Islamic finance is growing at a remarkable rate. The impressive performance of Islamic finance is due to the vigorous development of infrastructures focusing on financial support in the industry. Malaysia is a hub for Islamic finance with the dominant sectors being Islamic banking, takaful and Islamic capital market, which includes Islamic financial planning solutions.
With the growing demands for modern-day Islamic finance, Islamic financial planning solutions is seen as a service that best caters to these ever increasing needs and covers the wealth cycle to cater to the financial needs of individuals.
Muslims may obtain advice and benefits from Islamic financial planning professionals on a wide range of issues, including cash flow and risk management, investment, self-managed retirement funds, zakat, taxation, takaful and legacy planning. All these tasks require specific knowledge and expertise in legislation, regulations, and market practices.
Unnerving as it may sound, the importance of Islamic financial planning once again received sporadic attention when COVID-19 severely impacted many Malaysians, especially Muslims. The Movement Control Order (MCO) caused many people to contemplate having proper and structured emergency funds – prompting them to undertake financial planning.
Technology – Emergent Requirement
Technology is everywhere and evolving rapidly. Whether we are financial planners or consumers, it will become harder to thrive and survive without technology in constructing holistic financial planning solutions. According to McKinsey Global Survey, consumers have moved dramatically towards technology during the pandemic. The survey results confirm the rapid shift toward interacting with customers through digital channels.
A piece of automated advice on financial planning solutions and applications is no longer (by right) a threat to financial planners, but rather an enabler for the industry to be competitive. The well-informed clients call for a wide selection of economical and practical financial planning solutions, whether online or through a mobile platform. Responding to this type of consumers, it is imperative to adopt financial technology as a channel for distribution.
Technology is an agnostic tool that can significantly change the financial planning industry. By using technology, financial management’s efficiency and effectiveness will increase, making it easier for customers to deal with financial institutions through various activities and financial products.
On the other hand, technology in the context of Islamic financial planning must be seen in compliance with Shariah guidelines.
The Role Of Technology In Islamic Financial Planning Solutions
It is essential to understand that financial planning solutions is not simply limited to the distribution of inheritance upon death, buying family takaful or investing in unit trusts. Developing a comprehensive financial plan is a personal journey for a true Muslim, and an excellent Islamic financial planner plays a critical role in this process.
The client needs to have confidence that financial planners are up-to-date on the current financial planning landscape and current Shariah-compliant financial technology (fintech), diversification of halal investment selections via digital platforms, and other latest solutions to be considered.
As technology advances, we have been able to automate parts of financial planning services, with vast improvements in the tracking of documents and records of advice. Access to information and keeping clients well-informed regarding their investments are part and parcel of technology’s role. However, without technology to complement, one might find things a little hard going as we drift deeper into the 4th Industrial Revolution.
To overcome the industry’s technology disruption, financial planners must be nimbler to apprehend new technologies and employ them for innovation on existing solutions that are in great demand.
For example, a few years back, the emergence of robo-advisor was regarded as a threat in the financial services sector. A robo-advisor is an automated platform running with a computer algorithm functioning to manage assets in investment. During that time, people were uncertain about the role future human advisors would fulfil as usage of robo-advisors gained traction.
Threat Or Enabler?
The COVID-19 pandemic is the most significant catalyst for digital transformation, and this change will lead to exciting insights into Islamic financial planning that will reshape its approaches. Technology can never entirely replace a human’s touch and skills.
In years to come, both humans and technology are vital to serve clients better and modernise our financial planning profession. Technology exists to support, simplify, and create efficiency, instead of threatening the industry. Technology allows financial planners and clients to have a more engaging and meaningful advice conversations.
A more robust framework of competency and consistent efforts for Islamic financial planners, including technical knowledge on the latest technology, would develop a more agile professional, who will safeguard the public’s interest, uphold the industry’s professionalism, and ultimately receive the rewards in the Hereafter.
About the Author
Dr Haji Shahizan Haji Md Noh is a licensed Islamic Financial Advisor (IFAR) for ASWA Advisory. He obtained his Doctor of Philosophy in Economics and Muamalat Administration from Universiti Sains Islam Malaysia (USIM). He also holds a Certified Qualification in Islamic Finance (CQIF) from IBFIM and Islamic Financial Planner (IFP) from the Financial Planning Association of Malaysia (FPAM). As an experienced practitioner, he has served numerous institutions in different aspects.