FPSC®) asked CERTIFIEDFINANCIAL PLANNER®/CFP® professionalsto weigh in on this question.“Confusion, procrastination and somelong-standing myths continue to beserious roadblocks standing in the wayof Canadians bringing more financialplanning into their lives,” TamaraSmith, Vice-President of Marketing andConsumer Affairs, FPSC said. “We askedCFP professionals to weigh in because theyinteract with Canadians every day andhave first-hand experience talking to themabout financial planning.”This survey is one of many initiatives FPSCis spearheading during the lead up toFinancial Planning Week to bring to lightthe importance of individuals engagingin financial planning for the betterment oftheir lives.Earlier this fall, FPSC surveyed CFPprofessionals across Canada invitingthem to share why they think too manyCanadians fail to engage in financialplanning. The following are the sevenhighest ranked statements in which CFPprofessionals provided a rating of seven orhigher on a 1-10 scale (with 10 indicatingvery strong agreement).FPSB Explores Potential forFinancial Planning in theMiddle EastDenver: FPSB will take advantage ofDubai as the location for its semi-annualglobal meeting from April 23-27, 2012 toexplore opportunities for bringing FPSB’sglobal financial planning standards andCFP certification programme to theMiddle East. FPSB’s Dubai event marksthe organisation’s first time to hold oneof its global meetings in the region.With member organisations in 24territories representing more than140,000 CFP professionals around theworld, FPSB’s mission is to benefit theclients and potential clients of financialplanners by establishing, upholdingand promoting worldwide professionalstandards for financial planning.FPSB’s global gatherings bringtogether FPSB’s Board of Directorsand the leadership of FPSB’s memberorganisations to develop policies andstandards for the global practice offinancial planning, evaluate trendsaffecting the financial planningprofession, and discuss issues andinitiatives relating to oversight of thefinancial planning profession, financialliteracy and career paths for financialservices practitioners looking to becomeprofessional financial planners.Q:What do you think are the biggest reasons Canadians fail to have afinancial plan?Statement1. They think financial planning is only about investing orretirement2. They are too busy and fail to make it a priority% of CFP Professionals WhoRated This 7 or Higher86%85%FPSB’s global gathering in Dubai willfollow a series of meetings organisationrepresentatives will have with financialservices organisations in Saudi Arabiaand the United Arab Emirates, at whichFPSB will discuss the potential for thedevelopment of a financial planningprofession in the Middle East. FPSB’s CFPcertification programme, recognisedas the global symbol of excellence infinancial planning, requires individualsto meet rigorous competency, ethics,experience and practice standards todeliver financial planning to clients. CFPprofessionals embrace a Code of Ethicsthat requires them to place their clients’interests first during financial planningengagements.“FPSB’s mission is to benefit consumersby establishing rigorous standards forthe financial planning profession, andwe believe we have a lot of experienceand know-how to bring to the MiddleEast region,” said Karen Schaeffer, CFP,FPSB Board Chairperson. “We’re lookingforward to engaging with financialservices regulators, educators and firmsto learn more about the region’s needsand the opportunity for collaborationwith FPSB and our network of memberorganisations.”“Each year in FPSC's Value of FinancialPlanning study, we see that thoseCanadians who engage in comprehensivefinancial planning feel further ahead intheir financial and emotional wellbeingthan those who do not.3. They don’t realise the value financial planning couldhave on their life4. They procrastinate and think they have plenty of time5. They think financial planning is about ‘numbers’ anddon’t realise it’s for life goals6. They think they have to be wealthier to merit having afinancial plan7. They think if they have an RRSP or some investmentsthen they havea financial planOther issues included:83%82%80%75%74%They know it’s good for them but fail to act on intentions (64%)They don't know how to get started (66%)They don't know who to engage for help (64%)They fear the process will be complicated (69%)They are embarrassed and uncomfortable talking about finances with a planner (58%)The more than 3 million Canadians whowork with CFP professionals can likelyattest to this experience but it’s theCanadians who have not yet embracedfinancial planning that we need to reach,”Smith said.In congruence with the theme of FPSC'sconsumer outreach campaign for FinancialPlanning Week (It’s About Time), she added:“Failing or delaying planning is too costly amistake to make. We urge Canadians to puttime on their side this Financial PlanningWeek.Engage, take action and bring morefinancial planning into your life.”The 4E Journal 39

INDUSTRYJuly - December 2012FPAM Signs MOU on Academic Collaborationwith UTARFPAM and Universiti Tunku AbdulRahman (UTAR) signed a memorandumof understanding (MOU) for academiccollaboration in the field of financialplanning on August 17, 2012.The collaboration involves incorporatingmodules of the Certified Financial Plannercertification programme into programmesconducted by UTAR under its Faculty ofBusiness and Finance.The MOU would not only provide UTARgraduates with greater career options butalso encourage the sharing of information,learning resources and other activitiesin the areas of financial planning and theparticipation of industry practitioners inteaching programmes. The ceremony wasattended by representatives from bothFPAM and UTAR.FPAM was represented by its president, WongBoon Choy while UTAR was represented byits vice-president of internationalisationand academic development, Professor EweHong Tat at the ceremony.Sabah ChapterThe FPAM Sabah Chapter organised a fullday seminar entitled “Formulating EffectivePortfolio Management Strategies” in November2012 in Sandakan. The speaker for the eventwas Dr. Ch’ng Huck Khoon.Dr. Ch’ng sharing his knowledge.Participants at the seminar in a group photo with the speaker.40 The 4E Journal

Melaka ChapterAKPK Power Mandarin seminarAKPK Power Mandarin seminarCPE Course: Technical Analysis – from conceptual to practicalCFP Certification Programme Classes - M3 & M4PRS ForumFPAM and the Malaysian Financial PlanningCouncil (MFPC) jointly organised a forumon private retirement scheme (PRS) inMalaysia on September 6, 2012. The guest ofhonour for the forum was Deputy Ministerof Finance Senator Datuk Ir. Donald Lim.Theforum was attended by 221 members.The speakers at the forum were:Goh Ching Yin – Briefing on PrivateRetirement Scheme (PRS) & otherinvestor protection issuesAlfred Sek – Effective DistributionChannels and Promotion of PRSAnthony Siau – Investment Criteria ofPRS that Influence Returns of PRSDatuk Syed Othman Alhabshi – PRS: AShariah & Academic PerspectiveAhmad Zakie Ahmad Shariff – FiMM’sRole in Regulating the PRS Distributorsand Consultants(L-R): Vincent Kwo (President of MFPC), Senator Datuk Ir. Donald Lim, Ahmad Zakie Ahmad Shariff (CEO of FiMM) and Wong Boon Choy (President of FPAM).The 4E Journal 41

PRS Roadshows & SeminarsFPAM participated in the PrivateRetirement Scheme (PRS) roadshows andseminars conducted by Money Compassmagazine which were held from October 5to November 2, 2012. The roadshows andseminars were held in various towns all overMalaysia.FPAM’s chapters also participatedin the roadshows and seminars held inPenang and Sandakan.Patricia Chow, FPAM’s acting CEO, receiving a token of appreciation from Deputy Minister of Finance Senator Datuk Ir. Donald Lim for FPAM’sparticipation in the roadshows and seminars.Ricky Khoo (extreme right) from FPAM’s Penang Chapter receiving a token of appreciation for participating in the PRS roadshow and seminar.Sabah Chapter members participating in the roadshow in Sandakan.42 The 4E Journal

Programmes are subject to changes. Course will be cancelled if dateof course coincides with the 13th General Election date.CE COURSESWEALTH MAXIMIZATION THROUGH TAX PLANNING(A Securities Commission CPE-accredited course)10CE10CPECode ofEthics10CPDSpeaker:KP Bose DasanDate: January 12, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by January 1,2013Normal – RM320 (FPAM Member), RM450 (Public)MANAGEMENT FOR PRACTICAL INVESTMENT(A Securities Commission CPE-accredited course)10CE10CPE10CPDSpeaker:Dr. Ch’ng Huck KhoonDate: February 21, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:30PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by February 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)ESTATE PLANNING CASE STUDIES FOR THE HIGH NET WORTH(A Securities Commission CPE-accredited course)10CE10CPE10CPDSpeaker:Azhar Iskandar HewDate: March 2, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by March 1,2013Normal – RM320 (FPAM Member), RM450 (Public)WHAT TO INVEST NOW? PORTFOLIO MANAGEMENT IN TRYING TIME(A Securities Commission CPE-accredited course)10CE10CPE10CPDSpeaker:Phua Lee KerkDate: March 2, 2013Venue:Harbour View Hotel,Kuching, SarawakRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM200 (FPAM Member), RM250 (Public)Payment by February 15, 2013Normal – RM250 (FPAM Member), RM30 0 (Public)FOREIGN EXCHANGE AND DERIVATIVES STRATEGIES: INSTRUMENTS AND PRACTICAL SOLUTION FOR PRIVATES CLIENTS(A Securities Commission CPE-accredited course)10 10CE CPE10CPDSpeaker:Ding Lai HongDate: March 23, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by March 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)ANTI-MONEY LAUNDERING (AML) FOR FINANCIAL PROFESSIONAL(A Securities Commission CPE-accredited course)10 10CE CPE10CPDSpeaker:David MathewDate: 20 April 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by April 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)UNDERSTANDING & INTERPRETING FINANCIAL STATEMENTS(A Securities Commission CPE-accredited course)10CE10CPECode ofEthics10CPDSpeaker:Thye Foot LeongDate: May 18, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:00PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by May 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)RISK AND RETURN AND MODERN PORTFOLIO THEORY(A Securities Commission CPE-accredited course)10 10CE CPE10CPDSpeaker:Dr. Ch’ng Huck KhoonDate: June 5, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30AM – 9:00AM9:00AM – 5:30PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by June 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)INVESTMENT PLANNING IN THE CURRENT ECONOMIC CLIMATE(A Securities Commission CPE-accredited course)10CE10CPE10CPDSpeaker:Wee Hun Been & Yeo Chee WeiDate: June 22, 2013Venue:Dewan Berjaya, Bukit Kiara Equestrian & Country ResortJalan Bukit Kiara, 60000 Kuala LumpurRegistration:Time:Fee:8:30 AM – 9:00 AM9:00 AM – 5:00 PMEarly Bird Special – RM280 (FPAM Member), RM400 (Public)Payment by June 1, 2013Normal – RM320 (FPAM Member), RM450 (Public)The 4E Journal 43

Unit 305, Block A, Phileo Damansara I, Jalan 16/11, off Jalan Damansara,Seksyen 1646350 Petaling Jaya, Selangor Darul Ehsan