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4.11 Investment Alternatives to UTS and PRS

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FIMM Combined Examination FCE

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1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

4.11 Investment Alternatives to UTS and PRS

Key Takeaways Explain This Topic AI

Cash and fixed deposits are low risk but generally give lower long-term returns than equities, property and bonds, and a deposit still carries some possibility of default.

To benefit from direct share investing, an investor needs enough capital to diversify across 30 to 40 stocks, the knowledge to select them and time to monitor them.

Listed REITs let small investors gain property exposure with a relatively low outlay and professional management.

Annuities provide contractual retirement income, but the annuitant bears the insurer's risk and may lose a substantial part of contributions on surrender.

In investment-linked insurance, unallocated premiums that pay agents' commissions may total up to 160% of the premium over at least six years, so early cash values are small.

Last updated: October 2026

Why Alternatives Matter

Most Malaysian financial assets sit in bank savings and fixed deposits , while other countries hold more in higher-yielding instruments such as unit trusts and pension schemes. As Malaysians become more financially literate, they look for better returns. A Consultant who understands the alternatives can explain honestly where schemes fit.

  • The Alternatives
  • Cash and fixed deposits

Safe but low long-term return ; most people need a bank account, and deposits range from overnight to multi-year terms.

Low risk, but there is still a possibility of default by the institution.

Over the long term, equities, property and bonds have historically given better real returns. Providers offer schemes for risk-averse investors who want capital security and regular income.

Direct share investments

Popular with retail investors in the mid-1990s bull market, many of whom wrongly believed they could make quick profits.

With limited money, investors can hold only one or two stocks , putting "all their eggs in one basket".

Success needs expertise, time and a long-term focus on sound companies . To benefit, an investor needs enough capital to diversify across 30–40 stocks , the knowledge to choose them and the time to monitor them.

Scheme managers bring research teams and pooled money to diversify more effectively.

Direct investment in property

Many Malaysians have profited, but property is cyclical .

Drawbacks: large capital , usually borrowing , illiquidity , non-paying tenants, maintenance costs, and the inability to sell part of a property.

Listed REITs give small investors property exposure with a low outlay and professional management.

International investments

Focusing only on Bursa Malaysia ignores about 99% of global opportunities ; overseas markets add diversification.

Hurdles for individuals: tax and regulatory barriers , currency management costs and the research needed .

The Capital Market Masterplan envisages more specialised international schemes from Scheme Providers.

Financial derivatives

Potential for high returns (or losses) with little capital .

Complex; most retail investors cannot analyse or manage them properly.

Annuities

Feature Detail

What it is A contract with an insurer paying a series of fixed payments (usually monthly) until the annuitant's death; each payment is part principal plus interest

Purchase Lump sum, or periodic contributions over a working life; payments start at retirement or when the price is paid

Relation to PRS PRS accumulates savings; at retirement a member could use PRS money to buy an annuity for regular, contractual income

Drawbacks The annuitant bears the insurer's risk (returns depend on its financial health, not markets); surrender may lose a substantial part of contributions; commissions can be high

Investment-linked insurance

Combines life cover with investment in selected funds.

It is mainly an insurance product. Cash value is what remains after unallocated premiums (agents' commissions, which may total up to 160% of the premium payable over at least six years ), insurance charges, policy fees and fund management fees.

Early surrender values are small ; investment value builds up only after these costs are paid.

Equity crowdfunding (ECF) and peer-to-peer (P2P) financing

Market-based financing platforms for micro, small and medium enterprises (MSMEs) : ECF for early-stage equity, P2P for working capital and growth.

Digital, lower-cost and convenient, attracting digitally savvy investors, but they finance young businesses.

Comparison Summary

  • Alternative Potential return Term Capital needed Risk
  • UTS and PRS Moderate Medium to long Small Lower (diversification)
  • Direct shares Moderate to high Medium to long Medium to large Moderate to high
  • Direct property Moderate to high Long Large Moderate to high
  • Derivatives High Short Medium to large Very high
  • Cash and fixed deposits Low Varies Any Very low
  • International investments Moderate to high Medium to long Large High (plus currency risk)
  • Investment-linked insurance Moderate Medium to long Small Low to moderate

The study guide stresses that its own comparison table (Table 4.6) is for general comparison only .

"Six Ways to Turn Savings into Investments" (Appendix 4.5)

  • Vehicle Pros Cons
  • Savings account Easy, low risk, flexible access Easy withdrawals disrupt saving; low interest
  • Fixed deposit Higher rate; restrains impulse spending Can trail inflation; less flexible

Property Forced saving; inflation hedge; good returns in booms High initial capital; long, inflexible mortgage; hard to turn into cash

Life insurance Saving plus protection; penalties encourage saving Lower returns; inflexible

Unit trusts Suits regular savers; reasonable starting amounts; dollar cost averaging; balanced portfolio managed for you; sell at any time Affected by market ups and downs

Share market Exciting; high returns if timing is right Large capital; unsuitable for small regular sums; needs information and time