Taking investment advice from so-called investment gurus can be dangerous. Learn the impact of bad decisions and how you can educate yourself in investing.

The Blight of Unlicensed Investment Advice

Due to the crisis caused by Covid-19 pandemic, investment advice is highly sought after, with investors trying to improve their finances and make money through investing. Retail participation in equity markets hit new highs both in Malaysia and globally as more newbie investors put money in the market.

But with the increased demand, there are unscrupulous people taking advantage of the situation self-proclaiming themselves as investment gurus and selling unlicensed investment advice or pushing “investment” products. Some recent cases include estate planning trusts being marketed as investments promising guaranteed returns, and insurance endowments being marketed using unauthorised illustrations and misleading returns projections, created without the knowledge of the life insurer.

There have also been online platform scams. Online broker RakutenTrade has warned the public not to fall into investment scams that have misusing the company’s name and falsely representing them. The company is the country’s first and only fully digital equities trading platform. All trades are executed using the official RakutenTrade website or via their iSpeed.my trading app.

Jail and Fines Await Unlicensed Investment Gurus

An investment advisor without Securities Commission Malaysia (SC) licence can be fined up to RM10 million or imprisonment of not more than 10 years or both.

“The provision of investment advice, whether through formal channels such as analyst reports or social media platforms such as Facebook and Telegram, is considered one of the seven regulated activities under the Capital Markets and Services Act 2007 (CMSA). Anyone conducting such activities will need to have a valid licence issued by the SC.”  ~Securities Commission Malaysia

SC added that the investors should remain cautious and take responsibility over their own investments. Suggestions for investors to is to upgrade their financial knowledge about investing and investor rights through the InvestSmart website and refer the SC’s Investor Alert List for any unauthorised or unlicensed companies and individuals before making an investment decision. [Editor: not being on the alert list does not make an investment legit automatically].

Unlicensed investment gurus giving questionable investment advice may lead to poor financial decisions and losses. This will affect investor confidence, affect professional standards of practice, and damage the reputation of licensed financial service providers.

Minority Shareholders Watch Group (MSWG) CEO Devanesan Evans thinks that the SC should come down harder on unlicensed investment advisers by taking action to deter and discourage unlicensed investment advisors and prevent numbers rising to an alarming number.

What About Bad Advice from Property “Gurus”?

There have been cases of people buying multiple properties as advised by self-proclaimed property gurus using loopholes to get their loans approved. These property “gurus” usually paint a pretty picture of all the potential benefits for an investor joining their investment club with bulk-purchase discounts, fantastic rental passive income, amazing capital growth and being able to unlock equity from your property.

But property markets are cyclical by nature and is affected by demand and supply. The recent MCO affected the number of tenants with some property owners facing a nightmare of multiple vacant properties compared to the idyllic relaxing on sandy white beaches picture that was painted. The situation will further worsen once the current bank loan moratorium ends and property owners without tenant will face negative cashflow and be hard pressed to service their mortgages.

Many who follow fake property “gurus” are persuaded into buying properties that they do not need and at prices they cannot afford.

“If we follow any ‘gurus’ who tell us about property investment, the one with no risk and profits is the guru while the one with high risk is the buyer.” ~Charles CL Tan, founder of kopiandproperty.com and property speaker

There are investment “gurus” do not have any license or credibility and some are even Ponzi schemes or get rich quick schemes (skim cepat kaya). Their marketing gimmicks are rather effective as they can persuade people to buy properties based on their speculative predictions and supported by their fancy public lifestyle displays. Social media has also been riddled with investment guru ads forcing platforms such as Facebook to ban ads, including poorly shot videos with dubious advice.

Overall

Investors should be wary and make sure to check credible information from regulators and get investment advice only from licensed financial professionals before making investment decisions. This will help avoid making bad financial decisions that can affect your future savings or investment portfolio.

Half-baked knowledge is even more dangerous when you are hoodwinked into thinking that you know what you are doing. If you’re being pressured to signup for an investment course/invest or if your greed sensors are tingling, you may want to quickly walk away.

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Have you came across any fake investment gurus or financial scams?