6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle
Key Takeaways
Investment planning is the area of financial planning most relevant to UTS and PRS Consultants.
Consultants help clients by putting investment planning in perspective, educating them on risk, liquidity, tax and management characteristics, advising on credit and strategies such as dollar cost averaging, and recommending suitable schemes.
A sale of a financial product may be the culmination of a properly drawn-up financial plan, but it is not the reason for drawing up the plan.
The study guide's four client life-cycle stages are roughly ages 21 to 30, 31 to 44, 45 to 60 and 61 and above.
Aggressive UTS and PRS that may produce high returns with considerable volatility are not suitable for retirees, according to the study guide.
Investment Planning Is the Consultant's Core Area
Of the five areas of financial planning, the one most relevant to UTS and PRS Consultants is investment planning. Consultants help clients by:
- Putting investment planning in perspective – teaching clients that investment decisions follow from strategies designed to meet financial goals within a time frame.
- Educating clients about the risk, liquidity, tax and management characteristics of investments.
- Advising on the use of credit and its costs, and on strategies such as dollar cost averaging.
- Discussing and recommending suitable UTS and PRS products.
Specific Investment-Planning Activities
In a comprehensive engagement, the study guide says a Consultant should:
| Stage | Activity |
|---|---|
| Goals | (a) Determine the client's objectives and their order of importance |
| Cash position | (b) Analyse financial position and cash flow, suggest improvements and priorities |
| Non-investment priorities | (c) Decide how much goes to non-investment needs such as an emergency fund and extra insurance |
| Resources | (d) Calculate the assets left for investment goals |
| Profile | (e) Gather data for the investment profile, including attitude to risk |
| Current holdings | (f) Assess the risk and return of current investments |
| Assumptions | (g) State the financial assumptions used |
| Adequacy | (h) Check whether resources can meet goals; if not, reallocate, change goals, or use higher-risk, higher-yield investments acceptable to the client |
| Service | (i)–(l) Provide the agreed planning, implementation, monitoring and ongoing services, updating the plan |
| Records | (m) Document the procedures, the client's decisions and continuing responsibilities |
Financial Planning Is Not "Selling"
- Selling is often a one-off act. Financial planning is a comprehensive, ongoing advisory relationship.
- A sale may be the culmination of a carefully considered plan, but it is not the reason for drawing up the plan.
- Planning requires understanding the client's affairs, goals and objectives, and applying technical, communication and interpersonal skills to write and implement the plan, perhaps partly through UTS, PRS and other products.
- A planner cannot be expert in everything and must work with the client's other professional advisers: accountant, tax adviser, stockbroker and lawyer.
Client Life-Cycle Stages
The study guide describes four generalised stages:
| Stage | Typical situation | Investment focus suggested by the study guide |
|---|---|---|
| 1: about 21–30 | Single or newly married; income covers living costs, little saving; retirement far away; few financial responsibilities | Once a home is bought, build a nest egg in growth-oriented UTS and PRS; some specialised or aggressive funds may suit; can tolerate short-term volatility |
| 2: about 31–44 | Married with young children and a home; tertiary education costs some years away; protect with adequate life insurance and accessible savings | Long-term growth through growth or balanced UTS and PRS; some higher-risk funds if savings allow; Akaun Persaraan balances may be large enough to transfer into EPF-MIS funds that fit these objectives |
| 3: about 45–60 | More secure, near career peak, high capacity to save for retirement; children's tertiary education imminent | Approaching 55, insurance still important but shift to more conservative UTS and PRS, such as income and balanced funds, for lower growth with reduced risk |
| 4: about 61 and above | Children independent, mortgage paid, probably retired with lower earnings | Priority on income from capital, preserving purchasing power while reducing risk of loss; allow for contingencies such as medical needs; a combination of income and balanced funds; aggressive funds are not suitable for retirees |
These stages are generalisations; every client is different. Section 4.9's horizon-based examples and the PRS default option in Chapter 7B (growth below 45, moderate from 45 to 54, conservative from 55) follow the same logic.
Where UTS, PRS and EPF Fit Across the Stages
| Need | Typical tool | Why |
|---|---|---|
| Emergency money and short-term goals | Money market or short-term fixed income UTS | Liquid; repurchase proceeds paid within 7 business days |
| Medium-term goals (home deposit, education) | Balanced or growth UTS through regular savings | Flexible access; dollar cost averaging |
| Long-term retirement top-up | PRS | Tax relief of up to RM3,000 a year; age-based default option; sub-account A locked until 55 encourages discipline |
| Diversifying mandatory savings | EPF-MIS into approved UTS | Uses Akaun Persaraan savings above Basic Savings, subject to EPF rules |
A Consultant who understands these roles can explain why one client might hold all three, and why the mix should shift as the client moves through the stages.
Applying It
Case: Mr Lee, 33, married with a two-year-old, has a mortgage and RM800 a month to invest. He has no emergency fund and minimal life cover.
Following the investment-planning activities, the Consultant would first suggest building an emergency fund and reviewing insurance (non-investment priorities), then calculate what remains for investing, assess his risk tolerance and document the assumptions. For his stage, long-term growth or balanced UTS and PRS through regular savings may suit, possibly using the PRS tax relief. The Consultant documents the advice and agrees to review it as his circumstances change, because the plan must follow the cycles of life.
Which area of financial planning is most relevant to UTS and PRS Consultants?
Investment planning
Risk management and insurance planning
Tax planning
Estate planning
According to the study guide's life-cycle stages, which type of fund is described as NOT suitable for retirees?
Aggressive, highly volatile funds
Money market funds for liquidity
Balanced funds of equities and bonds
Income funds paying regular dividends
Which statement reflects the study guide's view of financial planning and selling?
A sale may be the culmination of a properly drawn-up plan, but it is not the reason for drawing up the plan
Financial planners should avoid working with clients' other professional advisers
Financial planning is a sales technique for increasing transaction volume
A financial plan is complete once the first product has been sold
Sections you finish are checked off in the contents.