“Can you help me make a financial plan that complies with Shari’a?” If asked this question, many financial advisers might not fully understand it. For those who do, most would be unable to fulfill this request despite the fact that all the client is asking for is financial advice that does not contradict his or her religion or the divine law in Islam, called Shari’a.

The number of Shari’a-compliant financial instruments — from bank accounts to hedge funds — coming to the market and related piecemeal advisory services (e.g., home financing) is growing. Therefore, advisers have access to tools that can be used to create Shari’a-compliant solutions. Advisers need an understanding of Islamic finance principles to understand how to use those tools.

The objective here is to demystify financial planning that complies with Shari’a. Five simple points can help advisers integrate Shari’a-compliant financial planning services into their businesses. Another five points can help them identify and overcome potential challenges to the implementation of such services.

First, the generic financial needs of the Muslim client are no different from those of other clients. Simply put, whether or not one practices a religion, one needs to earn a living, pay taxes, and worry about retirement and transfer of wealth. Similarly, one needs protection from the risks associated with employment, mortality, and longevity. The difference between the client seeking Shari’a compliance and other investors lies not in their financial needs, but how those needs are met. Therefore, the financial planning framework used for other clients will also work for the Muslim client seeking Shari’a compliance so long as unique noneconomic considerations are taken into account in recommending suitable products.

Second, integrating noneconomic considerations into financial planning is already being done for the client concerned about environmental, social, and governance issues. The Muslim client seeking Shari’a compliance is concerned about noneconomic considerations without necessarily being willing to compromise on economic returns. By accommodating the socially responsible investor, financial advisers are already one step closer to serving the client seeking Shari’a compliance. In either case, the effect of introducing noneconomic considerations is the same: It reduces investment choices, although the degree of this effect will probably be much greater for Shari’a-compliant investments.

Third, the principles of Shari’a are fairly easy to grasp. The key is to understand the relevant prohibitions, such as the general prohibitions on riba (interest on monetary loans) and gharar (preventable ambiguity in contract essentials) and more specific prohibitions, such as those concerning alcohol and gambling. With an understanding of these prohibitions, an adviser can explain to a client why some financial products (e.g., bonds and whole life insurance) and businesses (e.g., breweries and casinos) may not be Shari’a compliant. Similarly, advisers may find other guidance for financial planning, such as Zakat (sharing wealth with the poor) and Hajj (the pilgrimage to Mecca), fairly simple to understand and plan for.

Fourth, expertise in conventional products is important for clients seeking Shari’a compliance. In general, Shari’a is not the law of the land, and whether and to what extent a client may seek Shari’a compliance is often a matter of personal discretion. A Muslim client may not automatically wish to pursue a purist approach that requires strictly compliant products. Moreover, Shari’a-compliant products are being developed that produce outcomes similar to their conventional counterparts. Understanding conventional products helps with understanding Shari’a-compliant products, and the client may be willing to consider conventional financial solutions where a suitable substitute is lacking or is economically uncompetitive. In fact, advisers should not rule out the possibility that a Muslim client may turn down a Shari’a-compliant product in favor of a conventional product even if the former is equivalent to the latter in every respect.

Fifth, Islamic financial institutions have already put into place structures and processes for obtaining and maintaining Shari’a compliance that could be used by the personal finance industry. Typically, an Islamic financial institution has a board of religious scholars that issues religious rulings on whether a product or service complies with Shari’a. The management of the company need not be experts in matters concerning Shari’a, nor should it necessarily consist of Muslims. Following the same model, a firm of financial advisers may also obtain the services of a panel of scholars that can advise on Shari’a compliance regarding issues affecting personal financial planning. The same issues will tend to arise repeatedly, so advisers should eventually be able to serve their clients seeking Shari’a-compliant solutions with speed and efficiency.

These five points show that financial advisers can integrate Shari’a-compliant products and services into their conventional financial advisory business. Nonetheless, challenges are bound to arise, and below are five of them.

First, the business model of a financial adviser may have Shari’a-compliance issues of its own. If the financial adviser is employed by a conventional bank, the client seeking Shari’a compliance may shy away from the bank’s advisory services because conventional financial institutions are deemed noncompliant with Shari’a for reasons that include the prohibition on riba. Therefore, the adviser may choose to check the Shari’a compliance of his or her business model and obtain a formal ruling from a scholar from whom clients may seek advice on Shari’a-compliant products.

Second, the Shari’a compliance of products branded Shari’a compliant by their providers may not be foolproof, and sometimes such compliance may only be a change in form rather than a change in substance of a conventional product. On more than one occasion, Islamic finance has experienced situations where products approved by the Shari’a supervisory board of an Islamic financial institution were later criticized for lacking such compliance. Recently, Sukuks came under intense criticism when prominent scholars condemned some instruments for being dangerously close to conventional bonds. A financial adviser need not take positions on issues of Shari’a compliance but should explain to the client that there is room for a difference of opinion on Shari’a compliance and that some of the common practices in the Islamic finance industry are not without their critics.

Third, the position of Shari’a on a given issue, as stated by a Shari’a scholar, may come in conflict with the law of the land. For instance, transfer of wealth under Shari’a could come into conflict with civil law, particularly where the client dies without a will. Clearly, financial advisers cannot assist clients in violating the law. They may, however, simply state the facts and confine their advice to solutions that comply with the law.

Fourth, given the emphasis on risk–reward sharing in Islamic finance and the prohibition on interest-bearing monetary loans, advisers may have difficulty meeting the suitability criteria of the client who seeks Shari’a compliance but displays high risk aversion or a low ability to withstand risk coupled with vulnerability to inflation. In such situations, the adviser may need to explain to the client that given the general lack of Shari’a compliance of conventional fixed-income instruments, the client needs to understand the potential trade-offs between Shari’a compliance and risk avoidance.

Fifth, the need to educate the client while remaining sensitive to his or her emotions is likely to be greater than in conventional financial planning. The client may have only a vague understanding of the scope and implications of Shari’a compliance. Because these matters concern the client’s religion, he may feel embarrassed that he neither understands such matters nor finds confining himself to Shari’a-compliant choices easy. This challenge, however, is not one that most advisers would find difficult to overcome because their profession trains them to deal with it.

In sum, integration of Shari’a-complaint financial planning into conventional financial advisory businesses is possible, in principle, because the financial needs of the Muslim investor are no different from those of other investors, and fulfilling those needs does not require a theoretical framework different from that of the personal finance industry. The process, however, does have its challenges.

Usman Hayat is director of Islamic finance and ESG at CFA Institute.