Wealth planning and management is a comprehensive program to plan and manage one's finances. It is useful for high-net-worth individuals and corporations. Users require services like investments, taxes, banking, and insurance. Providers include banks, fund managers, insurance agents, and more. Various organizations govern the industry and establish codes of ethics for professionals to act with integrity, objectivity, and put clients' interests first. Regulators also oversee the industry to protect consumers and maintain confidence.

1. WEALTH PLANNING AND
MANAGEMENT
• Lecture 09
• Issues Related to Wealth Planning
• and Management
1

2. CONTENTS
• Introduction
• Users and Providers of wealth Planning
Services
• Organisations and Governing Bodies
• Regulatory Control
• Ethics and code of Conduct
• Professional Responsibility
• Review Questions
2

3. INTRODUCTION
• Wealth planning and management as a
comprehensive programme is still relatively
new.
• People do plan and manage their wealth in a
small and ad hoc way but not in a
comprehensive way.
• It used to be the High Net Worth Individuals
(HNWI) who find it useful
3

4. USERS AND PROVIDERS OF WEALTH
PLANNING SERVICES
• Users of wealth planning services are
normally individuals (HNWI)
• Corporations usually do it on behalf of
individuals or for their clients
• Providers of wealth planning services are
usually firms who can be sole proprietorships
or a group of individuals or large
corporations
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5. Users of Wealth Planning
and Management Services
• Wealth planning and management services
cover different needs at various stages of life.
Among those needs are:
– Buying of shares and stocks
– Purchasing of Real Estate or cars
– Income Tax
– Banking services
– Insurance or Takaful
– Trustee services
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6. Users of Wealth Planning
and Management Services
• Technically everyone requires some form of
wealth planning and management
– When someone starts to work and earn a salary
he needs to plan how to spend it so that he would
have enough till the next pay day or even have
something to save
– When he gets married he will need to figure out
how to spend on various needs
– When he gets a child he may have to look deeper
into his plans
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7. Users of Wealth Planning
and Management Services
• When one have a bigger family or when he will be due
for retirement naturally he should have planned to have
enough for his retirement such that he need not change
much of his lifestyle.
• For Islamic wealth planning and management the
considerations are similar but the tools must be Shariah
compliant. This includes wealth generation instruments
as well as well protection and distribution. It should also
include wealth cleansing (zakat)
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8. Providers of Wealth Planning
and Management Services
• The providers of Islamic wealth planning and
management services include:
– Islamic Banks
– Conventional Banks with Islamic windows
– Insurance /Takaful Agents
– Unit Trust Agents
– Trustee Agents
– Others
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9. Users and Providers of Wealth Planning
and Management Services
Wealth Planning and Management Services
Bank Fund Credit Stock- Accountants Trustee
Managers Managers Counsellors brokers Agents
Real Tax Lawyers Zakat Unit Trust Insurance/
Estate Agents Consultants Collectors Agents Takaful Agents
Providers of Wealth Planning and Management Services
Users of Wealth Planning and Management Services
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10. ORGANISATIONS AND
GOVERNING BODIES
• Financial Planning Association with 17
countries offering Certified Financial Planner
(CFP) awarded by Financial Planning
Standards Board (FPSB)
• FPSB founded in 1990, has 17 affiliate
members who have the right to award the
CFP. Malaysia is included in the 17
10

11. ORGANISATIONS AND
GOVERNING BODIES
• Wealth Management is relatively new and most
governing bodies are in USA
• International Association of Financial Planning (IAFP)
was formed in 1969 to promote wealth management,
conduct educational and training programs for members
and to promote ethical conduct among practitioners
• In 1998 Society of Financial Services Professional
(SFSP) was formed and in 1999 the National
Association of Insurance and Financial Advisers
(NAIFA) was formed
11

12. ORGANISATIONS AND
GOVERNING BODIES
• On the education side, College of Financial Planning
was formed in 1972 to provide the Certified Financial
Planner (CFP) program
• The CFP award was later transferred to Certified
Financial Planner Board of Standards.
• In 1973 the Institute of Certified Financial Planners was
formed and later the American College created the
Master of Science in Financial Services (MSFS) which
later awarded the Chartered Financial Consultant
(ChFC)
12

13. ORGANISATIONS AND
GOVERNING BODIES
• In UK the Personal Finance Society is the
main organisation responsible for the
financial planning industry. Together with the
Chartered Insurance Institute (CII) it has
decided to adopt the Chartered Financial
Planner (CFP) designation as the benchmark
for its members
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14. ORGANISATIONS AND
GOVERNING BODIES
• In Malaysia the proper training was started in
1990’s when Malaysian Insurance Institute
(MII) brought Life Underwriter Training
Council (LUTC) Fellowship program to
conduct a module called “Fundamentals of
Financial Services”.
• Later MII brought American College’s
Chartered Financial Consultant (ChFC)
program into Malaysia
14

15. ORGANISATIONS AND
GOVERNING BODIES
• Wealth management came into Malaysia only
in late 1990’s although insurance agents
called themselves “financial advisors”,
“financial planners” and “financial
consultants”
• Later when unit trusts became popular their
agents also called themselves “financial
planners”.
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16. ORGANISATIONS AND
GOVERNING BODIES
• On 13 December 1999 the Financial Planning
Association of Malaysia (FPAM) was formed.
• The mission of FPAM was to educate the public in the
process and benefits of wealth management and to raise
the standards of competency and ethical practice of
qualified financial planners in Malaysia
• The International Association of Registered Financial
Consultants (IARFC) was established in 1984 as the
International Association for Registered Financial
Planners. The Malaysian Affiliate of IARFC was set up
in 2001 to promote the Registered Financial Consultants
(RFC) in this region.
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17. ORGANISATIONS AND
GOVERNING BODIES
• The Malaysian Financial Planning Council (MFPC) was
later formed which confers the Registered Fianncial
Planners (RFP) designation. The initial members are the
Life Insurance Association of Malaysia (LIAM), the
National Association of Malaysian Life Insurance and
Financial Advisors (NAMLIFA) and the Malaysian
Insurance Institute (MII). Since then the MII no longer
provides education and certification of the ChFC
designation
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18. REGULATORY CONTROL
• Public confidence in wealth management depends on
the soundness of financial infrastructure
• For this purpose the following are the key regulations
affecting wealth planning and management industry:
– Banking and Financial Institutions Act (1989)
– Islamic Banking Act (1983)
– Securities Commission Act 1993
– Securities Industry (Central Depository) Act 1983; and to
some extent the Insurance Act 1996 and the Takaful Act 1984
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19. REGULATORY CONTROL
Ministry of Finance
Bank Negara Malaysia Securities Commission
BAFIA Insurance Takaful Securities Futures Industry
Act Act Industry Act Act
BURSA MALAYSIA MESDAQ COMMEX KLOFE
SCANS Malaysian
Derivatives
MCD Clearing House
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20. REGULATORY CONTROL (Malaysia)
• BAFIA under Bank Negara Malaysia provides
regulation for the banking and financial services
industry
• BNM objectives are:
– To issue currency and keep reserves to safeguard value of
currency
– To act as a banker and financial advisor to the government
– To promote monetary stability and sound financial structure
– To influence credit situation to the benefit of the country
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21. REGULATORY CONTROL (Malaysia)
• With regards to the wealth planning and
management industry, BNM also announced
the regulatory framework for the licensing of
Financial Advisors after the enactment of the
Insurance (Amendment) Act 2005 (IA) and
the Insurance (Amendment) Regulations
2005.
21

22. REGULATORY CONTROL (Malaysia)
• The Licensing Requirements for Financial Advisors
(FA) are:
– FA will be licensed under the Insurance Act as a new category
of intermediaries. In addition to insurance products, they can
advise and market other financial products
– FA must be a body corporate with minimum paid-up capital
unimpaired by losses of RM100,000 and majority Malaysian-
controlled
– FA must have minimum professional indemnity insurance of
RM200,000
– Licence will be renewed annually subject to compliance with
licensing requirements
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23. REGULATORY CONTROL (Malaysia)
• The Licensing Requirements for Financial Advisors
(FA) are: (cont’d)
– The FA is also subject to other requirements such as changes in
shareholding, approval for appointment of CEO and Directors,
opening of branches and submission of annual returns
– Representatives of FA must be approved by BNM and have
specific qualifications as required by BNM
– The use of “Financial Advisor” is restricted only to those
awarded the licence
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24. REGULATORY CONTROL (Singapore)
• In Singapore, the sole governing body
regulating the wealth planning and
management industry is the Monetary
Authority of Singapore (MAS)
• Established in 1971 under the Monetary
Authority of Singapore Act 1970, it is the
sole authority to regulate all elements of
monetary, banking and financial aspects in
Singapore.
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25. REGULATORY CONTROL (Singapore)
• MAS is given powers to act as banker to and financial agent of the
Government. It is to promote monetary stability and formulate credit
and exchange policies conducive to Singapore’s economic growth
• In April 1977 it took over the regulation of the insurance industry and
in 1984 the Securities Industry Act (1973)
• MAS now administers the various statutes relating to money,
banking, insurance, securities and the financial sector in general.
Following the merger with Board of Commissioners of Currency on
1st October 2002 it now assumes the function of currency issuance.
• Financial Advisors’ Act provides for the regulation of the wealth
planning and management industry in Singapore
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26. REGULATORY CONTROL (Singapore)
• Basically MAS’s objectives are:
– To conduct monetary policy and issue currency,
and to manage the official foreign reserves and
the issuance of government securities;
– To supervise the banking, insurance, securities
and futures industries, and develop strategies in
partnership with the private sector to promote
Singapore as an international financial centre;
and
– To build a cohesive and integrated organisation
of excellence
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27. REGULATORY CONTROL
(United Kingdom)
• In UK, the Financial Services and Markets
Act 2000 provides for the regulation of the
wealth planning and management industry
through the Financial Services Authority
(FSA).
• The FSA is an independent non-
governmental body, a company limited by
guarantee and financed by the financial
services industry.
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• The Treasury appoints the FSA Board

28. REGULATORY CONTROL
(United Kingdom)
• The four main objectives of FSA are:
– Maintaining confidence in the financial system;
– Promoting public understanding of the financial
system;
– Securing the appropriate degree of protection for
consumers; and
– Reducing the extent to which it is possible for a
business to be used for a purpose conneced with
financial crime.
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29. ETHICS AND CODE OF
CONDUCT
• In order to ensure that the wealth planning and
management industry is professionally run, it was
decided to adopt a code of conduct
• Two of the most comprehensive codes of conduct are
the ones adopted by Financial Planning Association of
Malaysia (FPAM) [CFP Code of Ethics and Professional
Responsibility] and Society of Financial Services
Professionals (SFSP) [Code of Professional
Responsibility]
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30. CFP Code of Ethics and
Professional Responsibility
• There are 7 principles contained in the CFP
Cod of Ethics, namely:
1. Integrity
2. Objectivity
3. Competence
4. Fairness
5. Confidentiality
6. Professionalism
7. Diligence
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31. SFSP code of Professional Responsibility
• SFSP code of Professional Responsibility
consists of:
1. Fairness
2. Competence
3. Confidentiality
4. Integrity
5. Diligence
6. Professionalism
31

32. Islamic Ethics and Code of
Conduct
• These are from the two main sources of
Islamic teachings: the Quran and the
Prophetic Traditions
– Knowledgeable
– Sincerity
– Truthfulness
– Trustworthiness
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33. PROFESSIONAL
RESPONSIBILITY
• The word “professional” has been used in
many different ways
– Professional athlete, golfer, wrestler may denote
one who is skilled and get paid for what he is
doing
– A professional makes a living out of playing golf
for example
– Some occupations are considered as professions:
doctors, engineers, lawyers, architects, etc
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34. PROFESSIONAL
RESPONSIBILITY
• What the professionals have in common are
– Job skills and devotion
– Reliability
– Dedication
– Thoroughness
– Dependability
– A commitment to providing good service as well
as the awareness that his quality of service affects
the reputation of others in the same profession
34

35. LEHMAN BROS AND BEAR
STEARNS
 EXECUTIVES MADE DELIBERATE DECISIONS TO
PURSUE AGGRESSIVE INVESTMENT STRATEGY
 TAKE ON GREATER RISK
 INCREASE LEVERAGE
35

36. LEHMAN BROS AND BEAR
STEARNS –WHY?
• FLAWED INCENTIVES AND EXECUTIVE PAY STRUCTURE
– TOP EXECUTIVE REGULARLY CASHED OUT THEIR EQUITY BEFORE STOCK PRICE OF
THEIR FIRM PLUMMTED (USD1.1B TO USD 859MIL)
– PAY ARRANGEMENTS DID ONT CONTAIN ANY ‘CLAW BACK’ PROVISIONS WHICH WILL
ENABLE TO RECOUP THE BONUSES THAT HAD ALREADY BEEN PAID
– PERFORMANCE-BASED COMPENSATION KEPT THE EXECUTIVES IN PISITIVE TERRITORY
 THE AGGRESSIVE RISK TAKING AT LEHMAN, BEAR STEARNS AND OTHER
AS A RESULT OF FLAWED INCENTIVES.
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37. LEHMAN BROS AND BEAR
STEARNS –WHY?
 THE AGGRESSIVE RISK TAKING AT LEHMAN, BEAR STEARNS AND OTHER
AS A RESULT OF FLAWED INCENTIVES.
 ABILITY TO CLAIM LARGE AMOUNT OF COMPENSATION BASED ON SHORT TERM
REESULTS HAD INDUCED THEM TO TAKE EXCESSIVE LEVEL OF RISKS.
 PROBABLE REMEDIES
 REFORM COMPENSATION STRUCTURES TO ENSURE TIGHTER ALIGNMENT BETWEEN
EXECUTIVES PAYOFFS AND LONG TERM RESULTS
 EQUITY INCENTIVES SHOULD BE SUBJECT TO SUBSTANTIAL LIMITATIONS AIMED AT
PREVENTING EXECUTIVES FROM PLACING EXCESSIVE WEIGHT ON THEIR FRIM’S
SHORT TERM STOCK PRICES
 ENHANCING THE VALUE OF COMPANIES AND E=THE WEALTH OF SHAREHOLDERS
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38. PROFESSIONAL
RESPONSIBILITY
• A wealth planning and management
professional, Burke Christenses, JD, CLU, a
former vice president of the SFSP suggested
that “A professional is a person engaged in
a field that requires:
1. Specialized knowledge not generally
understood by the public
2. A threshold entrance requirement
3. A Sense of altruism, and
4. A code of ethics”
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39. REVIEW QUESTIONS
1. Describe the users and providers of wealth
planning services
2.What in your opinion is the most important
function of governing bodies in the wealth
management industry?
3.Is there really a need for regulatory control
when you find that the banking and other
financial sector has gone into deregulation
instead?
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40. REVIEW QUESTIONS
4. Why do you think ethics and the code of
conduct is considered essential in the wealth
planning and management industry?
2. Do you agree with Burke Christensen’s
suggestion on “Professionalism” and why?
3. Discuss the concept of siddiq and amanah
in the context of Islamic wealth planning
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