The Hindu Business Line : `Demand for fee-based financial planning to rise'

`Commission-based models have been in vogue for a long time here and people are not really accustomed to any other mechanism. The user community should realise it would pay to work with competent, ethical financial planners.'

Kolkata , Feb 2

THE agenda set by the Financial Planning Standards Board India (FPSB) will not be easy to meet, according to Mr Ranjeet Mudholkar, CEO. He should know, for FPSB India is trying to professionalise financial planning practices. This in a country where most distributors of financial products would rather vend on the basis of commissions and investors are reluctant to pay for advice.

Excerpts from an interview:

Would you agree that appropriate legislation would provide a solution?

Yes, legislation is necessary. Today there is little distinction between advice and selling. Financial planners are those who have clients' interests in mind and are driven by certain processes. Thay offer comprehensive advice aimed at meeting the financial goals of their clients.

As things stand, distributors of products like mutual funds and insurance have been catering to investors' needs in a variety of ways.While some of them have been in the business for a long time, they are not regulated in the strict sense of the term. The product manufacturers are, on the other hand, governed by norms set by regulators like SEBI and IRDA. There is a case for supporting regulatory developments that are in line with our overall objectives.

How can professional planners be distinct from generic advisors?

Financial planning certification singles out the entities that are competent to practise financial planning. FPSB India is seeking to develop a pool of professional knowledge on this front.

We are also trying to bring various constituents of the financial services community on a common platform.

It should be remembered that financial planning can be an independent career. And the user community should realise that it would pay to work with competent and ethical financial planners.

Why can't fee-based practices be institutionalised in India?

Commission-based models have been in vogue for a long time here and people are not really accustomed to any other mechanism. So far we did not have a process of certifying professionals. But one is sure changes would occur as and when the market matures. A certain demand for fee-based services would hopefully emerge in future.

There is not enough public awareness...

True. Users of financial planning services need to appreciate that planners have cleared a minimum competence test, which equips them with certain skills and makes them professionally responsible. Any stakeholder - it could be policy makers too - would want this to happen.

Are fee-based service providers coming up?

They are, slowly. A number of professionals have lately emerged in this industry, catering to a new breed of investors who seek greater aptitude and proficiency. I can straightaway think of one or two who have left their jobs to become engaged in this sort of activity.

Logically there is scope for the financial planners fraternity to grow as well. Let me say that globally the number of Certified Financial Planners is expected to record a major increase in the coming days.

And talking of international experience, let me also add that leading personal financial services firms have already come together to professionalise the business.