The Application of Robo Advisory Platform for Faraid (Inheritance) Investment in Islamic Wealth Management in Malaysia (International Journal of Islam and Contemporary Affairs)

Summary

• Unclaimed inheritance assets in Malaysia reached approximately RM90 billion by late 2024 and 2025, up from RM70 billion in 2020 and RM42 billion in 2011.p.2
• Only approximately 5 percent of Malaysian citizens have prepared a will or estate planning document, causing lengthy litigation and distribution delays.p.3
• The Small Estates (Distribution) (Amendment) Act 2022 raised the jurisdictional threshold for small estates up to RM5 million.p.3
• Global Assets Under Management (AUM) through robo-advisors are projected to exceed US$2 trillion by 2025, driven by an annual growth rate of more than 30 percent.p.11
• In Malaysia, the robo-advisory sector is projected to reach approximately US$2.5 billion in assets in 2025.p.12
• The qualitative study collected insights through structured interviews with 5 experts across academic, industry, and regulatory sectors.p.13

Key insights

1. Academic and industry experts broadly support applying robo-advisory platforms to invest Faraid assets, provided portfolios strictly maintain Shariah compliance and offer capital protection.p.1
2. The key Malaysian regulatory trustee, Amanah Raya Berhad, stated it is not yet prepared to deploy a robo-advisory platform and will continue focusing on its current investment portfolios.p.19
3. Passive management of frozen inheritance assets depletes real wealth over time due to inflationary erosion and missed investment opportunity costs.p.3
4. Existing Malaysian robo-advisory platforms primarily focus on stocks, ETFs, and gold rather than integrated Islamic estate management.p.1
5. Integrating Shariah-compliant robo-advisory systems can expand financial inclusion by offering lower entry barriers and cost-effective services to retail investors.p.12
6. Wealth management firms must obtain client consent before investing Faraid assets using robo-advisors, though managers should make direct investment decisions on behalf of minor beneficiaries.p.18