Financial Daily from THE HINDU group of publications
Wednesday, Feb 18, 2004
Money & Banking
`Financial planners have a bigger role to play'
Kolkata , Feb. 17
THE US-based Financial Planning Standards Board (FPSB), which controls the Certified Financial Planner trademark, has initiated a reality check on the Indian market.
Mr Ian Middleton, Director, FPSB, feels financial planners will be increasingly required to play a bigger role here. "The newly-reformed pensions sector in particular will need many competent, ethical advisors," he told Business Line.
Where is growth likely to come from in India?
This is a rapidly emerging market, where growth is being spurred by important developments and changing social and economic factors. We foresee major growth happening here, given India's large pool of advisors who act as insurance agents and the like.
We are looking at a conversion rate of around 10 per cent over, say, the next five years or so. New graduates will also be urged to adopt financial planning as a profession, catering to those who need the right sort of advice. Service providers such as insurance companies and mutual funds will play a key role in encouraging planners, including those who operate at the low end of the market. The target audience is really big, matching an economy of the size of India.
I look at it from the point of view of the consumer, who is faced with factors such as low inflation rate, a volatile equity market and the growing use of mobile telephony.
India is doing a lot on the pensions front. How do you perceive these developments?
Yes, we are aware of the changing face of pensions in India. As in other areas like mutual funds, this too will require a dedicated set of advisors, people who provide competent and ethical service to clients. A certain code of ethics has to be followed.
The OASIS report, if you recall, had referred to `retirement advisors'. In future, there could be a fair number of service providers, belonging to both public and private sectors, offering their pension schemes. In a situation marked by such diverse choices, people will have to be advised correctly.
Retirement could then easily be the single-largest investment for prospective clients... something that already has been evident in other countries.
Are you meeting the regulators?
We will meet the Securities and Exchange Board of India and the newly-formed interim pension authority. The ground has been prepared by the Association of Financial Planners, our local affiliate. We had a round of talks with the pension regulator quite recently and were asked to present a formal proposal. We now wish to take it forward. Let me add that we will also conduct what we call is a "grandfathering" rite; the idea is to choose some role models for the financial planning industry.
Given our progress, are there any worries or possible downsides? What is your experience from other markets?
You know, over-regulation could become a major issue. This can influence the natural state of things as the consumer may be required to bear the cost of regulation. Regulators put together laws that are meant to benefit consumers, but a line needs to be drawn somewhere.
Over-regulation has lately become a matter of debate in certain countries. With this as backdrop, we encourage the formation of self-regulatory organisations, ones that try to improve the existing state of financial planning. The idea is to strike a balance between the needs of regulators, service providers and consumers.
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