OBJECTIVES OF FINANCIAL PLANNING

Achieving your dreams

Someday you would like to quit your job and start your own cafe, or a boutique, or do your MBA, or tour the world. If you don't plan for these things, chances are they'll just remain dreams. You will never have the right resources to go about achieving them.

The difference between someone who plans and someone who doesn't, is that the one who plans, puts it into action, whilst the one who doesn't, just talks. You've met these people before. They keep having little crises in their lives, which they claim prevent them from doing what they want. So it is the time for you to take control of your life.

List down the things you want to do. Find out how much they cost, and embark on a mission towards achieving the right resources in order to be able to afford them.

When your mind is focused this way, you start to be aware of every dollar that you spend and earn. Does it help you achieve your goals? You will have better control of your money, and not be left with very little at the end of every month, and wondering where it all went.

Financial Independence

Can you imagine a time when you are no more a slave to money? When you can do anything you want at any time that you want? The time when you no longer have to work but have enough money not to worry about the major expenses in life, we call that Financial Independence.

It's different from retirement. You may still continue to work if you enjoy it. But your have the resources to stop working anytime should you wish to.

Financial Independence is different for everybody. It really depends on your lifestyle needs. If you can be happy with small flat, you are likely to reach your Financial Independence sooner than if you have to live in a landed property.

Financial Independence doesn't just happen. You have to plan for it. Those who do tend to achieve it sooner than those who don't.

Prudence is a way to achieve the objective

In the book "The Millionaire Next Door: The Surprising Secrets of America's Wealthy" by Thomas J. Stanley and William D. Danko, the authors discovered that the typical American millionaire does not fit the stereo-typical idea of a millionaire. Most of us would think that millionaires are characterized by their big houses, flashy sport cars and expensive jewelry. But what the authors discovered was that most of America's millionaires were average people, living in average houses, driving American-made cars. They tend to have small businesses of their own, and their lives are characterized by long working hours and a high level of prudence in how they spend their money. That's how they amassed their fortune.

So what our parents taught us when we were very young is right. If we work hard and spend little, our chances of making it is a lot higher. If you constantly feel that you need more luxuries in your life, then you may forever be asset-rich, but cash-poor, and certainly a long distance off from financial independence.

http://www.fundsupermart.com.my/

Why Most People are Not Saving Enough for Retirement

To retire or not to retire? I believe that is really not an option for most people. Retiring is only the privileged few, like, the 5% of the population who can really retire financially independent.


The majority of the people not only do not have the option to retire with financial independence, but they do not even have the option to retire at all. So, why is that the case?

We have to take a look at the problem. Assuming you start working at 25,most of us may start slightly earlier – and assuming you would retire from work at 55.

According to our Malaysian latest mortality rate, meaning how long Malaysians live, it has been said that we live to about 75 years old. We are not talking about now, so let’s take it further, about 20 to 30 years later although Malaysians will certainly live longer. Let’s say we retire from life at 85.

We can separate our life phases in to these two distinct phases called:
Accumulation phase – This is from when you are 25-55, or your working years.
Consumption phase, which is from 55-85 years old.

Do you see the problem? We have thirty years of working and thirty years of not working, meaning we will be consuming our savings. It simply means that each year of our working life, we will be actually saving for each year of our retirement years. At this point you cannot afford not to miss a years of savings because for each year of saving that you miss, you may not have enough for your retirement.

There’s another problem: How much do we save while we are working? Assuming all of us employees and you have EPF. If we have EPF we put aside 11% while our employer tops up another 12%. So, we get 23% going in to our EPF every month.

However, when we retire, we would need,  a minimum of 50% of your last drawn salary. However your last drawn salary may be our highest income, assuming RM10,000. So, we would need about 50% of that, which would be RM5,000. Imagine why this is a problem. We need 50% but we are only putting 23% while we are working. That means there is a shortfall of 27% or more than a quarter.

EPF statistics(2011)  say 50% of retirees spend their entire EPF savings within 5 years.  This is the problem.

courtesy KCL

How the Poor, the Middle Class, and the Rich Think about Investment

How the Poor, the Middle Class, and the Rich Think about Investment


The poor don’t invest because they don’t have money to invest. They spend all their money and forget about investments. The funny thing is though, although they have no money to invest, they have money to gamble. They have money to buy lottery, they have money to buy 4D and 3D, go to Genting and gamble a few thousand Ringgit, travel with Star Cruise, drink alcohol and smoke.

For all these money-burning activities, the poor have money. When it comes to investing, they have no money.

Now, the middle class is actually where most people you see or meet are. The middle class say, “Investing is Risky.” Every time people say investing is risky, they actually mean that speculating or gambling is risky. Most people cannot differentiate between speculating and investing.

Understanding about the difference between investing and speculating is very important. If you still cannot differentiate, then just follow this simple definition. -anything that can make money and can lose money is gambling or speculating.

Investing, if you do it the right way, you cannot lose money. This doesn’t mean that you never lose money, but as a whole you cannot lose money. Just like in a casino. If you are a casino owner, you may lose at individual rounds, but as a whole if you combine all the tables and bets, you cannot lose.

As for the rich, instead of saying, “Investing is risky,” the rich will say, “Not investing is risky.” Why do you think the rich would say so?

Inflation eats our money away. If you don’t invest, your money will be eaten by inflation.
So, why is not investing risky? Because if you don’t invest, your money will be in your savings account, or FD, or EPF where you look for all the guaranteed things and so forth, plus all your money will be eaten by inflation.

Secondly, you face another risk which is “you don’t have enough money” risk – the risk of having not enough money. You don’t have enough money for your kids’ education, not enough for your retirement, maybe not enough for your parents’ hospital bills in the future and maybe your own hospital bills in the future as well.

If you talk about insurance, the insurance might be so costly that you could barely afford to pay for it unless you plan to work for life. Even if you plan to work for life, you still face another risk: Whether people will still hire you when you’re old, and whether you can still work or not when you’re old. In that sense, even if you don’t invest you are facing many risks, which is why, to the rich, not investing is also a risk.

Another risk of not investing is that your money will grow too slowly. What if got you into an illness and cannot work anymore? When you cannot work anymore, all your financial goals are not met, and you have financial liabilities.

So, investing actually expedites financial security if you do it the right way. Not speculating or gambling – but Investing.



courtesy KCL

Private Retirement Scheme (PRS) – A Guide to Malaysia’s Voluntary Private Retirement Scheme

What is the Private Retirement Scheme (PRS)?


In short, the PRS is a defined contribution pension scheme which allows people (or their employers) to voluntarily contribute into an investment vehicle for the purposes of building up their retirement income.

In a Malaysian retirement framework, it is to be complemented with (and not a substitute for) the mandatory contributions made by both employee and employers to the EPF scheme.

Having a voluntary scheme in addition to the EPF also allows private company employees and self-employed persons to voluntarily contribute towards their retirement in a systematic way.

Similarities of PRS with the EPF:

1. Retirement Purpose: Both the EPF and PRS schemes are for building up a person’s retirement assets and income.

2. Tax Benefit: Tax relief is given for contributions to both schemes (up to RM6,000 a year for EPF, RM3,000 for PRS)

PRS vs EPF: A SummaryFeature Differences PRS EPF

Feature Differences	PRS	EPF
Contribution Type	Voluntary	Mandatory
Contribution Amount	No statutory minimum or maximum	Statutory minimum (11% Employee, 12-13% Employer)
Contribution Frequency	No statutory interval	Statutory Monthly Contribution
Contribution Paid to	Individual PRS Providers	EPF Directly
Yearly Personal Tax Relief	RM3,000	RM6,000
Partial Withdrawal	From Sub-Account B only, and 8% Tax Penalty	Account 2 only, specific reasons no penalty
Selection of Fund Investments	Freedom of Selection (among PRS Providers)	Freedom only on Partial Amount (EPF-MIS)
Dividend Policy	No statutory minimum (depends on Fund performance)	Minimum 2.5% p.a.

PRS Providers

The PRS Providers are fund management firms which are approved by the PRS administrators to manage the investment vehicles that contributions get paid into.

The eight PRS Providers approved (as at 5 April 2012) are:
CIMB-Principal Asset Management Bhd;
AmInvestment Management Sdn Bhd;
American International Assurance Bhd;
Hwang Investment Management Berhad;
ING Funds Bhd;
Manulife Unit Trust Bhd;
Public Mutual Bhd; and
RHB Investment Management Sdn Bhd.

FAQ

General FAQ

A.UNIT TRUST INVESTMENT

Get to know more about Unit Trust Investing, Trust Nomination and Financial Planning.

1. What is 'Capital Appreciation'?
A form of profit from a unit trust investment, it refers to the appreciation of a particular unit trust fund's NAV per unit.

2. What is 'Income distribution'?
A form of profit as it is an income earned by a particular unit trust fund and given out to its investors. An investor may decide to reinvest the income distribution to own more units. No service charge is applied when reinvesting the income distribution, but will be subjected to terms and conditions.

3. What is 'Unit split'?
An exercise by the fund management to increase the affordability of the particular fund's Net Asset Value per unit. This will increase the units in circulation in the fund while lowering its Net Asset Value per unit.

4. What is an optimum investment period?
We encourage a period of at least 3 years, although you are allowed shorter periods.

5. What is 'Forward Pricing'?
A practice we adopt to ensure fairness in unit trust fund transactions including investing, redeeming or switching funds. Every transaction submitted will be based on the next published NAV per unit.

6. What is the 'Cooling-off Period'?
The time period when the investor has the right to cancel the initial investment, with a full refund within 6 business days. At CWA, we allow the cooling-off period for first time investors but not for our staff and consultants.

7. What are the main types of investment plans available?
Cash – Lump sum investment or Cash Plan
Cash – Regular Saving Plan (Auto Debit, Direct Debit, MEPS Direct Debit from Bank accounts)
EPF Investment Scheme

8. What does a regular saving plan mean?
It is an auto-deduction facility with your bank for unit trust investment. CWA partner banks that provide the facility are:

CIMB
BSN
RHB
MBB
BIMB
Citibank
Deutsche Bank
Hong Leong Bank
OCBC
PBB
Standard Chartered Bank
HSBC
Bank Rakyat

9. What would you receive as the confirmation details for your unit trust investment?
Confirmation Advice Slip is given with every investment (Quarterly statements are given with Regular Savings Plan)
Yearly Statement of Account
Unit Split Statement / Distribution Statement (if any)

10. What documents you need to provide for setting up an initial investment?
a) EPF
Account Opening Form
Transaction Form
KWSP 9N Form
Photocopy of NRIC
Photocopy of Police or Army ID - employer's letter confirming that the NRIC number refers to the same person (if applicable).
Pre-Investment Form

b) Cash
Account Opening Form
Transaction Form
Photocopy of NRIC
Photocopy of joint holder's NRIC (if applicable)
Photocopy of Birth Certificate (if joint applicant is below 21 years of age)
Payment – Cheque, banker's draft, money order or cashier's order
Pre-Investment Form

The payee's name on cheques or banker's drafts for unit trust investment is: CIMB Wealth Advisors Berhad. The investor's name must follow his or her identification document and as that written on the Transaction Form.

11. What would be the payee's name on cheques or bankers drafts for unit trust investment?
The payee's name should be written as CIMB Wealth Advisors Berhad for (or behalf of) the investor's name. The investor's name must be the same as his or identification document and as that written on the Transaction Form.

12. What documents are required of the beneficiaries, upon the demise of the unit trust holder?
Declaration Form
Redemption form or Transfer form
Release Letter (if this is EPF Investment scheme)
Letter of Administration certified by Commissioner of Oath or Solicitor
Death certificate certified by Commissioner of Oath or Solicitor
Photocopy of beneficiaries' NRIC certified by a Commissioner of Oath or a Solicitor.

B.TRUST NOMINATION

1. What are the documents required for setting up a Trust Nomination?
a) New unit holders (individual or joint) need to provide the following:
Account Opening Form
Transaction Form
KWSP 9N Form (EPF investment only)
Photocopy of NRIC – 1 copy each for the principal and the joint-holder (if any)
Photocopy of NRIC/Birth Certificate - 1 copy each for the beneficiary/beneficiaries
Trust Nomination Application Form & Declaration of Trust
Cheque payable to CIMB Trustee Berhad for Trust Nomination
Note: In the case of a Joint Account in setting up a Trust Nomination, both the principal and joint holder must agree by signing the Trust Nomination Form.

b) Existing unit holders need to provide the following:
Photocopy of NRIC – 1 copy each of the principal and joint holder (if any)
Photocopy of NRIC/Birth Certificate - 1 copy each for the beneficiary/beneficiaries
Trust Nomination Application Form & Declaration of Trust
Cheque payable to CIMB Trustee Berhad for Trust Nomination’

2. Upon the demise of the unit holder (settler-trustee), what do the Trust Nomination beneficiaries have to do?
The beneficiaries are required to submit the following to CWA:
Death Certificate as certified by a Commissioner of Oath
Letter of Indemnity signed by the beneficiaries
Redemption Form or Transfer Form
Photocopy of their NRIC
Release Letter if part of EPF Investment Scheme

C.FINANCIAL PLANNING

1. What exactly is financial planning?
It's charting your future plans by getting to know your present financial position, through our 6 steps solutions and how you can attain your desired goals. Let us give you a hand in setting the right directions, picking the options that suit you best and putting them together to reach your aspired goals.

2. Why do we need financial planning?
The ultimate goal for many of us is to achieve financial independence. It helps when our financial needs have been identified and provisions have been in place. Think of it as a 'big picture' plan which makes sense of all the various components of our financial jigsaw – taxation, cash flow, debt, investment, employee benefits, insurance protection, inheritance, etc etc.

Financial planning addresses these common life goals:

Financial freedom during retirement
Preparing future expenditure such as marriage, funding the children's education, or for a potential business
Increasing our ability to manage unforeseen circumstances – serious illness, unemployment, business opportunity or accidents
Improving our success rate if we are faced with a financial crisis – death or a breadwinner or business failure
Caring for aging parents.

3. What are the fees involved?
This depends on the range of service you select and the complexity of your financial requirement. Our one time professional fee usually starts from RM500 and includes the initial analysis, strategy recommendations and specific proposals in implementation.

4. What is our scope of financial planning services?
Our comprehensive financial planning involves reviewing your current financial position by way of cash flow, lifestyle needs and investment. We can also help determine your resources required for funding your life goals by factoring into the whole, adverse events like death, disability or loss of income.

5. What is the role of a Financial Planner?
A professional financial planner provides holistic advice covering a complete spectrum of financial options, compatible with your goals and aspirations. He or she will guide you on what's needed for investment, which funds to use, discuss potential risks and can help launch a savings plan into an effective financial life plan.

6. Is financial planning only for the wealthy?
We prefer to think it is for the wise!

Our customers are career professionals, business owners and individuals from all walks of life. Like them, you too can learn that financial planning helps your chart your life goals in a clear, concise manner. Of course, the intention is to make our customers wealthier than when they started.

7. What is the right age to start financial planning?
We say, as early as you can.

Even though you might have just graduated and looking to find your desired career. Start now and get the hang of financial planning as soon as possible.

The more and better prepared you are, the more capable you will be in managing the twists and turns in life.