Islamic Wealth Management Industry Evolves with Market Trends

KUALA LUMPUR — The Islamic wealth management industry is on the brink of significant transformation as it adapts to changing market needs and emerging trends, according to Securities Commission Malaysia (SC) executive chairman Datuk Seri Dr. Awang Adek Hussin.

In his keynote address at the 11th Malaysian Financial Planning Council (MFPC) conference on Shariah wealth management and financial planning, Awang Adek emphasized the importance of embracing innovation while maintaining high standards of corporate governance and professionalism guided by Islamic values to stay competitive in today’s dynamic environment.

“Islamic wealth management practitioners can leverage technology to optimize their services,” he said. “By adopting digital solutions, they can stay ahead of the curve and provide greater value to their clients.”

Awang Adek pointed out that mobile apps and online portals developed by financial technology firms offer clients comprehensive access to real investment portfolios, real-time market insights, and personalized financial advice. These technological advancements are crucial for the industry’s growth and relevance, enabling practitioners to meet the evolving demands of a tech-savvy client base.

The SC has been proactive in promoting the growth of Islamic wealth management in Malaysia through significant steps to strengthen the regulatory framework and encourage innovation. One key initiative is the Islamic Wealth Management Blueprint introduced in 2017. This comprehensive blueprint outlines three strategic thrusts: enhancing Malaysia’s position as a global hub for Islamic finance, establishing the country as a regional center for Shariah-compliant sustainable and responsible investment (SRI), and developing it as an international Islamic wealth management services provider.

“The blueprint has led to the introduction of frameworks and regulatory efforts to support innovation and further strengthen the market infrastructure for Islamic wealth management,” Awang Adek noted. This includes revising key frameworks and guidelines such as the SRI sukuk framework in 2019, the Shariah advisors guidelines in 2020, and the guidelines on Islamic fund management.

These efforts have significantly expanded the scope and sophistication of Shariah-compliant investment products and services available in the market. One notable initiative is the waqf-featured fund framework introduced in 2020. This innovative framework allows investment returns to be channeled back to charity through cash waqf, supporting sectors like health, community empowerment, and education. In 2022, the framework was further expanded to include Islamic real estate investment trusts (REITs) and Islamic exchange-traded funds (ETFs).

Awang Adek highlighted that these initiatives have broadened the scope of Islamic wealth management, enabling it to cater to a wider range of investor needs and preferences. The introduction of these frameworks not only promotes ethical and sustainable investments but also aligns with the broader objectives of maqasid al-shariah, which seeks to preserve and promote social welfare.

The industry has seen commendable growth in Islamic assets under management (AUM), which rose to RM226 billion in 2023, constituting 22.7 percent of the total industry AUM. The number of fund management companies operating Shariah-compliant funds increased to 59 in 2023 from 53 in 2018, driven by a robust ecosystem characterized by strong intermediation and innovative product offerings. This growth underscores the increasing acceptance and demand for services among investors seeking ethical and Shariah-compliant financial solutions.

Moreover, the SC has been instrumental in fostering an environment conducive to innovation and growth in the Islamic wealth management sector. Efforts to enhance the regulatory framework, coupled with the introduction of new guidelines and frameworks, have provided a solid foundation for the industry to thrive. This proactive approach has enabled Malaysia to strengthen its position as a leading global hub for Islamic finance and wealth management.

Awang Adek’s insights underscore the dynamic nature of the Islamic wealth management industry and its potential for growth through innovation and adherence to Islamic principles. As the industry evolves, it is poised to offer enhanced value and opportunities for investors seeking Sharia-compliant financial solutions. The integration of technology and adherence to high standards of corporate governance and professionalism will be key drivers of this growth, ensuring that the industry remains competitive and relevant in a rapidly changing market landscape.

The continuous development and refinement of the regulatory framework, coupled with the industry’s commitment to innovation, position Malaysia as a trailblazer in the Islamic wealth management sector. By staying true to its core values and embracing modern technological advancements, the industry is set to achieve new heights, offering diverse and sophisticated investment products that cater to the evolving needs of a global investor base.

The Islamic wealth management industry is poised for a transformative journey, driven by innovation, robust regulatory support, and a commitment to ethical principles. As it adapts to emerging trends and market demands, the industry is well-positioned to provide comprehensive, value-driven financial solutions that align with the tenets of Shariah law and promote social welfare.