The Hindu Business Line : `We don't have sufficient number of certified financial planners'

"It is not that everybody is completely aware of things. But it can be safely assumed that conceptions are increasingly becoming clearer in some quarters," he says in an interview to Business Line.

Excerpts:

What is stopping people from adopting the most effective strategies?

It is clear that not all investors are being guided by professionals. Proper financial planning, which should form the very basis of an individual's strategy, is absent in many instances. But this should not be the case in an ideal situation. In many ways, people make mistakes while being too hasty in their decisions.

For instance, an investor is often guided entirely by short-term considerations. For him, getting in and out of an investment far too frequently is nothing less than natural. Now, that will not be a very prudent thing to do. Such an approach may only increase costs.

What I am suggesting is that advisors should be chosen with considerable care. Also, an investor should pay great attention to his asset allocation. A wrong mix of assets will simply weaken his chances to generate wealth over time.

When it comes to working out asset allocation, what should be the key considerations?

A number of factors should be kept in mind before one sits down to outline a plan. Broadly speaking - and this may not be strictly applicable to everybody in this order - an investor's age, current income, immediate debt payment commitments and future monetary requirements should be considered.

The best debt-equity mix for an investor in the under-25 bracket will not be the same as what is relevant for someone who has crossed 60. The point is, there is no one-size-fits-all principle here. It is generally felt that a relatively young investor can allocate more to equities, while a senior citizen can think about greater exposure to fixed income.

Compared to debt, equity is a more risky proposition. But that may not daunt a younger person who, it is assumed, can be in a position to bear more risk. At any rate, he will have more years ahead of him.

Are investors aware of all aspects of financial planning?

People are normally more responsive to investment planning as well as to issues such as taxation. Also, the market is becoming more aware of insurance products, which may be partially attributed to the recent entry of new-generation insurance companies.

Today, we know that LIC is not the sole option... just as we realised some 12 years ago that UTI (and other PSU fund managers) was no more the only fund house. However, there is limited awareness when it comes to estate planning in this country.

Not many Indians are willing to write wills in their lifetime. However, wills are quite common in certain other markets. There is a feeling this will change over time.

Aren't there too many players passing off as financial advisors?

What we don't have in sufficient numbers are certified financial planners. Contrast this with the vast army of people who dispense advice on subjects as diverse as MFs, insurance and the like. One is referring to insurance agents, MF distributors and even to an extent, tax consultants.

At another level, you have private bankers who are constantly trying to offer value-added services to clients. There are portfolio managers who run various schemes. Their presence makes the advisory scene fractured and complicated.

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