A Personal Financial Planner for Malaysian

8/6/2019 A Personal Financial Planner for Malaysian

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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.


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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?


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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


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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.


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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.


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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.


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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,


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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


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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


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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.


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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


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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.


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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.


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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.


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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.


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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


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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.


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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.


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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


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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


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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


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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


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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%


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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.


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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


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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


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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

.


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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


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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


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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


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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


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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


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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


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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.

A Personal Financial Planner for Malaysian

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