A Millennial's Guide to Wealth Management in Malaysia

Wealth Management is gaining popularity in Malaysia due to rising salary levels and a booming economy expected to churn out more millionaires in the coming decade. However, comprehensively managing one’s wealth isn't possible for every busy millionaire. Here are where wealth management services may come in handy.

Mostly, wealth management is a sector with enduring growth potential driven by growing entrepreneurial wealth and intergenerational wealth transfer in Malaysia. However, the industry has yet to fully tap into different customers and age groups, stretching beyond the elite, for example, the millennials in Malaysia.

What is wealth management?

Wealth management is a professional service that reconciles investment advice, tax and accounting services, retirement planning and estate planning for wealthy clients at a fee. Typically, wealthy individuals work with a single Wealth Manager who coordinates advice from their lawyers, accountants and insurance agents to devise a way to manage and multiply their wealth safely.

In the past, wealth management services were the preserve of high-net-worth individuals. Fortunately, the internet opened this once-exclusive domain to wider audiences. As such, one does not have to be an ultra-millionaire to access wealth management services.

Besides managing stocks and shares, wealth managers help their clients to:

Choose between different collective funds in which they may be interested.
Select from a range of wealth management plans tailor-made to their criteria.
Invest to increase long-term capital or to take a more balanced position between long-term gains and immediate income.
Continually monitor the breadth and direction of the markets to make expedited adjustments in an investment portfolio.

A wealth manager may also help with tax planning, including minimising potential liabilities like capital gains or inheritance tax. Additionally, some wealth managers provide clients with investment calculators and access to wealth management reports to help comprehensively manage investment returns and risks.

Wealth management vs. financial planning

Wealth management is a financial discipline that encompasses financial planning as one of its key subcomponents. Wealth management principally focuses on optimising the growth and preservation of a person's wealth over time by:

Designing and managing investment portfolios.
Strategically diversifying assets to accomplish long-term financial goals.
Selecting tailored financial products for them.

On the other hand, financial planning revolves around creating a structured financial roadmap for an individual to achieve short and long-term financial goals. Financial planning typically involves:

Debt reduction strategy development.
Creating emergency funds.
Managing cash flows.

Asset management vs. wealth management

Asset management is a financial service that focuses on managing assets within one’s investment portfolio. On the other hand, wealth management is a more comprehensive fiduciary service, including asset management, that seeks to maximise private wealth and protect it. For example, estate planning, tax planning, trust management, and insurance protection.

What is the difference between private banking and wealth management?

Despite their similarities as specialist services customised to meet clients' specific needs, private banking and wealth management differ in their focus. The former usually entails traditional banking services, while the latter involves investment and financial planning.

For the most part, private banks mainly provide banking-related services like deposit-taking and lending to high-net-worth individuals. Wealth management firms mainly offer investment management and financial planning products to high-net-worth individuals.

Is wealth management the same as investment banking?

No, wealth management differs from investment banking. In practice, wealth management is oriented towards individual clients to provide them with a broad spectrum of financial services to help them manage their personal or family wealth.

On the other hand, investment banking focuses on serving corporate and institutional clients, providing financial advisory and facilitating capital markets transactions.

Who needs wealth management?

Malaysia has a growing economy with diverse manufacturing, services, and agricultural industries. Furthermore, Malaysia’s significant infrastructure and technology investments have helped attract foreign investment. Malaysia’s economy is growing at a pace of 5.6% year-on-year as of 2023, after annual economic growth of 8.7% in 2022.

Compounded by its relatively stable political environment and a well-educated workforce, Malaysia is breeding more millennial millionaires by the day. Consequently, millennials require wealth management services to cater to their current and future financial needs.

Many millennials are successful business owners, highly compensated professionals and executives who require specialised financial planning and investment strategies.

Furthermore, more millennials are inheritors of substantial assets and members of multigenerational families seeking to preserve a legacy. All these millennial groups require wealth management services tailored to their diverse financial holdings or unique financial objectives, including philanthropy.

Why is wealth management important for millennials?

Millennials are individuals born between the 80s and the late 90s. They grew up during a period of relative stability and economic prosperity. However, they also experienced significant events, such as the 2008 Recession.

Millennials' enthusiasm for investing and willingness to take risks puts them on the radar for wealth management services. Though many millennials may have a strong interest in investing, they don’t possess the expertise to navigate the complexities of the financial markets effectively.

Wealth management is essential as it provides tailored guidance to meet the specific needs of millennials across investment management, tax and financial planning, estate planning, and risk management. This is especially true in a rapidly evolving investment landscape with various unique asset classes and digital investment platforms. Here are other reasons why wealth management is imperative for millennials:

Helps you maintain your current lifestyle

Wealth management services can help millennials maintain their current lifestyle with tailored guidance on how to manage their finances effectively and invest money wisely.

Helps reduce financial stress

Tailored wealth management services can help reduce financial stress by providing a millennial with a holistic financial plan that considers their existing financial situation and future objectives.

Puts a systematic financial plan in place

Wealth management places an organised financial plan in play to help one achieve their precise financial goals. This may include curating a tailored budget, devising a debt management plan, or even building savings for emergencies and retirement.

Prepare financially for your family

Wealth management can help one prepare financially for a family by providing guidance on estate planning, life insurance, and other valuable financial tools to help protect a family's financial future.

Manage your financial goals

Wealth management can help millennials manage their financial goals by availing ongoing financial guidance and support. This may include regular reviews of their tailored financial plans and investment portfolios to ensure they are on track to achieve their milestones.

Prepare for retirement

Wealth management can help retirement preparations by availing expert guidance on retirement planning. This guidance may include how much one needs to save, how to invest money, and even how to manage retirement income.

Provides comprehensive and flexible investment strategies

Wealth management offers comprehensive and flexible investment strategies tailored to your individual needs and goals. This includes access to a range of investment products and services, including stocks, treasury bonds, mutual funds, etc.

Fights against inflation

Wealth management services can help fight against inflation by providing investment strategies designed to keep pace with inflation and protect your wealth over time.

How does wealth management work?

Wealth management is predominantly underpinned by a holistic, collaborative and personalised approach to managing an individual's financial assets to accomplish specific financial objectives.

Wealth managers extensively assess clients' financials, such as liabilities, income, assets, and expenses. Based on their findings, a tailored financial plan with clear strategies to meet the client's short-term and long-term financial objectives is curated.

Subsequently, upon client approval, the wealth manager executes the financial plan by devising a diversified investment portfolio aligning with the client's goals, risk tolerance and investment horizon.

A mix of disparate investment vehicles may be selected, like stocks, real estate, treasury bonds, and mutual funds. The process is client-focused and iterative, optimising returns whilst carefully managing risk.

The manager will subsequently coordinate with the client while engaging them in regular reviews to assess portfolio progress and iteratively adjust the investment vehicles depending on the economic climate. Additionally, some wealth managers provide tax planning, estate planning, retirement planning, and even insurance management services to optimise all nuances of the client's financial well-being.

The role of insurance in wealth management

Insurance providers like Prudential avail millennials with specialised wealth management products like PRUWealth Enrich to help them build greater wealth and secure legacies for their families.

This unique product boasts features such as multiple loyalty rewards, flexible payment options, insurance charge discounts, legacy planning, financial security, customised services, and expert advice to meet the specific needs of millennials.

Conclusion

Malaysia’s economic landscape constantly evolves, with new tax laws and investment products. Millennials need ways to adapt to these dynamics and ensure their investments grow accordingly. Furthermore, significant investments are never made on the spur of the moment, and it is vital to diversify wealth.

Fortunately, wealth management is a fiduciary service that millennials with a clear appetite for investing can use. Wealth management offers a medium to help millennials make informed investment decisions, select diversified portfolios, and access expert-tailored guidance on risk management whilst pursuing growth opportunities to leave a legacy for their families.