Bank Negara Guide on the role of a Financial Advisor in Malaysia

What you need to know

The Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) regulate companies and individuals that provide advice on Insurance and Takaful products to consumers. The laws also provide Bank Negara Malaysia with the necessary regulatory and supervisory oversight powers to ensure business conduct and consumer protection compliance.

Who is a Financial Adviser

A Financial Adviser (FA) is a company approved by Bank Negara Malaysia under the FSA to carry out financial advisory business.

Who Is A Financial Adviser’s Representative?

A “Financial Adviser’s Representative” (FAR) means an individual, however styled, in the direct employment of, acting for or by arrangement with an approved FA, who performs for the FA any services relating to financial advisory business.

Work Scope Of A Financial Adviser / Islamic Financial Adviser

FAR scope

What Is The Difference Between A Financial Adviser /Islamic Financial Adviser And An Insurance And Takaful Agent?

FA / IFA is an independent party that provides financial advisory services to the customer based on the customer’s financial needs.
Therefore, the FA / IFA sources for insurance policies and/or Takaful plans from multiple insurance companies and/or Takaful operators that best suit your needs.

An insurance or Takaful agent represents its principal insurance company or Takaful operator and primarily sells insurance policies or Takaful plans issued by the insurance company or Takaful operator it represents.


FA represents customer

What Are The Requirements To Be A Financial Adviser / Islamic Financial Adviser?

  • Must be a body corporate with a minimum paid-up capital
  • Must have a minimum professional indemnity insurance coverage in order to protect consumers in cases of professional negligence
  • Subject to compliance with specified licensing requirements for annual renewals

What Are The Requirements To Be A Financial Adviser’s Representative/ Islamic Financial Adviser’s Representative?

  • Possesses minimum professional qualifications specified by BankNegara Malaysia, to ensure that they have the appropriate level of competency required to provide advice to the consumers
  • Must fulfill minimum hours of continuous professional development programme annually, to ensure that they continuously maintain and enhance their abilities, skills and knowledge

How Does A Financial Adviser And Financial Adviser’s Representative Benefit Me?

  • In dealing with consumers, FA / IFA representatives must have a reasonable basis for the recommendation they make. They have to take into account your financial objectives, financial situation, and personal needs when recommending a financial product.
  • A FA / IFA representative must take all reasonable steps to ensure that the product he/she recommends is suitable for you, taking into account the information you gave.
  • Consumer should provide complete and accurate information to ensure that the FA / IFA representative is able to recommend a suitable product.

Are Approved Financial Advisers Or Islamic Financial Advisers Allowed To Handle Clients’ Money?

  • Most of the FA / IFA practices do not handle client monies. When you purchase an insurance policy through a FA / IFA, make sure that the payment is made payable in the name of the insurance company. This restriction does not apply to monies owing to the FAs / IFAs for the services provided to you.
  • For those FAs / IFAs who handle clients’ money, they are required to establish a separate client account to be held in trust.

How Are Financial Advisers And Islamic Financial Advisers Remunerated?

  • FAs / IFAs are remunerated in several ways. If a FA / IFA charges you a fee, it must disclose details of the charges at the outset.
  • If a FA / IFA intends to receive commission on insurance products and/or Takaful products sold on behalf of the insurance company and/or Takaful operator, it must disclose the amount of commission it receives.

What Should I Do If I Received An Unsolicited Call To Purchase A Financial Product?

  • You should find out where is the person calling from, the company he/she represents and whether he/she is an agent or a Bank Negara Malaysia approved FAR / IFAR.
  • For further verification, please check the Bank Negara Malaysia website at http://www.bnm.gov.my under the List of Financial Advisers’ Representatives or contact the approved FA/IFA firm.

Who Can Claim To Be A Financial Adviser /Islamic Financial Adviser Representative?

Financial Adviser is a restricted word under section 139 of the FSA. No person shall in its name, description or title uses such word, unless such person is approved under this Act to carry on financial advisory business.

Islamic Financial Adviser is a restricted word under section 151 of the IFSA. No person shall in its name, description or title uses such word, unless such person is approved under this Act to carry on Islamic financial advisory business.

Any person who contravenes these sections commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.

In The Event Of Dispute, Who Should I Contact?

Contact your FAR / IFAR and discuss over the matter.

If your complaint is not satisfactorily resolved within the next seven working days, please contact the FA / IFA company. They will endeavour to resolve your complaint quickly and fairly. Or;

Contact Financial Mediation Bureau (FMB) and Bank Negara Malaysia for any dispute related to banking/financial, insurance and Takaful
issues.

complaint for FAR

Download the handbook – PDF version

A consumer education program by AFA – Association of Financial Adviser

This Post Has 7 Comments

  1. How much fees is applied by the Financial Advisers? Is the fee regulated?

    1. Hi What do you mean by regulated?

  2. let say if i would to be a crypto or bitcoin advisor in future… what procedure should i do and what
    should i have?

    1. not sure if such profession exists yet in Malaysia?

  3. Great article! This is very interesting. I found it very informative. I learned a lot from this. This article helps me a lot to understand Financial Advisor very well.

  4. Financial Advisers are only in respect of insurance products right?

    1. Actually no, financial adviser does comprehensive financial planning

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