Financial planning and the application of behavioral finance and Maslow need theories: A case study of Malaysia’s EPF

Decision-making is complex behaviour and includes analysis of several factors. Behavioural finance also depends on financial planning objectives. Thus, understanding the application of behavioural finance theories and need theory is essential. This study was conducted due to the lack of formal discussion in financial planning in Malaysia. The Employee Provident Fund (EPF) members’ financial behavior became the focus of this case study. It included three sections. First, financial planning of EPF members’ pre-retirement withdrawals where it was found to be concentrated on capital investment and housing. Second, behavioural finance application of Expected-Utility Theory (EUT) and Prospect Theory (PT) in explaining why individual members chose differently even while in a same situation. Third, Maslow need theory application (MNT) where the pre-retirement withdrawals were divided into four categories of continued saving in EPF, housing, capital investment and both. Overall, the study confirmed the relevance and applicability of the financial behavioural theories developed in financial planning. With this understanding, financial institutions such as the EPF should be able to understand better the financial behavior of their contributing individual members and thus arrive at better marketing plans.