According to The Straits Times, the middle-class segment that makes up for nearly 40% of Malaysia’s population, often face numerous financial challenges. With limited resources and an ever-changing market, it is essential to understand the nuances of financial planning for this demographic. Kam Pei Min, a four-year MDRT member, from Puchong, Malaysia, shares her valuable insights servicing clients from this demographic, exploring approaches to not only reach them but to also meet their needs effectively. 

Remind them the importance of insurance 

Kam shares that the middle-class population is often unaware of the importance of financial management or they do not prioritize it as they get carried away with their existing lifestyle commitments, making no room for other essentials such as medical, life and accident insurances. “At times, when their existing commitments increase, they will start to think of discontinuing their insurance plans thinking this will relieve financial constraints,” she said. “In these instances, financial advisors will always need to emphasize and explain the importance of having financial safety nets in case of unpredictable emergencies.” 

To make sure clients are on the right path, she adds financial advisors should  advise clients on their current lifestyle and commitments. “If they have children, I would ask them how they would continue to support those commitments like school fees – costs that seem to be increasing every year. In an unfortunate circumstance where funds need to be reassessed, are they able to meet these existing requirements?”  

In other times, Kam says she shares some of her clients’ stories that relate closely to the individual she is speaking with. “I have clients of all ages and from various backgrounds. I pick out some of my client’s that have a similar lifestyle and share their experiences, not to instil fear, but to raise their awareness of some of the realities.”   

Offer affordable financial planning services 

The four-year MDRT member further explains many middle-class families are hesitant to engage with a financial advisor because they believe that it is too expensive. As such, she recommends that financial advisors offer free or low-cost initial consultations to give middle-class families the opportunity to learn more about financial planning and investment options.  

Match plans to cover the most basic needs 

Since finances are one of the biggest challenges faced by the middle-class, Kam believes the onus is on financial advisors to help clients find the right plan for them. 

If an entire family does not have any sort of coverage, Kam recommends financial advisors to “target and prioritize the family’s breadwinner and explain the reality”. She elaborates, “If they cannot commit to a comprehensive plan, I would suggest, at the very least, a personal accident coverage and then to consistently save up monthly to eventually get the whole family covered”.  

She explains advisors can start with the most importance types of insurance to encourage middle income clients to consider their individual needs and risks. For example, if they have a family, they may want to prioritize life insurance. If they have a chronic health condition, they may want to prioritize health insurance with a low deductible.  

Address current life and future goals 

Kam also points out that financial health checks are a great way to help clients understand financial planning and to prepare them for the long-term investment. Not only that, these reviews also provide financial advisors insights into the individual’s daily lives and learn their mid to long term goals while allowing the client to make a decision for themselves. It helps to do yearly checks as the client needs may change over time. 

“As part of the financial health check, we ask about their financial objectives, make a list of their goals, and evaluate their insurance knowledge. We conduct the financial health check yearly and monitor for any changes in the client’s life, such as goals or life stages,” she adds. It is an effective way to keep clients on track to achieve their financial goals in the long run. 

There are also situations where Kam experiences individuals that are opposed to the safety nets that financial advisors offer. “As an advisor, I try to figure out why they are not open to these options and would tone down my approach. I will change it to a “friend” approach. I will completely steer away from any hard sell and instead accept their point of view. Perhaps every year, for the next two years, I would follow up with them to see how they are doing and not bring up financial plan mentions. If they “ghost” me, I do not try to push my luck and risk ruining our relationship permanently.”  

Understanding the financial needs and challenges faced by the middle class is essential for developing effective financial plans. By conducting financial health checks, discussing goals, and offering affordable coverage, Kam believes financial advisors can help the middle class in Malaysia overcome their financial challenges and build a secure future. 

Contact: MDRTeditorial@teamlewis.com