marzunisham omar : financial advisers, trusted advisers keynote address by mr marzunisham omar, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the 6th annual conference of the association of financial advisers 2017 " financial advisers, trusted advisers ", kuala lumpur, 9 october 2017. * * * it is indeed a great pleasure to be here this morning. i would like to thank the association of financial advisers for inviting me to speak, and allow me first to congratulate the team on the successful organisation of this year ’ s conference. the future is as promising as it is unpredictable. as i reflect on the theme of the conference, i am reminded of a quote from confucius, the ancient chinese philosopher – “ i used to take on trust a man ’ s deeds, after having listened to his words. now, having listened to a man ’ s words, i go on to observe his deeds. ” this morning i would like to talk about trust – financial advisers as trusted advisers. indeed, trust is at the heart of the financial advisory industry. while customer service and technology are increasingly the key differentiators, the most essential element has been, and will always be, trust. in an industry where the very foundations are dependent on the strength of personal relationships, trust is not only a necessary feature – it is its strongest advantage, its defining value proposition. therefore, in my view, trust is where the future is – the financial adviser of the future will be a trusted adviser – one that customers can depend on for reliable, thoughtful and bespoke advice without hesitation. confidence and trust in the industry has unfortunately been bruised in recent years. instances of mis - selling and fraudulent practices have adversely affected the industry ’ s reputation. the rising occurrence of illegal financial schemes in recent times has further worsened the public ’ s perception towards individuals who call themselves “ financial experts ”. most financial advisers have done the right thing, only a small minority has not. yet, it is this minority that has been enough to trigger a tipping point of bad publicity for the profession. under these circumstances, trust becomes the ultimate currency of trade. trust entails adherence to high ethical standards, putting the interests of customers first and treating them fairly. it comes down to the profession having a genuine concern for customers ’ long - term financial needs. as trusted advisers, your responsibilities extend beyond just advising customers on how to invest their money. rather, it is about helping them achieving

by the financial services professional board. going forward, the association may consider refining this code of 2 / 5 bis central bankers'speeches ethics to better reflect the specificities of the financial advisory industry. for improved efficacy, the code should also be complemented, if i may suggest, by rigorous monitoring and strong enforcement. to this end, i would like to suggest the association spearhead the development of an oversight programme aimed at identifying and responding to misconduct risks in a timely manner. perspectives from members could contribute towards crafting more creative, practical and effective monitoring mechanisms, such as members ’ compliance report cards. to further elevate the professionalism of financial advisers, bank negara malaysia is currently reviewing the fit and proper requirements. these requirements will specify, among others, the factors to be observed in the assessment and appointment of key responsible persons, such as members of the board and ceos of the financial advisers, and financial advisers ’ representatives. adoption of these standards we hope will help to strengthen the credibility of the profession. another aspect that is closely linked to professionalism is transparency. it is for this reason that the bank has introduced additional disclosure requirements through the life framework. these disclosures are intended to ensure that appropriate and fair advice is given to consumers who purchase insurance. mandatory sales illustrations have also been enhanced. additionally, all intermediaries now have to provide a service guide to help insurance buyers better understand the advice and services to which they are entitled. instead of viewing these as requirements to be complied with, i would like to encourage financial advisers to take advantage of these disclosure tools to help customers fully understand what they are paying for. this will go a long way in establishing yourselves as trusted advisers. upholding independence the second feature of a trusted adviser is independence. when consumers seek financial advice, they expect to get an objective point of view that places their best interest above all else. and rightly so – the individual ’ s hard - earned savings are at stake. yet, the reality today is that the practice of commission - based compensation for financial advisers may not be fully aligned with the principle of rewarding quality advice to customers. certainly, commission - based compensation has its advantages. it is effective in ensuring that products are actually bought. it is also appealing to consumers who may not be able to afford to pay for advice. but there is a world of difference between sales and advisory. while sales seeks to maximise transaction volume, advisory seeks to maximise the consumer ’ s welfare. with the