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Despite the increasing sophistication of some investors, one in three Malaysians have low financial knowledge, particularly among the lower income households18. Accessible investment advice is thus important to support Malaysians with varying levels of financial and investment literacy. Those with low investment literacy and poor retirement planning discipline would require basic or automated advice to bolster investment literacy and help them better manage their retirement savings. Investors who are more sophisticated and equipped with knowledge may require a more holistic portfolio-level advice, whereas those entering retirement may require advice that incorporates elements of decumulation into their portfolio. While financial planners (FPs) and DIMs have made advisory services accessible to more Malaysians in recent years, more can be done to strengthen investment advice offerings to better empower Malaysians to make investment decisions for their future. This includes allowing investment advisory models to evolve and thrive in Malaysia, thus raising the bar on the quality of investment advice.
Access to information and ease of investing are important aspects of investor empowerment. This is driving the evolution of fund management market infrastructures. Across various jurisdictions, there is a variety of infrastructures, including one-stop fund information hub, e-Know Your Customer (KYC) infrastructure and centralised fund management processing infrastructure. Such infrastructures not only improve the investing experience, but also enable greater efficiencies for domestic market participants.
While digitisation has empowered investors with greater access to capital markets, there may be a risk that certain segments of the population could be excluded. Elderly and rural investors are most at risk of digital exclusion given the lack of digital access and know-how. As digitisation democratises financial services, it is crucial to bring the broader Malaysian population along the journey and ensure that no group gets left behind.
STRATEGIC CONSIDERATIONS
3.2.1 WIDENING INVESTMENT OPTIONS ACROSS MORE INVESTOR SEGMENTS
A. EMPOWERING FOR GREATER RETIREMENT SAVINGS
PRS has gained investor traction, particularly with the middle income group, with total AUM of RM3.7 billion across eight providers as at December 2020. About 71% of PRS members are employed, 19% consist of students, homemakers as well as retirees, and the remaining 10% are self-employed. PRS has also observed steady adoption by employers, with about 800 companies joining the scheme as at December 2020.
Nevertheless, PRS members still represent only a small proportion of working Malaysians, and most have low average savings – about 59% of members have account balance of less than RM5,000. While efforts have been made to liberalise asset allocation and flexibility to withdraw funds for health and medical reasons, there is still room to enhance the investment proposition of PRS. This includes the need to differentiate against the typical unit trust fund as well as enable innovative and low-cost PRS investments.
As investors near retirement, their investment strategies will need to include permutations of growth, steady long-term income and decumulation investments across a range of asset classes to better prepare for their short to long-term life changes. These needs may be served by the introduction of the portfolio account management schemes (PAMs) within PRS. PAMs will reflect a fundamental change in the current structure
18 Malaysia National Strategy for Financial Literacy 2019-2023, FEN, 2019.
60 SECURITIES COMMISSION MALAYSIA