This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on Jan 18 - 24, 2016.

Investors around the world are turning to computer algorithms, big data and robo-advisers to manage their wealth. How have these global trends affected the Malaysian wealth management industry? 

What are some of the trends in the Malaysian financial planning and wealth management market today? Gavin Teoh explains:

Another trend in which Malaysia has been late getting on the bandwagon is providing financial services that cater for women. Women represent a growing portion of wealth globally, yet there is a dearth of products that cater for them specifically.

"To be honest, we don't need specific investment products for women. Most of the products out there can apply to both men and women, unless it is insurance, which covers female illnesses and things like that," says Teoh.

What women require, however, is a good planner who is empathetic and willing to listen. "Ladies tend to be more comfortable talking with someone who really listens to them. If you are a product pusher, you will frighten them away," he says.

But Teoh does see a growing number of single and newly single women in need of wealth management services. And even married women who are looking to make their own financial decisions, and do not want to depend on their husbands. 

In his experience, women tend to opt for more conservative products, even when the profiling software classifies them as moderate or moderate-aggressive. "When you do the risk profiling and you see the type of investor she actually is, and you look at the products she has opted for, you realise there is a mismatch."

What does this mean? "It means that they are really not conservative investors and they have the appetite to take on more risk. The profiling system is psychologically designed to ascertain your profile. So if you are not conservative, you should not be behaving conservatively. In the same way, if you are not aggressive, you should not be going for aggressive investments. That just means becoming greedy," says Teoh.

The main test of aggressiveness is if they can sleep at night, having lost 20% of the value of their portfolio. For a really aggressive investor, even a loss of 50% does not cost them a night's sleep. So, they can afford to walk a little on the wild side. 

But it takes more than profiling software to gauge their risk appetite. "After she has been a client for a number of years, you start to be familiar with her behaviour and thinking," says Teoh.

In the case of married couples, some of the planning involves both husband and wife, while some of it involves only one partner. "As a professional financial planner, we have to follow a code of ethics and keep everything confidential. We have to stand neutral between husband and wife, and that is not always easy," he says.

Do we need financial planners who focus specifically on services for women? "We are not like the US where the financial planning market is very big and people love to go to financial planners to help them. There are financial planners solely for doctors, solely for women, solely for divorce. Their market is big enough to allow for a certain level of specialisation. Ours isn't," says Teoh.

Another trend in the US is coming up with more tailor-made solutions for clients. Is the same true for Malaysia? "I have to be careful with this word. Investment philosophy covers risk profiling, objectives, concerns, time horizons, what you are supposed to do and what you cannot do.  Based on your investment philosophy, we look at your issues, time horizons and the constraints you are operating under," he says.

"We look at all these issues and customise your portfolio in terms of volatility and risk, as well as the returns that are suited to your profile. If you are conservative, your returns will be 2% to 5%. If you are moderate, 6% to 8%, and moderate-aggressive, 9% to 10%. It would not be good if you are a moderate-risk investor and I give you something very aggressive. You may love it when you see it giving you 15% returns, but when it defaults or the value drops 30% to 40%, you won't be able to sleep at night - whereas the aggressive investor can sleep at night even if the value of his portfolio drops 50%."

Teoh says it is important for financial planners to distinguish themselves from traders, who pop in and out of the market and just want to make a quick buck. Traders may use technical analysis but they don't look at the fundamentals. Investors, on the other hand, have to look at the longer term. 

"That is what financial planners are supposed to do. But then I see some financial planners themselves confused as to where they should position themselves; whether as traders or investors," he adds.

A financial planner is basically a risk manager, says Teoh. "This is easy to understand when it comes to insurance and estate planning, but less easy to understand when it comes to investment. But this is what it means. If your client is a moderate-risk investor and when you calculate his shortfall, you realise that he will require a return of 12% to meet it, you cannot plan to hit 12%. Instead, you help him find a way to change his lifestyle, get a better income or restructure certain things. You have to respect the client's risk profile. But I see some planners do this and it is very bad. Instead, they should use the risk management method to manage their client's money.

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