A journey into entrepreneurship and disrupting the insurance industry, with Malek Ali, founder of BFM 89.9 - The Business Station, and Fi Life

Episode summary

Malek Ali shares his journey in starting BFM 89.9, an independent business radio station, and debunks the myths behind investment-linked insurance policies while starting Fi Life, the largest online platform for term life insurance in Malaysia.


Episode transcript

Philipp: Welcome to another episode of In Your Best Interest, your personal finance podcast. I'm your host Philipp Muedder, and today I'm looking forward to having a conversation about entrepreneurship, as well as protection in the form of life insurance, which forms a crucial part of everyone's financial plan.

For that, I have the pleasure of having Malek Ali join me. After founding and leading BFM Radio 89.9, Malaysia's only business radio station for more than 10 years, Malek has now entered the insurtech industry with his latest venture, Fi Life, which acquired Malaysia's first online life insurance business. Fi Life seeks to disrupt traditional distribution systems of life insurance companies by offering consumers direct, online access, and immediate cover.

Malek's latest venture continues his career theme of bringing new products to market, which includes stints at Yahoo!, JobStreet Corp, Maxis, the Boston Consulting Group, and law firm Allen & Overy. Malek sits on the Asia-Pacific advisory board of Harvard Business School, where he earned his MBA. He's also a law graduate of Bristol University. Welcome Malek, how are you?

Malek: Fine, thank you, Philipp, I'm great. Thank you very much. I'm sitting here in Singapore, talking to you, [02:00] and you're in the US, I understand?

Philipp: Yes, at the moment. So yes, but hey, podcasting makes us be available anywhere, right?

Malek: Yes, that's a beauty of this pandemic, actually. One of the bigger things, the advantages, amongst many things as the disadvantage.

Philipp: Yes, many disadvantages. But like you said, many good things came out of it too. And I think having the freedom or like going forward; there will be a little bit more freedom for people to probably work from anywhere. As long as work gets done, right? Which I do want to get to in a little bit.

When we talk about how you're managing during this pandemic, all your different businesses being in Singapore, while most of them are actually over in Malaysia. But before I go into this, reading through the bio just now, right? You've done quite a lot of different things.

Going from a law degree to Boston Consulting Group to various tech companies at some point, and then creating your own businesses. Did you always look, or were you always entrepreneurial? Or was that something that maybe was built by going to Harvard Business School? Or maybe that was something that was instilled to you at a very young age when you just grew up?

Malek: Yes, it's that. It was inculcated when I was very young. My father was a businessman himself. Was he successful? I think he was successful at times, but there were very difficult times too. So, I saw through all that as a teenager, actually. So yes, it was part of my world to see the ups and downs of business. And I think doing law and going to business school.

I think that doing law was something which was a bit more like building up skills, right? [04:00] I didn't know that at the time. I think I just kind of like said my father wanted me to do law; I said OK, it sounds interesting. So I did law, but at the end of the day, I knew I would get back into, at some point in time, I will go back into sort of starting businesses and startups and so on. So that's, sure it's in the blood.

Philipp: So, you've really thought about this already at a young age then, even though you said there were also some setbacks - which do occur in running a business, right? That you've seen, but they didn't distract you?

Malek: No, it didn't. My father lost most of his life savings, I guess, with one particular business which got hit by - in Malaysia, we had a recession at the time, 1985 recession. It was 1985; the stock market crashed.

And I was just about to go to university, and I guess my father said, “Malek, I'm not sure I can afford your university in the UK, you have to apply for some loans to fund your education.” So that was a realisation that business is not just up and up, but it's also sometimes a big down.

Philipp: Big down, yes, for sure. So how did you manage then to get to university in England? Were you able to secure some scholarships?

Malek: Yes. I managed to secure a loan from the Malaysian government. And it was a fantastic loan because what happened was, it's like if you get a certain grade, you don't have to pay it back, right? So, in a way, it's a semi-scholarship that incentivises you to do well. If you don't do well, if you fail, you have to pay the whole thing back, right?

So it's a bit of like, so you better do well. It's a bit ironic, right? So if you do well, you tend to get better jobs, and you probably have the means to pay back the loan. But if you don't do well, you don't have the means to pay back.

Philipp: No. But I think it's a good, what's the word? It's a very good, you know, dangling the carrot in front of you. Hey, look, you need to do good, right?

Malek: Yes, this was all before nudge economics, right?

Philipp: Yes, exactly. No, this is awesome. OK, so you make it to England. [06:00] And then from England, you start your law career, and then you're heading over to Harvard Business School. Obviously, you know, a very reputable school to go to. What was the process like getting in and even making that decision of going to business school?

Malek: Yes. So my first love was to do, probably do something either business or economics at undergraduate. But since I did law, I thought going to Harvard Business School or a reputable university like that to do the MBA, especially stateside. Especially in the States, I thought was really important.

I think because I looked at the business programmes in the UK, and at the time in Europe, it was fairly conservative. I mean, it was just quite; it felt very academic. Whereas, the programs I saw in the States were much more, at least when you look at the prospectus and so on. I found it very exciting; I was raring to go and do these programs. So I applied, and I was very lucky.

I managed to get into Harvard Business School. I got rejected by Stanford, I got rejected by a few others, but Harvard said yes, and off I went. So it was a fantastic two years. I think it was; I actually love the positivity, the enthusiasm, and also what was called living vicariously through the experiences of others. Because you have 90 people in the class, and you're broken up into groups of 90 people.

And what then happens is you discuss something called cases, and cases are this sort of 40 page, basically synthesis of a particular problem - business problem - and of a particular company, or a particular situation. And I think in trying to solve those problems, and we did three every day. And trying to solve those problems, you're actually stepping in the shoes of a problem solver or someone who's facing these problems.

And you have to figure out how to [08:00] solve it. I think doing that 3 times a day makes you kind of like, in a way, it kind of like accelerates your learning. Because you no longer have to figure this out when you're on the job, you're doing this semi-academically. But you are actually living the shoes of that person, of the protagonist, for 2 hours at a time. And I think that was fantastic.

And sometimes the protagonists and the people who the case is right about are in the room, right? They actually are sitting down quietly in the corner, and you don't know who they are. And then at the end, after you've bashed the protagonist, you kind of said, he did this wrong, he's stupid, he's this, he's that, and he didn't lookout for this.

And then suddenly he turned up, and he was there right in front of you, and saying OK, hi guys, I'm so-and-so, and yes, you are right but, etc. So that is a fantastic experience, and I think doing that actually helped me with sort of, in a way, get more experience than I actually had, right? That was the beauty of it.

Philipp: No, it's a great process. The school I went to in the Netherlands actually use case studies exclusively as well. Based on that concept as well, I thought it's one of the best ways to learn for me. At least, maybe not for everyone, but I think it's amazing. Because it actually makes you learn real-life things, instead of just by the book, right? Everything by the book. Very dry, the experience is amazing.

So you went to Harvard Business School, you graduate. Are you already making your way back to Southeast Asia? Or you're still in the US afterwards?

Malek: So I wanted to stay in the US. Unfortunately, because of the fee structure, et cetera, I had to get a certain type of visa that doesn't allow me to work in the US afterwards. If you remember, I graduated in 1995, and many of us during that time were excited about the listing of Netscape [10:00] in 1994.

And that was, I remember you know, sort of a professor come, the courses were starting to build up. The internet courses were starting to build up when the excitement was about the internet; at the time, we didn't know what internet 1.0 was; it's just the internet, right? So if I had the opportunity, I would have actually gone to Silicon Valley straight after graduating.

But I wasn't able to, legally. So I had to leave the US, which I felt, nevermind, at least I'll go back to Malaysia and see what I can do there.

Philipp: Yes, interesting. So I was going to get there because that was the time of the brewing dotcom bubble.

Malek: Yes.

Philipp: And I think now when we get to your latest venture, being a fintech or insurtech in that case. Your first experience and exposure you're right there, right? You said it's getting started; you went to Kuala Lumpur.

I think you're working in like classified ads, and especially with Jobstreet.com, which is like an online recruitment service, right? So you had first doing the dotcom bubbles. So how was that experience then? Working for a company like that.

Malek: Yes. So, in fact, even before that, we're doing these classifieds. Actually, my biggest battle scar actually, which is, it's almost like in proportional terms. I've talked about my father losing his life savings in one era. I also had that experience in 1997, and it was something called the Asian Financial Crisis.

Philipp: Yes. I think most of the listeners here that are local to Southeast Asia will still remember, at least if they ask their parents, right? They will still be able to remember that.

Malek: Yes. And what happened then is that while the US was kind of like booming in a way, Asia was just crumbling at that time. I think Thailand, [12:00] Malaysia, even Hong Kong, had to come out and fight and try to keep parity, their exchange rates with the US Dollar. What happened was that a lot the financial markets collapsed, and in the same way that GFC affected the US. It was prior to that, yes, it was the AFC and the similar experiences that the US went through; it collects very similar experiences that we went through, in the sense that property markets crashed, there's no liquidity. People cannot buy; people cannot sell, meaning things like property, people cannot buy property. People cannot buy cars, cannot afford to. People can't sell; liquidity stops because loans were jammed up.

So we had that really difficult situation at the time, and my business was in classifieds, and classifieds depended on the volume of trading and people buying and selling. And that business just collapsed within 1 year.

So it was a very sharp learning, very quick learning, sharp, and I ended up sort of, at the time to make things worse, there was not really a venture capital industry in Malaysia at all. So I had to borrow from the bank to start my business, and I was literally sort of, I was literally about US$100,000 in the red.

Philipp: Yes, and that's stressful?

Malek: Yes.

Philipp: That is a very stressful situation.

Malek: Yes. I had a US$100,00  in the red; I had student loans of about another, sort of another US$100,000. Yes, it's kind of like, wow, this is really rough.

Philipp: Yes, absolutely. Then you go to Jobstreet.com, right?

Malek: Yes.

Philipp: So this is a dotcom company in 1999 you started, you stayed for 4 years. Was it something you were seeking out? [14:00] Or was it something you just had to get a job? But were you interested in the whole internet?

Malek: Yes, I was hugely interested in the whole internet. In fact, the classifieds business was meant to go; that was the play to go into, to convert it into internet classifieds, and then to go on from there. But since that, I couldn't get past first base. An interesting thing happened. I knew the founder of JobStreet; we worked together on a couple of projects when I was running my own business.

When he found out that my business is, I was going to close down my business. He turned around to me and said Malek, why don't you join me? I said, I'd like to, but... He goes, I'll pay you a salary of US$1,500 a month, right? And I'm like, Mark, I can't. Mark Chang is his name. I said, Mark, I can't, I have to pay back this US$100,000 loan.

And I have to go down to Singapore, and the ringgit is not valued anymore at all. So it's not exchangeable in any currency at that time, so I need to go to Singapore and earn some hard currency and payback. So Mark left it at that, but I got a call a week later when he said, “Malek just turn up for a meeting, just to meet some of my founders at JobStreet.” And so I met them, and it was a very odd meeting.

It was like sort of, it was questions about philosophy, about my values. Very little on the company and what I wanted to do with the internet and so on. But at the end of the meeting, they said, “Malek, could you just step out for a second, we just have something to discuss, and then come back in.” So 10 minutes later, I came back in, and a gentleman, one of the co-founders, a gentleman called Kay Yip, turned around to me and said, “Malek, I'm going to make you this offer.”

He says, “How much [16:00] is your loan?” And I said something like US$70,000. I was too proud to say the actual number. And he goes, “Why not I pay off your loan for you, you join JobStreet. And if JobStreet does well, I mean if you resign by yourself, you have to pay this loan back. But if we fire you, you don't have to pay this loan,” right? And I'm like, wow. Here was someone who was kind of like able to sort of solve immediately a huge issue that I had, which was this loan overhang over my head.

And literally gave me a check for US$70,000 a week later to pay down my loan. My biggest regret is not doing this thing; honesty is the best policy, right? My biggest regret was not telling him, hey; I actually have US$100,00 not US$70,000. But that's OK, hey, wiping off two-thirds of your loan just like that made it really great.

Philipp: That's amazing.

Malek: Yes, it's an amazing story. And not only that, I got some stock options as well. And those stock options continued on until JobStreet listed. So that was where I made my first little windfall, where I could at least windfall 10 years later, I guess, where I could sort of buy my first property, right? And have a home.

Philipp: This is what I always tell people, also the listeners, right? It's like you want to hear from people these stories. It's not always set in stone when you go to university what subject you pick, your first job, right? Life happens. And like some of it is controllable, some of it is just not.

Malek: Yes. And I think sometimes it's how do you respond to those things, right? That's more important, that's more defining. And I must say, to a certain extent, [18:00] I was very lucky; right place, right time, right people. And Kay Yip is now my investor in Fi Life, he's an investor in BFM. So we're now business partners after all those years.

And now we, I mean and in the same way that he looked out for me, I mean I think we look out for entrepreneurs who are in sort of also in the same situation. The way I'm paying it forward, right? And kind of saying, “Hey, we can step in,” and “What's your problem? What are your issues? What kind of thing?” and step in.

And I realise in entrepreneurship, you know business plans are one thing. But you know, the biggest problems I find I had to resolve on behalf of other entrepreneurs is like relationships with their co-founders. Relationships with their first investor, how to execute yourself from a very tough situation - situations like that, or situations where entrepreneurs are basically sort of really struggling personally, but the company is also struggling, so they're struggling on both fronts.

So how do we structure it so that they don't struggle personally, right? Give them a decent salary that can cover costs and a little bit by raising funds for them and so on, and then they can really concentrate on the business. So I think that philosophy of, just looking at the human opposite you when you're investing, seeing what's the cloud that's hanging over their head.

I think because I'm paying it forward right now. In recruiting employees, I do the same thing. I look at the cloud that's hanging over their head, and you try to resolve that as much as possible.

Philipp: Yes, it's a super interesting story. I really appreciate you sharing that with us. And this gets us really close now to today's world, but there's one more step, or actually a couple. We will skip a couple of the other tech companies that you did for a few years. But how do you go from JobStreet?

You work there for a few years; you do a couple of other tech companies. [20:00] And now you do a 360 almost, right? And you're starting a radio station, a traditional radio station. So BFM 89.9, so this is super interesting to me, and I have not asked you this in person. So what was the driving force behind that?

Malek: So this came again from something blast from the past. When I was a university student, I was fascinated with radio stations. Particularly radio stations coming out of the UK at the time. Radio stations in Malaysia at the time were very staid, or this part of the world really was very staid, generally government-owned, boring, and so on. And suddenly I went to the UK, and I was giggling like a child, at all the jokes and all that.

So radio will become very much a thing I look forward to. When I'm in a car, and you're a student - you're not often in a car as a student, right? But when you're in a car,like let's listen to this Capital Radio at the time, that's in London 95.8. See, I can still remember the signature of the radio station I listened to. So I think I always kept; it was a little fire. But I guess that when I did all this, and when I first came back from business school, I explored the idea.

But there was a fellow Harvard Business School alumnus who had the license to operate 6 radio stations at one go. So, I thought, OK, here's a billionaire, and here's you, a young graduate, forget it, don't compete with it. But interestingly, 12 years have passed, and I've done my tech thing and so on, and I suddenly realised that radio has become very staid again in this part of the world.

Because you know it was just the classic entertainment, slapstick stations, a lot of trivia. ‘He says, she says’, ‘Battle of the Sexes’ that's like, oh my gosh. Now is there anything - can't we do something better with this fantastic media which people at least in this part of the world, they were listening to because they were in the cars a lot. Cars are a major mode of transport for a lot of people in Kuala Lumpur, in Bangkok, and Manila, right?

[22:00] So I explored that idea and said, OK, why not a business radio station. Something which is substantive, something which is interesting, and it actually capitalises on my own experience: Harvard Business School, the business principles. And I wanted, but the whole purpose of it was to raise this, kind of like in a way, get Malaysian companies and Malaysian managers and leaders really to be able to compete on the global scale, against their global competitors, right?

Raising that knowledge. So because I felt what was really, I mean the business that we were learning in Malaysia at the time was just very academic, again right remember? I talked about business education being very academic until I went to Harvard Business School and likewise. I felt that business education in Malaysia was very academic. Let's raise the game by having a radio station.

So yes, I cobbled together a few of my ex JobStreet investors, ex venture capital company that sort of invested in JobStreet and managed to get a license, which is really hard to get. Not very easy; that was the toughest part. And got one frequency, which was thankfully it was for the capital Kuala Lumpur, and then we launched.

And then there's one thing about me if ever I launch a new business, I think I should do a podcast because what happens is that markets tank immediately afterwards. This time, so remember, the first one was the Asian Financial Crisis, right?

Philipp: And now you did September 2008.

Malek: What happened in September 2008?

Philipp: I was doing an internship, doing an internship at State Street in the asset-backed securitisation business. That was hell, that summer.

Malek: Yes, indeed. And Lehman Brothers went down 11 days after BFM launched. So that was again baptism by fire, and I'm sitting at my desk going, oh no, here we go again. [24:00] So yes, but a few lessons, you're older, so immediately, what I did was just kind of like, sort of cash-up.

In terms of like, I sold the property that I had, just to make sure that in case we needed more capital injection. All the projections got pushed back for another two years and all that. But thankfully, in the same way, I mean like the Global Financial Crisis did not hit Asia as badly. Things rebounded pretty much after about 10 months.

Philipp: Plus having a business station might be actually interesting for people to listen to because they're worried or they want to learn about what's happening, right? I think that actually might have even played into that.

Malek: That's right. So on the content side, yes, but on the, I guess, the lifeblood of the advertising side.

Philipp: You still need ads, right?

Malek: Yes. So we started in 2008, and yes, so I think that was the first, a bit of sort of worrisome first two years. But I think by 2011, where I think I knew that, hey, we're on to a good thing here. And we managed to turn around the business, I mean in terms of like being cash flow positive. I mean that's every entrepreneur's thing, right? To get the business cash flow positive.

I mean StashAway or whoever Fi Life, once we get to cash flow positive, you can actually just breathe a huge sigh of relief, a huge milestone. So that came cash flow positive, probably early 2011, so then it was just actually just about sort of in a way, the people were OK, I mean the listeners were fine.

The advertisers were fine; all that was going good. We just had to worry about the Malaysian government at the time, which didn't like us talking about new areas. Interestingly, if you look at business media, business media tend to follow the money. And when the money goes into politician's pockets, politicians get upset. And as you can tell, [26:00] the biggest story of that decade for Malaysia was 1MDB, it'll become a movie.

Philipp: They're still seeing the repercussion of that still today, right?

Malek: Yes. I mean, if you want to see a Wolf of Wall Street in real life, that's Wolf of Wall Street in real life. In fact, the irony is that Wolf of Wall Street was funded by 1MDB. So I think I'm looking forward to that. Michelle Yeo's production company is going to do that movie. I'm really looking forward to it. I've read the books, and it's fascinating.

Philipp: Yes, I read them as well, it's pretty mind-boggling. But then, now we can really switch gears. So now you're marrying your early tech background with your business investment kind of focused radio station.

And you're creating an insurtech company. How did that come about? And also, tell the listeners maybe a little bit about what Fi Life actually does. And then I actually want to talk more and deeper into why life insurance is important and what kind of your thoughts around that are.

Malek: OK. So we call it Fi as in like Wi-Fi or Hi-Fi, Fi Life. And literally, right now, we're in the distribution space. We distribute life insurance online and directly. So basically, you can buy term life insurance online directly with Fi Life, and we distribute products by an insurance company called Tokio Marine. But maybe in future, other kinds of insurance products.

But we're starting out with life first, and you can access it online. So the reason for going into insurtech, or rather fintech generally for me, is as follows. My favourite time at BFM was just to sit in our pantry, and then we have a flagship show called the Breakfast Grill. Where we grill CEOs and business leaders and political leaders [28:00] at 8am every morning, right?

And what I normally do is to sit in the pantry, and after they've had the grilling. And it is a grill; they come out looking a bit shell-shocked. And looking oh, some of them are a bit OK, but some of them are a bit like they need an arm around them, and saying OK, it's not a problem; you did well. And I used to serve them coffee and sit them down in the pantry; we used to talk, right?

And what was really interesting for me is to see that these were, I guess, the captains of industry in Malaysia and elsewhere. And they were great at sort of managing well; some of them were great at managing other people's money, shelf funds, and all that to bring the company forward. But as far as their own financial wellbeing, I think a lot of them were a bit ignorant of it, actually.

I mean, the knowledge actually was quite; I must say it was quite appalling. And I was like, wow, here you are managing all these funds for other people very well, competently. But just for your own personal stuff, you're kind of like expecting things to happen automatically. One guy even said, a CEO once, he even said to me, “Malek,” and he's Malaysian. And then he goes, “How do I invest in a US stock market? I want to get access. But I don't know how to get access.”

And basically, these guys just don't have time; they're just so focused. It's just like that doctor, right? That doctor that is great at managing his patients but not so great at managing his own health. He smokes or something like that, right? So I think that was the inspiration really, about sort of trying to, the inspiration behind doing, getting into fintech. And why insurtech? It was because I needed a way into that space. 

And there was a fantastic, I mean, there was a great advertiser who came on board called, which was an insurance distribution company called You For Life. They were owned by [30:00] Hannover Re and another software company. And they were launching a direct-to-consumer life insurance, and that was when I picked my ears and said, my gosh, this is exactly the kind of product that we need for this local market.

Good luck to them because I wish I had done it; I wish I had thought of it myself. But these guys are doing it, and they're buying advertising on BFM to do this, and they are sort of operationalising it. And then, two and a half years later, I think there was a change of strategic direction, and Hannover Re put up the company for sale.

And then I got wind of it and said, if I wanted to have a space where we can get into the area of financial wellness and financial education, this would be a fantastic place to start. Because it is probably the most misunderstood sector, misunderstood sector in Malaysia at least. And I know in a few countries as well.

Philipp: Yes. I think it's in a lot of places, right? Like I talk to a lot of people. My background is in financial planning, and I always, every financial plan has to have some kind of insurance included, right? And then especially coming. So I lived in the US for 12 years before coming to Southeast Asia. And I was appalled when I saw the fees on the investment side, right?

Malek: Crazy.

Philipp: When I came and then sat down with the first few clients, and just to see like, reviewing some of their portfolios. I always mentioned this in our financial planning talk as well. It's like I sat down with one person, very smart. He had 28 different insurance policies, and he was still underinsured.

Because he bought a little bit, $10,000 from this guy after school, right? Then a little bit in national service, then from this guy he got sold something. But he's still underinsured because he did really well; he bought property around the world, so with loans, though, right? So I think it's very misunderstood, [32:00] that's why I wanted to have you on because I know you understand this inside out and you're passionate about it. 

So how do you guide people when it comes to insurance right? Like how do you tell people, what should they look out for when they first pique their interest? Or someone comes up to them and says, hey, look, you should buy some insurance?

Malek: So to me, insurance is about protection, it's not about investments. And I think that's the crazy thing about this part of the world. People buy insurance for investments. And I think that's why the gentleman that you mentioned about 28 policies, he was buying it for pretty much in investments.

And the market has educated, or rather the insurance companies currently have educated people so much about, sort of, about the fact that insurance is about sort of something for you for a rainy day that you can put away. And all that is about savings and investment, it's not about protection, really. So what tends to happen is that you get this, sort of combined packaged products that has a combination of a bit of insurance and a bit of investment, but guess what?

A huge portion of fees in between, right? So which mutual fund manager or unit trust manager charges, kind of like a sales charge or a distribution charge of 40% of your first-year contributions? And then second year, another 40%, third year another 40%, fourth year, that drops down to 20%. Fifth year, 20%. If you had a fund manager charging those kinds of things, you'd be like kicking him out of the room, right? That's what happens, right?

So that's what happens when someone sells you something that is both insurance and investment packaged together. And then I think what consumers like [34:00] is the simplicity; the simplicity is this. It's like here's $1,000 a month, right? And I don't have to worry about it. All I have to make sure is that I have to pay $1,000 a month, and I get some protection, I get some investments, but you don't really look into the details of like where does this $1,000 go.

Actually, this $1,000, a lot of it in the first 6 years, goes a lot to the person who sells it in front of you, right? The person in front of you that sells it to you. And I think that's the irony of all this, is that that's where, and the industry, it's seen as like, hey, the words I get back is, “Oh, you know we have to do this, we have to distribute via agents.” And because insurance is sold and not bought, right? That's the idea.

Philipp: I always tell people you should always buy your investment or protection product, right? You should never be sold them.

Malek: Right, exactly. And I think the greatest thing, the biggest sort of disservice we do to ourselves here in this part of the world, is basically selling combined savings and investment products. Which attaches the same sort of fees that you know to the investment product, as well as the insurance product.

Philipp: Yes, absolutely. And I think the thing is that the whole thing, about what you said in the beginning, is everyone should take a step back. You look at your overall financial plan; you have investments and protection, right? And they should be handled separately, right? You're buying car insurance because you're wanting to insure the risk of being in an accident or whatever, right?

You should think about the same thing with your life insurance, right? You invest your money for retirement. But you can buy insurance, not as investment. So it's best when it's seen separate, right? You get the best fee, the lowest fee if you do it separately. 

So let's say someone comes up to you and [36:00] says, “Hey Malek, look, I'm torn in between buying these term insurance products, which you can maybe explain a little bit more the differences. And this whole life insurance product, right? Which gives me also some money at the end. Because with the term part, I'm just not happy because I just pay money and then I don't have anything at the end.”

Right? That's usually the question that comes up, and why people still buy a lot of times these high-cost insurance products.

Malek: Yes, right. And my response to that is, actually if you buy term, it's a lot cheaper than buying. The premiums you pay is between sort of 20% to depending, right? Of what you would normally pay if you were to buy a combined product. And why don't you take the 80% of what you saved and put it into an investment, right? So that's the idea. You break it out so that yes, you do buy term; you want a simple protection thing.

You want to say like, “OK, if something happens to me, I need a million dollars for my family. And if nothing happens to me, that's a good thing. I can still support them; I can still take care of them. And that protection that I pay, that premiums I pay in case something happens to me, that doesn't get refunded,” or get like and so on. Actually, that's a good thing, because you're alive and you can support your family.

It's only, you pay this, just like anything. You don't pay for car insurance because you want to get the money back, right? You pay for car insurance in case you had... And you don't really mind; you don't pay car insurance for $100 damage, right? You pay car insurance because of that situation where you injure someone else, or the other car gets hit, and it's your fault, et cetera.

So it's a big amount, and it's going to hit your finances if you hit a big amount. Same thing with life insurance, it's like you pay for that. Not to kind of, [38:00] “I want my money back.” Hey, you can do investments for that. You buy life insurance because if something happens to you, your family is safe.

And I think that's the simplest derivation of insurance. You've been in the derivatives market, I've been a lawyer in the derivatives market, it's really complex. You don't want to get complex products; you just want to get really simple products. And guess what? The rest of it - the beauty about today's fintech world - the rest of it that you save from not buying this sort of loaded, very expensive investment-linked policies we call them, is take that 80% savings, and put it, if you really don't know, a unit trust which has no sales charge and a reasonable management fee and does reasonably well.

Or buy your exchange-traded funds, or you can buy SPY, which is Standard and Poor’s 500 or these days, you can actually fill out your risk profile with a digital investment manager like StashAway and like others. And fill up your risk profile, fill out your goals, and then just put it there.

Philipp: And I think the process it's getting easier like you just mentioned, right? Like there are many ways that you can do it. But I think that's exactly why still people buy whole life, right? Because it's then maybe it's safer for themselves, that they're forced to save almost, right? Because they make a premium payment.

Instead of, “Hey, I rather pay less, do a term. But then I have to go find something else to put that money in.” But the internet, like you just said internet, the whole fintech space makes everything so much easier and accessible to anyone, right? Even if you don't have knowledge. It's really like a Google search away probably by now.

Malek: Correct. But I think the fear is real, the fear of the unknown, the fear of investing is very real. I interact with [40:00] a lot of personal finance groups, and parents, parent community groups, and all that.

And the fear of investment is so high that people are willing just to abdicate that responsibility to an insurance company, right? Without thinking through, like, this is really not a good choice.

Philipp: Yes. How did you get around then? You're a new player in the market, right? New name, new company. Yes, you use an underlying underwriter in that product. But how do you guys get around that? Because I'm sure these big old insurance companies, they've built up a big reputation, they're very liquid, they're very good.

Some of them have very good ratings for payouts and things like that that people look for. How are you guys going about that then? Because like you just said, right? People are afraid of that unknown.

Malek: Yes. So I think we have to go from ground up. I think what you see Fi Life doing, we're going into the parent’s forums; we're really going very deep into, very kind, deep into the ground, right? In terms of sort of spreading the word about, “Don't be too afraid of investments. There are these other guys who can do the investment side. But hey, insurance, you can get it for really cheap.”

And what we do is we have little campaigns that say, “You know what, how much do you think RM1 million, which is about US$250,000 - which is a big number in Malaysia - how would you think a RM1 million policy costs?” And then we have a guest, a premium, and people kind of say RM300, RM400, and we turn around to them and say, “Oh, it's only RM100 for a 32 year woman.” They're like what, really?

So that's the kind of ground campaigns that we have to do. And it's not campaigns as like a structured campaign, and sometimes it's all about just being there on forums and all that, just to kind of chip in, right? I think the difficulty is that sometimes when we do chip in [42:00] and give comments like the pricing and all this.

What we find the greatest pushback in some of these comments are from agents, I guess whose rice bowl is going to be affected by all this. I see every time we kind of like to help consumers try to make sense of this; sometimes I'm just a little bit annoyed, I must say.

Sort of, the agents who come in, and yes, and make the whole thing murky again. Like, oh, you know, but you can't get this, you can't get that, I'm like, argh. It starts again, right? So basically, it's almost like a battle for the minds of consumers on social media. So yes, so I think.

Philipp: I think the education part is huge, right? I think that's why we go out there every week, right? Webinars, on the ground events, just being there educating people about what's out there. And then have them make that decision. In the end, it's their decision, but at least you know, get everyone as educated as you possibly can. I think it is the best way forward there.

Malek: Yes. But here's the thing though, Philipp, what I would say is that as an entrepreneur, sometimes there are ways in which you try to change people's thoughts and opinions. But the better way actually is to, in a way, ride on what they believe in, right? And offer products that kind of take advantage of what they believe in a little bit.

So take, for example, let's talk about investment-linked policies, right? The investment-linked policies are in 54%, maybe even more of all policies. Sorry, I think it's in excess of 60% of all life insurance policies sold in Malaysia. Investment-linked policies are subject to all these sorts of huge fees, right? As I said before.

So if that's the case, then I think there is an opportunity to still offer; [44:00] I mean, there's still opportunity to work on this concept of investment-linked policy, but have a differentiated product, right? And I see interestingly; in Singapore, I see a bit of it happening a little bit. I mean, I see, for example, SingLife offering money market product.

So they're getting their feet wet a little bit in this sort of that kind of like. I haven't seen any policies that take advantage of that, but I'm seeing this sort of movement towards, sort of offering the consumer what they already know. But without the disadvantages.

Philipp: Yes. And I think the consumer gets educated; I think the internet is a big equaliser, right? Equaliser actually in the world over time. I totally agree. So one last thing when it comes to the insurance policies, right? Because we already covered most of the things that I wanted to talk about is a lot of times, when people misunderstand also term insurance, that if you buy it online, can you actually add any riders on there, right?

Like critical illness or long-term care, right? Because that's always on people's minds as well. Hey, what happens to me when I get critically ill, I can't provide for my family, but I'm not dead, right? So the insurance policy is not paying for that. Would you say that people, and then do you guys offer it digitally, these riders? Or would you say people should buy these separately?

Malek: So we offer it as riders. So the nice thing is like for example, if you were to buy - people say that I mean - you're a financial planner before, so the worst thing that can happen to you is not that you die, it's that you are a vegetable.

Philipp: Correct.

Malek: Because then you have to take care of yourself. Your family has to take care of you, and then they don't have money for themselves. They need money for themselves as well, right? And not all of us are Michael Schumacher's, right? [46:00] That can have this huge wealth that can kind of support that.

So I think what we do is then we take the decision to say look, our policies actually are packaged together with disabilities, total and permanent disability. So that at least if you buy RM1 million worth of sum assured, you get RM1 million of both if something happens to you when you're disabled, permanently disabled, or you die, right? So that's one way of covering.

Basically, you package it together So that people don't have to make that call. I mean, if we wanted to, we can separate it out. But we thought that hey, this is prudent. The other thing that we put in, and this one, we do it as a rider. But again, insurance companies can choose how they want to do this, but we put it like, OK,  if you get cancer or 1 or 4 critical illnesses, and you can go up all the way to 36 if you want with other companies.

But where if you get 1 of the 4 critical illnesses, you can buy a rider an extra premium or so much, and you can get what we call an accelerated payment. That means if you buy RM1 million dollars' worth of life insurance, you can get sort of RM250,000 of that which can be accelerated if you get cancer. And if then you don't recover from cancer, and then you die, you get the balance of RM750,000. But I think it is open, so that's our product at the moment. But I guess as we go forward and kind of enhance it and so on, I think we'll get to the stage at some point where you can actually choose.

OK, I want RM1 million worth of life, I want RM1 million worth of total probably disability, and my premium adds up every time like a little calculator. And then I want RM1 million worth of critical illness added up to your calculator. I think that is eminently possible; the underwriting for that is actually standard. So it's just a question of putting it as a consumer choice online.

Philipp: Yes. Thank you for dropping this information. [48:00] I think a lot of people will be able to go back, see what they have right now. Or if they're already looking for insurance, just have a clearer view and like hopefully do their own research on top of what we talked about today to learn more about this, right?

Malek: Yes. I would actually strongly suggest. I mean, the biggest thing for me is, and the craziest thing is, like, when you ask people. OK, let's start; “So what insurance policy do you have?” And suddenly the answer is like you get a blank look, and it's like, “I think I have this, and my parents,” - at least in Asia - “My parents bought me this.”

But I don't know what exactly it is, and my aunt asked me to buy this and that. And then, so actually that first piece is actually knowing what you have, I think that's so critical. I mean it's like this guy you talked about, who has 28 policies, right? He has to first spend a day kind of like retrieving all those policies and just having a little spreadsheet or piece of paper, and a table and just writing down.

How much is sum assured, how much is the cash value, how much is this, how much is that? To just understand what you have. And sometimes I think people find it really hard, and I'd really recommend them to... financial planners are not for the wealthy anymore. I think in Malaysia, for example, you can get a really good financial planner, independent one who can look at your stuff for about US$700. And if it's less than a month's salary for you, it's well worth it.

Philipp: It's money well spent, exactly. I think it's coming more and more, it's kind of, look for an independent, maybe fee-only advisor that can really set you up once. Because I think that's the thing like you just said, that getting set up with a spreadsheet, know where your things are.

It gives you so much more peace of mind, right? Like you will say, “OK, I'm on track, I'm not on track, where can I improve? What policies do I actually have to review them?” [50:00] So I think yes, you're absolutely right on this.

Malek: Yes. So it's such a nice, to get rid of, like sometimes you do to say, “Look, I'm going from sort of 28 policies to these 3 policies that are fantastic for me. The rest I can just disband, and whatever and things like that.”

“And now I'm streamlined, I pay only these three folks, and I have my investments, and everything's going hunky-dory.” Then you just continue your professional life, and don't worry about this anymore, right?

Philipp: Exactly. No, I think that's always the biggest outcome of any of the financial planning I've done so far. It's always, “Oh yes, we knew some of the things, but now we kind of like have it in place, and I don't have to worry about it all day, every day,” right? So getting on that. So hey, Malek, thank you so much for your time.

I know we've been talking for quite a while, and I think we can fill it up with even more because I did have some more questions around investments and what you're excited about in the future. But I think maybe we can do a second round next year and talk about a few more other exciting things.

Because I know you do like to invest in startups, as you mentioned earlier, so that would be amazing to hear and learn more about your reasoning and thinking behind that as well. So once again, thank you for being with us today, I really appreciate it.

Malek: You're welcome, Philipp, really enjoyed it. Thank you.

Episode notes

With his entrepreneurial spirit, Malek Ali seeks gaps in the market to find a niche for himself. BFM 89.9 was founded out of his love for radio and business while studying in the UK and the US. Malek Ali entered insurtech when he acquired U For Life, Malaysia's largest online life insurance platform and rebranded it to Fi Life. Fi Life offers consumers direct, online access to immediate term life insurance coverage. In this episode, Malek shares his entrepreneurial journey after leaving university, and why you should use insurance as a form of protection and not as an investment tool.

For past guests, visit stashaway.com/podcast

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Episode contributors

  • Philipp Muedder (Head of Financial Planning at StashAway)
  • Malek Ali (Founder of BFM89.9 and Fi Life)