IN THE first article in our series on Your Personal Journey to Financial Security, we explored the benefits of investing as a way to ensure a solid future for yourself and your loved ones.
We explained how it was a more dynamic strategy for your money, instead of simply saving it in a basic savings account or a fixed deposit account. Hence, you need to:
· Know your financial goals
· Evaluate your current financial status and understand the benefits as well as the risks involved in investing
· Develop a financial plan
Once you have made the decision to invest in the first place, it is important that you learn how to be an informed investor. Being well-equipped with the necessary knowledge increases your chances of being successful in investing. You will also need to be aware of market developments. To do this, you need to analyse and evaluate the markets that your investments are invested in.
The two paths
There are two options available to you once you have made the decision to invest: you can choose the DIY option, where you take the time to study each stock, and seek out a brokerage firm or platform that will allow you to build your own portfolio.
However, there are several disadvantages to this. Not only is this time-consuming, but it also comes with increased responsibilities and worries. On your own, you will be more sensitive to shifts in the market, and may be pressured into buying or selling the wrong thing at the wrong time. In addition, certain investment products may be out of your reach, or you may be required to put up more capital than you are comfortable with.
The second option offers a safer investment experience, where you choose to seek professional assistance in order to help you make the best decision. This means engaging the services of a Unit Trust Consultant (UTC), or a professional fund manager at a Unit Trust Management Company (UTMC) or at a funds distributor, such as at an Institutional Unit Trust Adviser (IUTA), who can help you in your journey.
The right tools for the right job
To explain the benefits of seeking out a UTC, we spoke to three experts from the Federation of Investment Managers Malaysia (FIMM) – Shahrul Nizam Zainol, Senior Manager, Professional Development & Services; Lim Foong Ying, Senior Manager, Research & Analytics; and Jegatheesan Govintharaj, Senior Manager, Legal & Regulatory Affairs.
According to Jegatheesan, a UTC has two main tasks. “They are to assist investors/clients in establishing their investment objectives, and propose suitable unit trust fund(s) based on the risk appetite of each investor/client, by upholding prescribed ethical standards and professional conduct,” he said. “In addition, they should provide prompt, efficient and continuous service to investors/clients.”
In short, a UTC has the necessary skills, relevant experience and dedicated resources to help you with your investments. They can help guide you towards your financial goals by helping you choose the right funds that suit your needs.
In addition, they can introduce investors to Unit Trusts that invests in investment assets/options that would otherwise be inaccessible to a DIY investor, vastly increasing your investment opportunities.
If you feel any hesitation about placing your trust – and your money – in the hands of another person, you can rest assured that legitimate UTCs are bound by FIMM’s Code of Ethics.
Shahrul explains: “A good UTC should have the following characteristics: honesty and integrity, professionalism, acting in the best interest of investors, deal with investors in good faith, comply with all requirements, avoid any conflicts of interest, provide accurate, timely and adequate information, and maintain investor confidentiality.”
All these are meant to ensure that the UTC’s ultimate duty is to help you reach your financial goals in the best way possible. Similar requirements are also applicable to the Private Retirement Scheme (PRS) Consultants (PRC).
The benefits of choosing a UTC
First-time investors, or those who have a particular financial goal in mind, would especially benefit from the advice that a UTC can provide. Their job is to educate you and help guide you along your journey.
Both Shahrul and Lim agree that a UTC can deliver a more “personal touch, especially for investors that are new to or less literate in UTS/PRS.”
And how easy is it to find a UTC? According to Shahrul: “Investors can engage a UTC via the UTMC, IUTA or even search for one themselves on the internet or through social media.”
It is important to keep in mind that all UTS and PRS Consultants are required to be registered with FIMM prior to marketing and distributing UTS/PRS. And it is easy to find out if your UTC is legitimate.
As Jegatheesan explains: “Anyone can check if a person is registered with the FIMM via FIMM’s website by merely searching for their name or registration number.” He adds that it is equally easy to reach out to FIMM should you wish to make enquiries or complaints regarding consultants, by emailing firstname.lastname@example.org or email@example.com.
This allows you to have a safety net while you embark upon your investment journey, and assures that all your interests are safeguarded.
Soothing lingering doubts
Admittedly, there are various channels to buy Unit Trusts, and investors who feel that they do not need advice may opt for DIY without having to pay a sales charge or advisory fees.
In addition, one of the most common reasons for people not wanting to engage a UTC has to do with the increasing amount of freely-available investment information over the internet.
Lim says the most common excuse is that “the new generation is savvy with technology and financial knowledge, and prefers moving towards online investing (or DIY) that is convenient and incurs lower costs.”
However, she has one major counterpoint against that argument – the fact that UTCs themselves are constantly upgrading their skills and can provide a wealth of resources that those doing DIY may lack.
“As investors become more aware of personal wealth management, continuous efforts in upskilling consultants in advisory (goal-based investing) and client servicing (after-sales service) will add value and bring confidence to investors,” she says.
Regarding the issue of costs, in the form of consultant fees, both Shahrul and Lim indicated that: “All fees are clearly disclosed in the funds’ offering documents (i.e. prospectus), which is lodged with the Securities Commission Malaysia (SC). The UTMC cannot simply charge any fee that is not disclosed to investors.”
Shahrul and Lim, as well as Jegatheesan, further added that ongoing after-sales services from UTCs can also help investors to achieve their financial goals by monitoring and keeping the investor informed of their progress, and reviewing the investment portfolio regularly and recommending changes where necessary.
The final word
Ultimately, the decision on how you wish to proceed with your investment is in your hands, and all three experts from FIMM agree that you should understand your investment objective and equip yourself with basic investment knowledge before you even begin to invest.
To find out what other steps you can take to reach financial freedom, look out for the next article in our series on Your Personal Journey to Financial Security, only in theSun, brought to you by Federation of Investment Managers Malaysia (FIMM).
Visit www.fimm.com.my for more details on Unit Trust Management Companies (UTMC), UTCs, information on Unit Trust Schemes and Private Retirement Scheme, as well as the lists of approved funds.