Time to empower Malaysians financially over the long term

Financial adviser Whitman Independent Advisors Sdn Bhd has called for measures that will help Malaysians grow their financial capital over the long term and to empower Malaysians to reclaim the ability to chart their own financial path responsibly.

Its independent financial adviser Felix Neoh said this can be achieved mainly by making Malaysians more financially empowered, encouraging long-term savings for retirement and making financial products more accessible.

“At the end of the day, there’s only so much of handouts from the government. Every Budget season, year in and year out, we go through the same motion and process. We’d like to see a Budget that is able to help Malaysians grow their financial capital over the long term, not just (thinking of) what’s the handout for me this year,” he told SunBiz in an interview.

In an effort to make financial planners more accessible to the layman, Whitman is proposing that advisory fees for engaging licenced financial planners be tax-exempt.

“There is no incentive for the man on the street to purposely look for this (financial advisory) service. While our services and products exist, they are not as well utilised. If more and more Malaysians become financially empowered, they would be less dependent on the government for handouts every year,” said Neoh.

He said personal finance should be included in the national education syllabus and teaching of the subject should start at primary school level, while educational programmes like the Securities Commission’s Investsmart should be continued and made available in more areas, not just in urban locations.

To encourage long-term savings for retirement, Neoh said, the tax relief for Employees Provident Fund (EPF) contributions and life insurance policies should be split, with a tax deduction of RM6,000 each as a start. Currently, for the middle class, the tax relief of RM6,000 for EPF and life insurance combined is normally fully utilised by contributions to the retirement fund alone. It is also suggested that the government increase the tax relief for private retirement schemes, which is currently capped at RM3,000.

In making financial products more accessible, Neoh has proposed to cap the distribution cost of financial products, like the initial service charge for unit trust or premiums on insurance policies.

“For example, if you go through agents for unit trusts, you’re paying 5.5%-6.5% as initial charge. We propose that the maximum amount that distributors charge be lowered for the benefit of the public for all financial products,” he said.

Neoh also suggested that the government facilitate better access to low-cost global financial investment products such as exchange-traded funds.

He said Malaysians should be empowered to grow incomes by providing incentives for employers to drive employee productivity and share the incremental benefits with the employees via higher wages.

“There is a good number of Malaysian corporates making good profits. Those benefits are being shared with shareholders of the company but they may not trickle through as efficiently and effectively to the employees of the company, which is keeping Malaysian wages low,” said Neoh.

Effective management of the cost of living with more ways to make housing more affordable rather than just focusing on increasing access to funding, especially for first-time home buyers, as well as measures to reduce speculation in property as an investment asset class, are also encouraged.

“From a financial planning perspective, we’ve seen many clients enjoy gains in property over the last five years and have in reality taken property as a high asset allocation in their respective investments. There needs to be more efforts to help people to buy properties for their own stay, but have more stringent measures for those buying properties for investments,” he said.

Neoh said reducing the personal income tax post-Good and Services Tax implementation should also be considered, citing Singapore as an example.
On measures to increase the government’s revenue, he suggested the re-introduction of estate tax (death tax) and to increase real property gains tax beyond first home or residential property, targeting investment properties.

“Death tax tends to affect more of the rich and if we’re trying to reallocate resources from a social perspective, perhaps this is one avenue to improve government coffers,” said Neoh, explaining that the aging population means that there will be a lot of transition of wealth upon death in the next few years. The death tax in the UK is 40%.