1. How do I know whether the Unit Trust Consultant (UTC) is authorized to promote unit trusts?
A registered UTC is issued with an Authorization Card by the Federation of Investment Managers Malaysia (FIMM) which must be produced when approaching a potential client. If not, insist to see the same and ensure its validity.
2. What kind of information will the UTC expect from me?
You would be expected to provide the UTC information about yourself including family background, attitude towards risks, your financial goals and such other relevant information. This information is to enable the UTC to assess your needs and recommend a fund that best suits you. However, you need not have to divulge this information, should you decide otherwise. In the end, you are the best person to decide on the information you want to give the UTC. However, investors are encouraged to provide the necessary information to enable the UTC to make a proper assessment of your investment needs.
3. Will the information that I give to the UTC be kept safe?
A client’s information is confidential and any disclosure of the same should only be made with the client’s prior written consent (unless disclosure is required by law).
4. What should I expect from the UTC?
You should expect the UTC to deal with you in an open, honest and professional manner. The role of a UTC is to actively provide information during his “interview” with you and thereafter, on an ongoing basis to review your portfolio of unit trust investment as and when the economy or your personal circumstance changes. He should recommend portfolios that best suit your needs, personal circumstances and financial goals.
5. What must I do during the meeting with the UTC?
You should ask questions about everything on unit trust funds which you do not understand. You should not sign or agree to anything unless you have read and understood it. Do not be pressured into agreeing to or signing a blank form. You are entitled to think over it for as long as you need.
6. What kind of explanation should I expect from the UTC before purchasing the recommended unit trust fund?
The UTC must clearly explain to you the following:-
• The investment objectives of the unit trust fund;
• All the fees and/or charges involved in the purchase and thereafter and their breakdown;
• The prices of units and how they are worked out;
• The risks of investing in the unit trust fund and in unit trust funds generally;
• The minimum investment in the unit trust fund;
• Any special tax implication of investing in the unit trust fund;
• Any unique features and/or restrictions of the unit trust fund;
• The long term nature of most investments in unit trust funds and the risks of early withdrawal from the unit trust funds;
• The risks involved if purchasing the unit trust fund using a loan facility; and
• The distribution policy of the fund.
7. What should I expect the UTC to do when he recommends a unit trust fund to me?
The UTC must take all reasonable steps to:-
• Assess your investment objectives, risk tolerance, financial situation and investment experience;
• Ensure that the unit trust fund recommended is suitable for you, taking into account the information you have given; and
• Explain to you why the unit trust fund recommended is suitable for you.
8. If I am unsure about any aspect of an investment, what should I do?
You are entitled to ask questions and/or seek a second opinion. If you are not satisfied with the answers given, ask for more clarifications as this will enable you to become an informed investor. If you are unable to understand the answers or explanation given to your questions, DO NOT invests. Invest only when you are satisfied and confident with the explanation given.
9. Who regulates the unit trust funds in Malaysia?
The Securities Commission (SC) regulates the establishment and operation of unit trust funds in Malaysia under the Securities Commission Act 1993. SC has issued Guidelines on unit trust funds. SC is the regulator of the unit trust industry, whilst FIMM has been granted as SRO status in February 2011. FIMM will regulate its own members while also ensuring that investors are protected and public interests are upheld. The FIMM’s immediate task is to enhance professionalism of sales agents and distributors through industry training and formulate a robust sales practices regime with adequate supervision and monitoring by FIMM.
10. Do I need a lot of money to invest in unit trust funds?
The minimum initial investment amount in most unit trust funds is relatively low, compared to direct investment in securities. Please read the prospectus which stipulates the minimum amount of investment.
11. What document(s) should I look for before investing in a unit trust fund?
You should be provided with the most recent prospectus of the unit trust fund which you are interested in. Prospectuses are valid for one year and are to be renewed yearly. A copy of the Product Highlight Sheet (PHS) should also be provided to you.
12. What are the fees and charges involved?
Fees and charges to be paid by you:
• Initial service charges – This is a fee chargeable when you buy a unit trust fund and is usually included in the fund’s selling price.
• Repurchase fee – This is a fee chargeable whenever you sell or redeem the unit trust fund and is usually included in the unit trust fund’s buying price.
• Switching fee – This is a fee payable when you switch unit trust funds as some unit trust funds allow investors to switch or change from one unit trust fund to another which is also managed by the same unit trust fund manager.
• Annual Management Fee – Management expenses include expense for portfolio management, the manager’s fees, trustee and custody costs, audit fees, administrative charges like printing of annual reports, distribution cheques, postage and other services properly incurred in the administration of the fund. These costs are paid out of the fund’s assets.
13. What are the types of unit trust funds I can invest in?
These are the more common types of unit trust funds you can choose to invest in:
• Equity Unit Trust Funds – Major portion of the equity unit trust fund portfolios are shares of listed companies.
• Money Market Unit Trust Funds – Invest only in short-term money market instruments such as treasury bills, negotiable certificates of deposit and bankers’ acceptances, with a maturity of less than 90 days.
• Real Estate Investment Trusts – REITS invest in real property, usually prominent commercial (office) properties and provide the investor with an opportunity to participate in property market.
• Exchange Traded Funds – ETF is akin to a listed index unit trust fund whose investment objective is to exceed or achieve the same return as a particular market index.
• Balanced Unit Trust Funds – Has a portfolio comprising equities, fixed income securities, cash and property.
• Syariah Unit Trust Funds – Unit Trust Funds that comply with Syariah requirements.
• Government-Sponsored Unit Trust Funds – Managed by the state development corporations for investors from the respective states.
14. What should I consider before investing in a unit trust fund?
The first step towards successful investing is to establish a realistic financial goal. You should also consider the following before investing in a unit trust fund:-
• Risk Profile – Your risk profile is determined by how much risk you are willing to bear. It will differ, depending on your age, financial situation and investment objectives.
• Investment Objective – Some unit trust funds focus on certain asset classes, geographical regions or industry sectors.
• Investment Strategy – Even unit trust funds with the same investment objective may use different investment strategies to achieve the same goal. Make sure that the fund’s investment strategies are in line with your own investment objectives.
• Time Horizon – Your investment time horizon is the time period that you stay invested until your expected withdrawal. The younger you are, the longer would be your investment time horizon.
• Fund Manager – As the fund manager is the only person looking after your unit trust, you should be comfortable in the knowledge that the firm and its staff have the necessary resources, experience and skill to manage your investment.
15. What are the payment methods available to me for investing in unit trust fund?
You can make your investment in the following manner:
• Lump Sum Purchase – Savings are invested in unit trust fund.
• Regular Saving – By making regular (e.g. monthly) contributions to the unit trust fund.
• EPF Investment Scheme – You can transfer your EPF savings to invest in Unit Trust Funds.
16. Is there any condition for withdrawal from EPF for the purpose of investing in unit trust funds?
Withdrawal can be made from Account 1 of your EPF account subject to the following conditions:-
• You are less than 55 years of age; and
• The amount of savings that can be invested must not be less than RM1,000 and not more than 30 per cent of the amount exceeding the required basic savings in Account 1. For further information on the basic savings at various ages visit the EPF website at www.kwsp.gov.my.
• Investments can be made at intervals of three months from the date of the last transfer, subject to the availability of the required balance in Account 1.
17. Can a non-Muslim invest in Syariah unit trust funds?
Yes. A non-Muslim may invest in syariah unit trust funds.
18. Can I change my mind after investing?
Yes, you can. A new investor is given a cooling-off period of six business days from the date of purchase to give him an opportunity to reconsider. Should you decide to exercise this right, you should be entitled to a full refund of your application money.
19. How do I keep track of my investment?
You are entitled to written confirmation of your investment including the amount received, the number of units acquired in the unit trust funds and the selling price of a unit on the date of the allotment of units. In addition, during any particular financial year, as a unitholder, you will receive:-
• An audited annual report for the financial year-end of the unit trust fund, which provides an account of the unit trust fund, including a complete portfolio listing and your annual statement reflecting the transactions for the year.
• An unaudited six months interim report which provides an account of the unit trust fund, including a complete portfolio listing and your interim statement reflecting the transactions for the period.
• A tax voucher showing details required for submission to the Inland Revenue Department at every income distribution (if any) of the unit trust fund.
20. What happens when I sell the unit trust fund I bought with my EPF savings?
You may sell your unit trust fund at any time in the normal manner. The proceeds from the sale will be paid directly to EPF, to be re-credited into your Account 1.
21. What are the types of returns I can expect from unit trust fund investment?
The returns on investment for unitholders are usually in the form of capital appreciation & distributions through income generated from the portfolio of the assets held by the unit trust fund.
22. How soon can I realise my investment?
By and large unit trust funds are medium to long term in nature. The longer you are prepared to commit your money to an investment in unit trust funds, the better the potential returns will be as the longer period reduces the impact of market volatility on investment.
23. Are the returns of the unit trust fund guaranteed?
Similar to other forms of investments, there are risks involved when investing in unit trust fund and returns cannot be guaranteed. Prices fluctuates and investors have to exercise judgment and make their own decisions.
24. Will my unit trust fund investment income be taxed?
In general, the dividend income received by the unit trust fund is subject to tax, however capital gains are generally tax-exempted. You should consult an independent tax consultant to enquire details of related matter on taxation for investing in unit trust fund.