Post on 07-Apr-2018
8/6/2019 A Personal Financial Planner for Malaysian
1/39
8/6/2019 A Personal Financial Planner for Malaysian
2/39
located at the upper section of the Malay Peninsula in the first millennium of the Common
Era.
Malaysia's multi-racial society contains many ethnic groups. Malays comprise a majority of
just over 50%. By constitutional definition, all Malays are Muslim. About a quarter of the
population is ethnic Chinese, a group which historically played an important role in trade and
business. Malaysians of Indian descent comprise about 7% of the population and include
Hindus, Muslims, Buddhists, and Christians. Non-Malay indigenous groups combine to make
up approximately 11% of the population.
Population density is highest in peninsular Malaysia, home to some 20 million of the
country's 28 million inhabitants. The rest live on the Malaysian portion of the island of
Borneo in the large but less densely-populated states of Sabah and Sarawak. More than half
of Sarawak's residents and about two-thirds of Sabah's are from indigenous groups.
Relate this paragraph with the topic as well for better understandings the concept of the
research.
1.3 Research Objectives
Each persons financial objectives may be different in terms of individual circumstance, goal,
attitudes, and needs. The main objective of this project is to develop a financial knowledge
and financial strategies to users.
y Protection against the personal risk.
y Reduction of income tax.
y Investment and property management.
8/6/2019 A Personal Financial Planner for Malaysian
3/39
1.4 Problem statement
Personal financial planning sometimes fails to properly diversify an investment portfoliowhich can result in substantial losses. And failure to plan can result in higher than necessary
income, estate, gift and perhaps generation skipping transfer taxation. Some people do not
know how to finance their money because they do not know where to invest their money.
This study identifies two problems:
i. Lack of information about financial planner for those working in Malaysia.
ii. Lack of taxation strategy focusing on Malaysian policies.
People fail to plan for many reasons. They often feel that they do not have sufficient assets or
income to make plan or that their affairs are already in good order. Both these assumption are
frequently wrong. There is also the natural human tendency for busy people to procrastinate
with respect to planning. Finally some people may be deterred by what they think will be the
high cost of planning services. However high quality planning services are usually well worth
for the cost. Also knowledge consumers can secure some valuable planning services without
additional cost.
1.5 Research Question
1. Does the personal risk really affect financial planning or not?
2. Does the reduction of income tax affect on a personal financial planning or not?
3. Is Investment and property management really important for a personal financial planning
or not?
8/6/2019 A Personal Financial Planner for Malaysian
4/39
1.6 Theoretical Framework (independent and dependent variables)
A personal financial planner is important for a person, who does not know how to make a
financial plan. Personal Financial Planner leads industry standard, ensures graduates gain theknowledge, skills and tools to evaluate and manage various wealth forms to optimize his/her
financial situations. To make the financial plan, information depends on dependent and
independent variables.
The determinant of the Personal Financial Planner has been considered as the independent
variable for conducting the study. The determinants are -
Figure: 1 Theoretical Framework.
The study will assess the determinants (independent variables) and evaluate the potential of
financial planning (dependant variable) For Malaysian.
Status of
financial
position
Skill of the
person
Property
of the
person
Total
worth of
the
person
8/6/2019 A Personal Financial Planner for Malaysian
5/39
1.7 Research Hypothesis
The research will be conducted on the basis of the following hypothesis -
Hypothesis 1: Based on protection against personal risk can this study make a personal financial plan
for Malaysian?
Hypothesis 2: Is financial Planning really helpful for Malaysian?
Hypothesis 3: Istax reducing only the way to make a personal financial planning?
1.8 Significant of Study
Personal financial planner is a practicing professional who helps people deal with various
personal financial issues through proper planning for investment and also for a business.
From this planning people will be developed. They will know where to invest and how can
make more money. So personal financial planning is important because to organize a proper
financial plan for a person.
1.9 Contribution of Study
In general, my research focused on personal financial planning for Malaysian. Personal
financial planning is for Malaysian broadly defined as a process of determining an
individual's financial goals, considering his/her resources and purposes in life, risk profile
and current lifestyle, to detail a balanced and realistic plan to meet those goals. The
individual's goals are used as guideposts to map a course of action on to reach those goals.
This study basically for young people for Malaysian they do not know where to invest their
money how to utilize, to make a proper goal or destination they need help from the planner.
The purpose of each goal is determined to ensure that the goal is meaningful in the context of
the individual's situation. Through a process of careful analysis, these goals are subjected to a
reality check by considering the individual's current and future resources available to achieve
them. In the process, the constraints and obstacles to these goals are noted. The information
will be used later to determine if there are sufficient resources available to get to these goals,
and what other things need to be considered in the process. If the resources are insufficient or
absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or
will be replaced with a new goal.
8/6/2019 A Personal Financial Planner for Malaysian
6/39
1.10 Limitation of the research
There are some limitation of the research which are time and resources such as internal data and
secondary data, which cannot be released to the public, so its difficult to predict the accuracy of how
profitable a company is. The study takes much time because the researcher has search the internet,
read and analyze the data. The resources that are mostly books get from library and searching via
Internet enable this study to be completed. Since the study is to predict the future, secondary data may
not be helpful in timely basic.
Chapter 2-Literatuer Review
The literature review is based on the literature that the researcher is going to research in the
field of the project. Reviewing literature exists because of two main reasons. First, the
preliminary search helps researcher to generate and refine research ideas. Secondly, literature
review is also referred to as critical review, which is a part of a proper research project.
(Smith, Thorpe and Lowe, 1991) Researcher will get foundation from the literature review.
Its main purpose is to helps researcher to develop a good understanding and insight into
relevant previous research and the trends that have emerged.
2.1. Personal Financial Planning:
A financial planner who helps to invest in individuals and corporations meet their long-term
financial objectives by analyzing the client's status and setting a program to achieve goals.
Financial planners specialize in tax planning, asset allocation, risk management, retirement
and estate planning. The role of a financial planner is to find ways to increase the client's net
worth and help the client accomplish all of his or her financial objectives.
8/6/2019 A Personal Financial Planner for Malaysian
7/39
Charles J. Farrell, J.D., LL.M. (2006) analysis on Personal Financial Ratios: An Elegant
Road Map to Financial Health and Retirement. In this article he tries to explain personal
financial ratios that individuals can use to analyze their financial standing. Just as stock ratios are
primarily based on a company's earnings, the personal financial ratios are based on an individual's
income. There are three ratios: savings to income, debt to income, and savings rate to income.Based on those ratios he tries to make a personal financial plan.
IRMA International Conference (2005) explain on A Service Oriented Architecture for
Personal Financial Planning. In this article they try to explain Personal financial planning is
the process of planning spending, financing, and investing so as to optimize the financial
situation. The framework they propose contains five main stages. 1: Data acquisition: Actual
state, Data analysis, data acquisition: To-be concept, Implementation, and Supervision. In
the Generalized Process Networks (GPN) graph events are represented by circles andfunctions are represented by boxes. Arcs are connecting events and functions or functions and
events but never events and events or functions and functions.GPN may be used to model the
gain in value a financial planner and a customer may have when using a Service Oriented
Architecture.
Ming-Ming Lai and Wei-Khong Tan (2009) works entitled An Empirical Analysis of
Personal Financial Planning in an Emerging Economy. In this paper examines the attitudes
of the Malaysians toward personal financial planning, which encompasses moneymanagement, insurance planning, investment planning, retirement planning, and estate
planning. This paper has implications on financial planners in formulation strategies on how
to successfully deploy a personal financial planning programme for their customers. This
paper, thus, fills the gap by examining the attitudes and management of general public, i.e.,
Malaysian towards personal financial planning, which encompasses money management,
insurance planning, investment planning, retirement planning, and estate planning. They
further explored the factors most influencing the decisions. This paper contributes interesting
and additional empirical evidence to factors influencing the respondents attitudes, and
managing personal financial planning in an Asian and different environment setting from
western countries. The findings will be extremely useful for effective financial plan in
tailoring the needs of individuals based on job status, age, gender, education level, income,
race, and marital status. It is hoped that the findings of this study contribute to the financial
planner profession and industry in an emerging economy such as Malaysia.
8/6/2019 A Personal Financial Planner for Malaysian
8/39
Lim (2003) analyzed via surveys in Singapore in the direction of the attitudes of 204 senior
workers towards work and retirement, retirement planning, and their willingness to continue
working after retirement, and to undergo retraining. The results showed that work taken a
salient part of the lives of employees in their 40s and above. Respondents held rather
uncertain attitudes with regard to the prospect of retirement. while they did not view
retirement negatively, they were nevertheless anxious about certain aspects of retirement. In
addition, respondents also generally have not planned for retirement. Those aged 50 years
and above were more likely to engage in retirement planning involving discussion about
retirement with others, financial planning, and planning for holiday trips compared with those
below 50 years old. The majority of them preferred to remain employed and willing to
undergo retraining after they have retired.
Kong Eng Chin (2009) analysis on A Personal Financial Planner for Malaysian (Taxation
Planning Report). In this article he to describe about young worker in Malaysia those are do
not know how to plan their financial planning. He tries to make a financial plan for a
Malaysian how it should be. He tries to make a system that system focuses on 3 sub-systems
which are cash flow management, investment planning and taxation planning and is development
by three students. Each of the students will be responsible on one sub-system. Taxation sub-
system consists of fundamental knowledge which is able to allow users without any knowledge in
taxation constitution to get started. Taxation calculator will be provided to users in taxation sub-
system. This calculator will incorporate with the tax rate data maintained by the administrator of
the system. The provided calculator can be manipulated to add or remove tax relief or tax rebate
items from the calculator provided to users. The materials in the assessment are based on
Malaysia taxation policies 2009. System administrator is allows to create new assessment and
modify the current assessment contents.
Khor Su Teik(2009) analysis on A Personal Financial Planner for Malaysian ( Investment
Planning). In this article he tries to describepersonal financial planner system is a web-based
system that provides aid tools to assist user in planning of finance. It is specify for Malaysian
especially those young working Malaysian who have no much experience in financial planning.
He tries to make a system. This system allow user to explore the three main financial aspects,
8/6/2019 A Personal Financial Planner for Malaysian
9/39
which are investment planning, cash flow management, and taxation planning. The investment
planning part will be focused in this report. Basically, the investment planning part allows user to
study the fundamental knowledge, create a personal investment plan, and manage their
investment portfolio. Besides, the system also provides several general modules such as
registration, feedback, and glossary to user. In addition, the system allows admin to manage user,manage glossary, manage feedback, manage fundamental knowledge, modify question in
investment plan, edit investment plans template, and manage portfolio as well.
J. E Cowen, W. T. Blair and S. M Taylor (2006) works entitled Personal financial
planning education in Australian universities. Personal financial planning in Australia is a
wide range of groups including consumers, the financial services industry, accountants, and
educators. This paper based on the development of the Australian financial planning industry,
focusing on its historical background and the relevant regulatory environment. This articlethen provides a descriptive analysis of the availability of dedicated financial planning courses
currently available in Australian universities at both undergraduate and postgraduate levels.
This report makes on basically those are new investor and those are finished their
postgraduate they do not have knowledge how to invest their money and how they make a
plan for the future.
Jalen & Mila Smith (2004) works entitled Sample Financial Plan (Planning toolkit 5). In
this article they are trying to describe six step process of personal financial planning those are
clarify your present situation, Identify goals and objectives, Identify financial problems,
Recommendations, Implement strategies, Monitor and review. From those steps they try to
make personal financial planning. Asset allocation is a tool designed to maximize the return
on your portfolio while minimizing the risk. It involves structuring a diversified portfolio
from these broad asset classes Growth, Income, Balanced and Cash based on income and
growth needs and risk tolerance.
Federal Reserve Bank of Dallas (2010) explains on Building wealth. In this article want to
explain how a beginner develops financial plan for future. To make a personal financial
planning fast need proper information about that person and also wealth. Based on assets a
planner needs to make a plan for a person. Planners control their financial affairs. They
budget to save. A budget allows understanding where money goes, to ensure dont spend
8/6/2019 A Personal Financial Planner for Malaysian
10/39
more than make, to find uses for money that will increase wealth. Develop a budget need to
calculate monthly income, track daily expenses, determine how much spend on monthly bills.
Gideon Rothschild and Daniel S. Rubin (2002) works entitled Estate Tax Savings with
Self-Settled Trusts. In this article they are trying to explain that planners were urged to
consider the use of trusts as the preferred estate planning vehicle because of the efficacy of
those trusts in protecting beneficiaries from the claims of their creditors. Secondly the author
explained some key point regarding the asset protection concept, discussing how certain
jurisdictions (mostly offshore) have repealed the traditional self-settled spendthrift trust
rule. The author explains that in such jurisdictions individuals can create trusts in which they
remain discretionary beneficiaries, with the trust fund nevertheless protected from their own
potential future creditors. The benefits that these offshore asset protection trusts provide to
clients who feel themselves to be at risk in todays litigious society is almost incalculable.
Terrence A. Hallahan, Robert W. Faff, and Michael D. McKenzie (2003) works entitled
An empirical investigation of personal financial risk tolerance. In this journal they are
trying to explain that risk tolerance, a persons position towards accepting risk, is an
important concept that has implications for both financial service providers and consumers.
In this article they used Droms, 1987 for describing risk tolerance. Risk tolerance is one
factor which may settle on the appropriate composition of assets in a portfolio which is
optimal in terms of risk and return relative to the needs of the individual (Droms, 1987).
Although its importance in the financial services industry, there remain some unresolved
questions with respect to the determinants of risk tolerance. Although a number of factors
have been proposed and tested, a brief survey of the results reveals a distinct lack of
consensus. Education is a third factor that is thought to increase a persons capacity to
evaluate risks inherent to the investment process and therefore endow them with a higher
financial risk tolerance.
Haiyang Chen and Ronald P. Volpe (1998) analysis on An Analysis of Personal Financial
Literacy among College Students. In this article he tries to explain a personal finance has
become increasingly important in today's world. People must plan for long-term investments
for their retirement and children's education. They must also decide on short-term savings
and borrowing for a vacation, a down payment for a house, a car loan, and other big-ticket
items. Moreover, they must manage their own medical and life insurance needs. This study
8/6/2019 A Personal Financial Planner for Malaysian
11/39
has three purposes. First, it provides evidence of personal finance literacy among college
students. Second, it examines why some college students are relatively more knowledgeable
than others. The analysis may help us identify factors that determine the level of competency
possessed by college students. The third purpose is to examine how a student's knowledge
influences his/her opinions and decisions on personal financial issues. This study surveys 924
students from multiple universities across the country to examine college students'
knowledge of personal finance; the relationship between the financial literacy and
participants' characteristics such as academic discipline, gender, and experience; and the
consequences of having inadequate knowledge. Results suggest that college students need to
improve their knowledge of personal finance.
Michael Stephenson (1981) analysis on Personal Financial Planning. In this topic he tries
to explain that some general guidelines how to make a personal financial planning and also to
look ahead. This planning make a person increase saving and investments for retirement. And
he tries to cover in this article such as budgeting, income tax, retirement and estate planning.
Moreover, in this article he set out a guideline for reviewing present financial position. In this
article he makes objective for short term and long term. Short terms are: 1. paying off a bank
loan. 2. Prepaying a part of your mortgage each year. 3. Establishing a fund for your
children's education. 4. Saving for a summer place, winter retreat, or holidays. 5. Saving for
major items-car, furniture, home, renovations, etc. Long terms are: 1.Again, paying off your
mortgage. 2. Children's education. 3. Creating investments-stocks, bonds, real estate. 4.
Retirement-adding to pension plans. 5. Estate planning requirements sufficient asset liquidity
to provide income for your family.
Arthur B. Kennickell, Martha Starr-McCluer and Annika E. Sunden (1996 ) works
entitled Saving and Financial Planning. In this paper they are trying to focus on saving and
financial planning. Most practical work on saving is consistent with the concerns emphasized
in theory, especially saving for retirement, incentives to save precautionary, and the desire to
leave wealth to heirs. In this regard, it may be valuable to investigate directly the ways in
which households make saving-related decisions. To resolve inter temporal trade-offs
correctly, households would seem to need to obtain and process a fair amount of information.
Some households undertake deliberate planning activities, such as keeping a budget,
consulting a financial planner, or reading books and magazines on personal finance. In this
article he uses Bernheim (1994a, 1994b, 1994c) as references to describe financial planning.
8/6/2019 A Personal Financial Planner for Malaysian
12/39
He has analyzed some surveys on financial planning that were sponsored by financial
institutions. The surveys suggest that people's financial planning methods are fairly
rudimentary, that their financial knowledge is generally poor, and that their self-described
savings plans are often inconsistent with the predictions of standard saving models.2 It is
unclear what accounts for these findings. People may lack problem-solving skills or abilities
required to make sound savings decisions. Or they may not consider systematic planning to
be worthwhile, especially if uncertainty in income, health, and other factors make it hard to
define optimal savings and consumption plans. This paper summarizes the results of a focus
group on saving and financial planning. The group consisted of eight individuals with
relatively high levels of income and wealth, mostly successful business people or
professionals.
2.2 Personal Financial Risk:
Lenart sjoberg (2003) analysis on The different dynamics of personal and general risk. In
this journal he tries to explain personal and general risk. Risk perception has often worked
with an undifferentiated concept if perceived risk. In this time people do make a clear
distinction between to personal risk and general risk. In many studies it has been found that
personal risk are judged as smaller then general risk, especially so called lifestyle risk.
Personal risk are seen as so small that they can be dismissed or ignored and behaviour then
proceeds to various forms of pleasant or exciting experiences that can be quite destructive
and dangerous. The personal or general distinction is thus crucial to the understanding of the
rationality or lack of it involved in various forms of addictive behaviours. In many previous
studies it in not clear if general or personal risk is the most important factor in demand for
risk mitigation. Demand for risk mitigation needs to be measured separately, and then related
to independent rating of personal and general risk. As a result of personal and general risk
ratings showed that general risk tended to be rated as larger than personal risk and that the
differences general and personal risk were of varying size across hazards. The standard
deviations were combined for general and personal risk separately for each hazard.
International Risk Management Institute, Inc. (2008) explains on Personal Risk
Management Tips you can use. In this article they are trying to describe how to minimize
personal risk. They have shown many ways to minimize a personal risk. This report has given
the following ideas for purchasing insurance for the home owners. Insurance is one of the
8/6/2019 A Personal Financial Planner for Malaysian
13/39
sources to minimize personal risk. In this report they have shown many tips to get insurance.
Like maintain home in optimum condition. If a repair is needed, perform it as soon as possible.
For example, loose or missing roof shingles should be repaired or replaced immediately. A home
in excellent condition is much less likely to experience a loss. Insurance company helps to
customer to reduce risk. As well as anyone can do insurance on his or her personal car. If
anyone gets accident with his or her, insurance company bound to pay all money to fix that
car.
Victor J Callan PhD FAIM FAICD and Malcolm Johnson (2002) works entitle Some
Guidelines for Financial Planners in Measuring and Advising Clients about Their Levels of
Risk Tolerance. In this journal they are trying to explain on to provide advisers and planners
in the financial services industry with an outline of the key issues to consider as they develop
an understanding of the risk tolerance of their clients. A planner can develop a tailored
financial plan that reflects on the clients perception between risk and the compensation
required for bearing risk. By making the clients risk tolerance explicit and understandable,
the planner is able to help the client identify any mismatch between psychological and
financial needs, then work with the client to make any trade -offs that might be required.
Most important is the financial planner provides the best approach to settle on the risk
tolerance of clients. Understanding the risk is most important to make a personal financial
plan for clients. In particular, this paper builds upon existing knowledge available to advisers and
planners in the financial services industry by providing a set of guidelines to consider as they
assist clients in developing an understanding of risk tolerance. In particular, this discussion
examines (a) the concept of risk tolerance; (b) why it is important that planners understand the
risk tolerance of clients; (c) how planners should go about obtaining an understanding of their
clients risk tolerance; (d) what planners should look for in a risk tolerance test; and (e) some
other general issues. These guidelines are also provided to assist financial planners and
counsellors to identify the main features of a good measure of risk tolerance.
Personal Financial Planning: Theory and Practice, 2nd Edition written by Michael A.
Dalton, this book tell us that sections on communication, internal analysis, and helping
clients establish financial direction are thorough and give the proper emphasis on the
planning process. The early and detailed discussion of mission, objective, and goal setting
provides an excellent framework for working through the specific planning.
8/6/2019 A Personal Financial Planner for Malaysian
14/39
2.3 Personal Tax Reduction:
Jim Saxton (2001) analysis on Economic benefits of personal income tax rate reductions.
In this article he tries to explain on how to minimize a persons personal income tax. He has
mentioned that there are six effects to reduce the income tax those are:
2.3.1. Labour Supply: A reduction in insignificant income tax rates would increase the
rewards to additional labour earnings. Workers respond to tax rate cuts by substituting more
labor for less leisure since labor becomes relatively more attractive. But tax cuts also create
an incentive to reduce labor because a higher after-tax income. Empirical research has found
that labor supply substitution effects usually outweigh income effects. As a result, overall
labor supply can generally be expected to modestly raise in response to marginal tax rate cuts.
An interesting conclusion from economic theory is that it is only the substitution effect that
comes into play in determining deadweight losses, not the overall change in a taxpayer's
behaviour. As a consequence, substantial deadweight losses may be occurring in situations
where substitution effects are offset by income effects and behaviour is little changed.
2.3.2. Saving: Personal saving provides individuals with financial security and allows the
levelling out of consumption over a lifetime. The nation's savings are put to use by businesses
to increase their capital stock and generate long-term economic growth. It is widely
recognized that the income tax system is biased against saving and towards current
consumption because the returns to saving often face high tax rates whereas current
consumption does not. This basic problem with income taxes has contributed too much of the
interest in fundamental tax reform in recent years. Income tax rate reductions can partly
alleviate this distortionary bias in the tax code.
2.3.3. Entrepreneurial Activity and Small Business Growth: The income tax system has a
wide-ranging impact on how businesses are structured and operated. Taxes affect such
decisions as purchasing capital equipment, hiring workers, and designing compensation
plans. Marginal tax rate cuts would reduce the influence of taxation on business decisions
allowing firms to allocate resources with greater efficiency. Personal income tax rates have a
direct effect on small business profits, hiring, investment, and growth. This is important
because small businesses fill a unique role in the economic growth process. While many
small businesses stay small, some will grow to become leaders in whole new industries. New
firms often challenge existing firms with untried ideas and thereby generate greater
competition and efficiency.
8/6/2019 A Personal Financial Planner for Malaysian
15/39
2.3.4. Production and Consumption Efficiency : The income tax code is riddled with
incentives and disincentives affecting different industries, investments, and consumption
goods. As a result, taxes alter the relative prices of different economic activities thus
redirecting resources to less efficient uses. For example, the income tax exclusion on state
and local government bond interest alters the allocation of investment funds in the economy.
2.3.5. Tax Avoidance: Tax avoidance refers to a wide range of activities designed to legally
reduce tax liabilities. As tax rates rise, individuals and businesses restructure their operations,
maximize their tax deductions, adjust employee compensation packages, modify investment
portfolios, change the timing of receipts and payments, and conduct various other
transactions to minimize taxes. They are aided by a large industry of expert accountants and
lawyers whose job is to continually develop new techniques and products for tax planning.
2.3.6. Tax Evasion: Tax evasion is tax avoidance by illegal means. Like legal tax avoidance,
tax evasion rises as tax rates rise, as confirmed by numerous empirical studies. Like tax
avoidance, tax evasion creates deadweight economic losses. These occur as resources are
shifted from more productive uses to less productive uses that are easier to hide from the
government.
2.4 Personal investment:
St Andrews Life Assurance plc (2010) explains on Key features of the personal
investment plan for growth. In this report they are trying to describe where should invest
money. Invests in different assets, for example stocks and shares, bonds and property. The
funds are split into units and the price of these units depends on the value of the assets the
fund invests in. If these funds increase or decrease then it makes profit or loss. The funds bear
the costs of buying and selling investments and these costs are included in the unit price. If
invest in the high Income Fund, it take charges from the capital rather than the income which
will reduce the growth potential of investments. If Income received from the investments is
added into the funds which will increase the value of units.
8/6/2019 A Personal Financial Planner for Malaysian
16/39
2.5 Personal Property Management:
USAID (2008) explains on Personal Property Management. In this chapter they are trying
to explain on how to manage property. Personal Property means such items as vehicles,
furniture, equipment, supplies, appliances, and machinery. It refers to all property not
otherwise classified as land, land improvement, buildings, and structures, which are normally
referred to as real property. They have mention to follow a system. This system shows how
manage a personal property those are:
a. Ensures the economical and timely acquisition of property required by the Agency;
b. Maintains issuance, inventory control, maintenance, and accountability records, as
required;
c. Safeguards against waste, fraud, loss, and misuse of personal property; andd. Provides the Bureau for Management, Office of Financial Management (M/FM)
with cost and inventory control data needed for the proper recording of capitalized personal
property.
8/6/2019 A Personal Financial Planner for Malaysian
17/39
Chapter 3
3.1Purpose and area off studyThe purpose of this study is to evaluate on personal financial planning for Malaysian. This
study basically for young people for Malaysian who do not know where to invest their
money, how to utilize, to make a proper goal or destination they need help from the planner.
The purpose of each goal is determined to ensure that the goal is meaningful in the context of
the individual's situation. Personal financial planning is for Malaysian broadly defined as a
process of determining an individual's financial goals, considering his or her resources and
purposes in life, risk profile and current lifestyle, to detail a balanced and realistic plan to
meet those goals.
3.2Population & Sampling ProcedureThe main focus of the study is held on students and young workers who are new and lacks in
experience regarding investment. This is why the young workers and the students have been
considered as the population for the study.
This study conducted via questionnaire survey. For the purpose of my desired study, a survey
will be needed to conduct via self administered questionnaires which will be distributed
among a random number of the Malaysian student and young workers. The survey will be
held on a random sample size of around 150 respondents who will be mostly from three
different professions (young workers, executives and professionals, and student) at different
areas in Kuala Lumpur, Malaysia. After collecting data from the respondents, the data
analysis will be held and necessary recommendations regarding financial planning will be
provided.
3.3 Instruments reliability and validity
Interview, telephone conversation and other mode of face to face communication is
considered to identify whether the respondents real opinion is reflected through the
questionnaire or not. By this way the validity will be tested. Asking two different questions
8/6/2019 A Personal Financial Planner for Malaysian
18/39
with same meaning to the respondents will help to measure the reliability of the data. If both
of the questions have same result from the respondents, the data will be found reliable.
3.4Data collection methodsWhile several data collection techniques have been developed and applied across different
disciplines, market survey has been identified as the most popular means of generating
primary data in business research (Zikmund, 2000). For marketing researchers, the self-
administered questionnaire survey has proven to be an important and useful instrument
(Ranchhod & Zhou, 2001).
For the purpose of this study, although there were many possible ways to communicate with
respondents, such as online focus groups and also chat rooms, the self-administrated
questionnaire was used. His method is considered to be the most popular method used given
the time and budget constraints of the project. More importantly, since the questionnaire was
highly structured and relatively straightforward, respondents will be able to complete the
survey on their own without much help from the researcher.
Therefore, the use of a self-administered questionnaire helps to increase convenience for the
respondents to participate in the survey.
3.4.1 Primary Data
Primary data are which first hands experience data are. In other words these are data which I
myself will be collecting and observing for the purpose of my research. The main advantage
of primary data is to find the data that is the most applicable for research purpose and the
disadvantage is that through primary data collection, it is usually more costly and burns more
precious times. (Slideshare 2009)
Primary data can be gathered by communication methods or observation methods or both.
Communication methods include interacting with respondents, asking for their opinions,
attitudes, motivation, characteristics and these can be collected by methods like surveys,
focus groups, pannels e.t.c.
8/6/2019 A Personal Financial Planner for Malaysian
19/39
On the other hand an Observation method usually does not interact with respondents and
letting them behave naturally and drawing conclusions from their actions. (Slideshare 2009)
For my research based on a personal financial planner for Malaysian I will use both
communication methods and the observation methods. The ways I am planning to achieve
these methods are by applying or using the structured questionnaires and personal
observation methods.
3.4.2 Secondary Data
Secondary data are those data that have been collected for some project and has already been
collected by someone else for a different purpose. Secondary Data can almost always be
gathered faster and at a lower cost than primary data (Zikmund, 2000, p58).
The common sources of secondary data include censuses, surveys, organizational records or
data collected through qualitative methodologies or qualitative research. (Wikipedia 2010)
Secondary data analysis saves time that would otherwise be spent collecting data and
particularly in the case of quantitative data, provides larger and higher quality databases that
would not be feasible for any individual researcher to collect on their own. (Wikipedia 2010)
3.5 Data analysis method
There is a number of software available for analyzing the study. In this research, Microsoft
Excel 2007 software has been used to analyze data. In this research, the responses and
information collected from survey will be tested using various statistical techniques such as
frequency distribution, ANOVA etc. Thus the overall data analysis for the study will be
conducted.
8/6/2019 A Personal Financial Planner for Malaysian
20/39
Chapter 4
As mentioned earlier a research was conducted by using the questionnaire method and laterthe data gathered from different area in Kuala Lumpur, Malaysia. The study will be analyzed
by using the frequency distribution testing and the outcomes of the research are described
below.
4. Facts and result of study
Table 1 shows the demographic profile of 150 respondents form different area in Kuala Lumpur,
Malaysia.
Table 1: Demographic Characteristics of the 2010 Survey Participants.
Characteristic Respondents( In percentage ) Respondents ( Total )
Gender
Male
Female
64.66
35.33
97
53
Age
Below 20
20 29
29-39
40 or above
13.33
47.33
28.66
10.66
20
71
43
16
Marital Status
Married
Single
13.33
86.66
20
130
Race
Malay
Chinese
Indian
Others
35.33
44.66
15.33
4.66
53
67
23
7
8/6/2019 A Personal Financial Planner for Malaysian
21/39
Religion
Islam
Christian
Hindu
Buddhist
Others
35.33
14.66
15.33
30
4.66
53
22
23
45
7
Highest Education
Primary
O level
A level
Degree
Post Grad.
Others
0
0
7.33
49.33
40.66
2.66
0
0
11
74
61
4
Occupation
Govt. Job
Private Sector
Own Business
Student
Others
8.66
28.66
18
42
2.66
13
43
27
63
4
Monthly Income
RM 2000 or less
RM 2000 RM 2999
RM 3000 RM 4999
RM 5000 or more
32
48
14
6
48
72
21
9
The overall result presented in the above table represents study mentioning that most of the
male want financial planning because males responded is 64.66% all though female are
35.33% of the total respondents. Form the survey of my study it is to be mentioned that there
are different people of different ages who want personal financial planning but mostly form
20-29 ages people need financial planning for their future because they have been come up
with new knowledge but do not know how to invest and make a financial plan for them. So
my study will help those find out how to make financial planning for them. From the data of
8/6/2019 A Personal Financial Planner for Malaysian
22/39
8/6/2019 A Personal Financial Planner for Malaysian
23/39
Table 2: Frequency of Managing for Various Aspects of Personal Financial Planning.
Items Details Responses (In
Percentages)
Investment Planning
1. What is the primarygoal of your investments?
Please choose the mostimportant one.
I am saving to use these funds for a large
purchase or expense, such as a car, home down
payment or other goal within five years
I want to invest for the long-term, but I need
this investment to generate cash flow and
provide regular income.
I would like long term growth. I have no need
for income now or over the next 10 years.
Im only interested in aggressive growth over
the long run. I want to maximize my potential
return.
41%
35%
13%
11%
2. Your personal timehorizon is an important
part of your financial
strategy. What percentage
of your income do you plan to invest within the
next 5 years?
More than 50%
30% to 50%
Less than 30%
I dont plan to spend any of it.
26%
42%
32%
N/A
3. Investment is the
commitment of funds toachieve long term goals or
objectives.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
57%
43%
4. Investment is the long-
term financial success.
Strongly Disagree N/A
8/6/2019 A Personal Financial Planner for Malaysian
24/39
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
48%
52%
5. Which of the following
statements best describes
your current investment
situation? (If you dont
currently have
investments, choose the
response that best
describes how you think.)
All of my investments will go on Savings
Bonds because I need the income or security.
Most investment will be made to generate
income and preserve capital, but I need some
capital growth.
Most of my investments tend to be mutual
funds, although they are generally not aggressive
funds.
My investments tend to be moderately
aggressive mutual funds. My objectives are long-
term growth; therefore I dont often make
changes unless my reasons for investing have
changed.
I tend to choose aggressive investments for the
long term.
23%
21%
29%
16%
11%
Money Management
planning
6. Spend my money very
carefully. Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
46%
54%
7. Maintain a disciplinedsavings or investment
program.
Strongly Disagree
Disagree
N/A
N/A
8/6/2019 A Personal Financial Planner for Malaysian
25/39
No Opinion
Agree
Strongly Agree
8%
53%
39%
8. Maintain adequatedisability insurance.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
7%
51%
42%
9. Reduce taxable
income. Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
35%
65%
10. Start or maintain
education fund for
children.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
67%
33%
Estate Planning
11. I would like to make
specific plans for asset
distribution in the event of
my death.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
72%
28%
8/6/2019 A Personal Financial Planner for Malaysian
26/39
12. My life insurance is
consistent with my total
estate plan.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
71%
29%
13. I would like to know
what income my family
will receive from the
proceeds of my estate.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
6%
73%
21%
14. I would like to
understand how taxes willbe applied to my estate.
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
43%
57%
15. I am well informed
about estate planning. Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
N/A
N/A
N/A
45%
55%
The overall result presented in the above table shows the frequency of respondents in
managing various aspects of personal financial planning. Overall, investment planning and
money management appear slightly better and actively managed as compared to estate
planning.
8/6/2019 A Personal Financial Planner for Malaysian
27/39
8/6/2019 A Personal Financial Planner for Malaysian
28/39
From t anal i iti to be noted t at about 42% people wantto invest oft eirincome 30%
to 50% wit in 5 years. Because most oft em are student so t ey wantto invest 30% to 50%
in between. Mostly young workers t ey wantto investmore t an 50%. And t ose are feeling
agitated to investt ey are 26% of people.
Fi i
For long term goal 57% people agree to invest t eir money. Long Term investments and
funds are investments in a company for more t an one year. They can consist of stocks and
bonds of other real estate, companies, and cash that have been set aside for a specific
purpose. So long term investmentis safe for investing and also can achieve good amountof
income.
Fi i l l
26
42
32
0
Inv st within 5 y s
ore 50
30 to 50
Less than 30
I dont plan to spend any
of it
0
20
40
60
Strongly
DisagreeDisagree
No
OpinionAgree
Strongly
Agree
0 0
0
57%
43%
Inv st in lon t m o ls
8/6/2019 A Personal Financial Planner for Malaysian
29/39
In my survey 52% people strongly agree toinvestin long-term investment because they think
it will success fortheir future life. There are many to success in long term investmentthose
are:
y Di i : Investing in a number of stocks in different markets and in mutual funds, bonds and otherinstruments. Diversify into property funds, commodity funds and
hedge funds. This should give protection against a collapse in any one particular
sector.
y Run the stars and sell the dogs: Monitor investments and compare their performances against the market position. If anyone holdings do well then the
temptation is to cash in and take a profit. On the other hand ditch the dogs that
significantly underperform the market. The temptation is to hold onto them in the
hope of a rebound or worse stillto increase holding atthe lower price. So sellthe dogs
and run with the stars.
y Reinvest dividends: The overall growth in most portfolios comes from reinvesteddividends rather than in appreciation of the stock prices. Choose some investments
with a solid history of dividends.
Figure 6: Long-term Financial Success.
0%
20%
40%
60%
Strongly
DisagreeDisagree
No
OpinionAgree
Strongly
Agree
0%0%
0%
48% 52%
Lon -t m Fin n i l su ss
8/6/2019 A Personal Financial Planner for Malaysian
30/39
Based on the survey it is found that 29% of the respondents to have mutual funds because
those are generally not aggressive funds. Mutual funds raise money by selling shares of the
fund to the public. It is an open ended fund operated by an investment company which raises
money from shareholders and invests in a group of assets to makes profit. As well as 23% of
respondents they want to invest on saving bonds because they need income or security. Invest
in asavings bonds are a great way to add investment portfolio. Its a safe and solid way to
make money grow and work. Based on the research 11% of respondents want to have
aggressive investment for the long term. They want to make more profit then others.
Figure 7: Best investment situation.
4.2 Money Management Planning:
In table 2 Malaysian respondents on money management planning. Money management is
the process of managing money, investments, budgeting, banking, and taxes. Money
management is basically important for young because they did not learn properly how tosave, invest, allocate, or how to make money work.
0
5
10
15
20
25
30
35
All of y invest ents will go on Savings Bonds
because I need the inco e or security.
ost invest
ent will be
ade to generate
inco e and reserve ca ital, but I need so e
Most of
y invest
ents tend to be
utual
funds, although they are generally not
My invest
ents tend to be
oderately
aggressive
utual funds. My objectives are
I tend to ch oose aggressive invest ents for the
long ter
.
8/6/2019 A Personal Financial Planner for Malaysian
31/39
8/6/2019 A Personal Financial Planner for Malaysian
32/39
Maintain adequate disability insurance is important for personal financial planning because
disability insurance provides partial wage replacementto eligible workers who are unable to
work because of a disability. Based on my survey 51% of respondents agree to have disability
insurance. Ratherthan 42% of respondents also strongly agree and 7% of respondents they do
not have an opinion about disability insurance.
Figure 10: Disability Insurance.
Reduce taxable income is one of the most important for personal financial planning. Personal
income tax usually progressive, levied on annual income subject to certain deductions. A
person means an individual, an ordinary partnership of person. In general, a person liable to
personal income tax has to compute his tax liability, file tax return and pay tax. In my
research respondents wants to reduce their taxable income. Among 65% of respondents
strongly agree to reduce their taxable income. So there are many way to reduce taxable
income those are:
1. Invest in home to save on tax: Buy a house or any real estate property. So thatrespondents can include the mortgage interest and property tax in oftheir deductions.
2. Keep house for two years, save tax while selling:Home sale exclusion is one ofthebest tax breaks available today. Respondents can exclude up to RM750000 of profit
on the sale oftheir home from theirtaxable income. Butto qualify for the exclusion,
they must have owned and lived in that home for atleasttwo years in their house.
Series10%
20%
40%
60%
Strongly
Disagree
Disagree No
Opinion
Agree Strongly
Agree
Disability Insu an
8/6/2019 A Personal Financial Planner for Malaysian
33/39
3. Timely sale ofinvestments: If respondents earn more than they expected, than theycan sell some oftheir losers and reduce theirtax liability. As well as selling mutual
funds, they can save their tax outgo just by selling them before the yearend
distributions. So that they can save on capital gains tax or dividend tax. Their
investments can be allocated to retirement accounts, thereby reducing your overalltax
burden.
4. Pre-Payment of Interest: Pre-payment is a common approach to claim the interestdeductions on margin loan or investment property loan so it will have the tax
deductions this financial year. As long as the loan is used to generate taxable income
so it can claim a tax deduction on the interest payments.
Figure 11: Reduce Taxable Income.
Education fun for children is one of the most important planning for future. Because the
education expenses are so high, so respondents should plan to fund these costs well in
advance. Now a days parents are worried about how to fund their childrens education. So
they have been trying to save for education costs is to set aside an appropriate sum that will
grow until its adequate to pay all your childrens education costs. However, most middle-
class family simply dont have enough money sitting around to invest a lump sum toward
college funding. There are many ways to come up with money to supplement whatthey have
saved fortheir childs education those are:
0%
10%
20%
30%
40%
0%
60%
0%
StronglyDisagree
Disagree No Opinion Agree StronglyAgree
Redu e taxable in ome
8/6/2019 A Personal Financial Planner for Malaysian
34/39
8/6/2019 A Personal Financial Planner for Malaysian
35/39
Most of the people want to have specific plan for assets distribution. So assets distribution is
one of the important factors for personal financial planning. So fast step is to determine not
only to whom but also in what manner property should be distributed. Consider special needs
of children and parents. About 72% of respondents agree to have specific plans for assets
distribution. And some of 28% respondents strongly agree to have assets distribution.
Figure 13: Assets Distribution.
Most of the people find that life insurance to be an important part in an estate planning. Life
insurance can be helping many financial objectives those are:
y Costs of the last illness, costs of administration, other settlement costs, immediate
cash for payments of debts, and if necessary, payment of federal estate taxes.
y Life insurance can also be used to create an estate planning where one would not
otherwise exist.
yFunds for the surviving partner to buy the partnership interest of the deceased partnerfrom the heirs. This enables the business to continue as an on-going enterprise.
y Some parents buy life insurance for their adult son or daughter who will be in the
process of taking over the farm. This action offers protection for parents so that the
death of the adult child will take the business.
0'
10(
20(
30'
40'
50(
60(
70'
80 '
Str) 0
gly
Disagree
Disagree1 )
2 3
i0
i) 0
4
gree Str) 0
gly4
gree
Assets Distribution
8/6/2019 A Personal Financial Planner for Malaysian
36/39
So based on my research 71% of respondents agree to have life insurance is consistent with
theirtotal estate plan. And rest ofthe 29% strongly agree to have life insurance is consistent
with theirtotal estate plan.
Figure 14: Life Insurance.
Most ofthe family they are conscious about whatincome their family will receive from the
proceeds oftheir estate. So based on my survey 73% of respondents agree to know how much
they will receive from the proceeds of their estate. And a few portion of respondents its
about 6% they do not have any opinion. As well as 21% of respondents strongly agree to
know how much they will receive from the proceeds oftheir estate plan.
Figure 15: Income receive from estate.
0%
10%
20%
30%
40%
5
0%
60%
70%
80%
Str 6 ngly
Disagree
Disagree N 6 Opini 6 n Agree Str 6 ngly
Agree
Life Insu an e
0%
20%
40%
60%
80%
Str 7 ngly
DisagreeDisagree
N 6 Opini 6 nAgree
Str 6 ngly
Agree
In me Receive F m Es ate
8/6/2019 A Personal Financial Planner for Malaysian
37/39
Tax is one of the most important factors for personal financial planning. So basic goalis to
conserve as many of assets as possible to benefit heirs, minimi ing taxes is a major
consideration. Much ofthe estate planning process focuses on reducing or eliminating taxes.
This tax is known as the Unified Gift and Estate Tax. So based on my research respondents
they wantto understand how taxes will be applied to their estate plan. So my study has found
outthose ways they are:
Tangible personal property, real estate, and other assets.
Jointly owned property.
Life insurance.
Employee benefits.
Gifttax paid within 3 years of death.
Based on my survey 57% of respondents strongly agree to understand how taxes will beapplied to their estate. As well as among 43% of respondents only agree to understandhow
taxes will be applied to their estate.
Figure 16: Taxes applied on estate.
For personal financial planning every people has to well inform about estate planning. So
everyone who owns anything has an estate. Like a home, cars, property, bank accounts,
stocks, bonds, mutual funds, life insurance policies and retirement plans. Estate plans can
minimi e the expenses of settling an estate. So based on my research my study gotto know
that everyone well informed about their estate planning. So from my research 55% of
Strongly
DisagreeDisagree
No OpinionAgree
Strongly
Agree
0%0%
0%
43%
57%
TaxesAppliedon Estate
8/6/2019 A Personal Financial Planner for Malaysian
38/39
respondents are strongly agree that they are well informed about their estate planning. As
well as 45% of respondents are also agree that they are well informed about their estate
planning.
Figure 17: Informed about estate planning
The studies which are conducting among the Malaysian those are do not know how to make a
financial plan forthem. So this study will help them to make a personal financial plan. The
importance of personal finance is how to manage finances the way businesses do and to track
things so can see at alltimes how is doing. This personal financial planning is important for
those are young workers and students. From my survey results it contributes importantto the
financial planners in adjusting their respondents needs and achieving personal economic
satisfaction, when the respondents move through different stages of their life cycle. For
personal financial planning my study have measure some steps those are:
y Clarify Present Situation: At first the financial planner need to know clear present
situation of respondents. And then planner need to collect all relevant financial data
such as lists of assets and liabilities, tax returns, records of securities transactions,
insurance policies, will, pension plans and so many thing about respondents.
y Identify oals and Objectives: After collecting all data from respondents planner
need to make goal for them. These may include providing for childrens education,
supporting elderly parents or relieving immediate financial pressures which would
help maintain your currentlifestyle and provide for retirement.
0%0%
0%
45%
55%
Info medAbout Estate Plannin
Strongly Disagree
Disagree
No Opinion
Agree
Strongly Agree
8/6/2019 A Personal Financial Planner for Malaysian
39/39
y Identify Financial Problems: After setting a goal for respondents financial planner
need to identify their financial problem. Problem areas can be including too little or
too much insurance coverage, or a high tax burden. So for planner they need to make
a low tax for respondents.
y Implement Strategies: A financial plan is only helpful if the recommendations are
put into action. Implementing the right strategy will help to reach the desired goals
and objectives. The financial planner should assist in either actually executing the
recommendations, or in coordinating their execution with other knowledgeable
professionals.
y Monitor and Review: Every financial planner they need to review and revision their
financial plan to assure that the goals are achieved.
After maintaining the steps planner can make a good personal financial planning for
Malaysian. Based on my research on behalf of financial planner my study will able to make a
good personal financial planning for Malaysian.