Collective Response from Financial Planners to SEBI’s Concept Paper - Network FP
October 5, 2011

Collective Response from Financial Planners to SEBI’s Concept Paper

Sadique Neelgund

Dear Members

Below is the first draft of letter which Network FP on behalf of the Financial Planning Community proposes to send to SEBI in response to its SEBI’s Concept Paper on Regulation of Investment Advisors

The response and the thoughts captured are based on initial feedbacks from some practicing and aspiring financial planners on our website, social media and phone calls. We have tried to capture the mood of financial planning community and would like to present it as “Collective Response from Financial Planners to SEBI”

You are requested to kindly go through it and offer your feedback and suggestions to develop the response further. All the feedbacks would be duly considered before sending the Final Draft. If you would like to support this “Collective Response from Financial Planners to SEBI”, you can do it in the following ways. (Also please provide your name, city, mobile number and email id. We will include them in attachment along with the letter as a show of support)

  1. Leave a comment/reply on this page below showing your support to “Collective Response from Financial Planners to SEBI” and also offer your suggestions if any.
  2. Send a mail to editor@networkfp.com showing your support to “Collective Response from Financial Planners to SEBI” and also offer your suggestions if any.
  3. Physically Sign up and offer your suggestions if you are attending “Network FP Annual Conference 2011” on October 19 in Mumbai

Although the proposed regulations are in favour of financial planning profession, it can backfire if not implemented in the right way and if there is no smooth pathway to transition. These are the tough times, we have to come together and speak in one voice to get heard.

It looks like SEBI is serious about implementing this concept paper. So instead of being critical which may not be herd, let us provide constructive feedback as a professional community.

Best Regards

Sadique Neelgund, CFPCM

Founder, Network FP

__________________________________________________________________________________

Collective Response from Financial Planners to SEBI

Dear Sir

This letter is Network FP’s response on behalf of the Financial Planning Community to SEBI’s invitation for public comments on “SEBI’s Concept Paper on Regulation of Investment Advisors”.

Network FP is a platform for aspiring and practicing financial planners in India. It has 1500 members online and regularly conducts trainings, workshops and conferences to promote fee-based financial planning services by independent advisors.

The Concept Paper and the whole thought process behind drawing a line between advisors and agent is a welcome move by the regulator which will have a positive impact in the long run for investor’s financial well being and will also promote the financial planning profession.

While the whole agent/advisory community is protesting and criticizing implementation of this regulation, this response is to give a practical and constructive feedback to the proposed framework so that the interests of investors, intermediaries and the financial planning profession are served.

This response may be considered as feedback from the perspective of a financial planner who in the Paper is being called as an “Investment Advisor”. And from the viewpoint of a current financial intermediary who if this concept paper is implemented may desire to opt for being an “Advisor” over being an “Agent”.

It is requested that the Points mentioned below be debated and considered before drafting the Final Regulations for Investment Advisors and creation of an SRO;

(Each of the points will be elaborated after receiving feedback from other financial planners)

1.   Substitute terminology “Investment Advisor” with “Financial Advisor/Financial Planner”

2.   Include “CFP” i.e. “Certified Financial Planner” as one of the qualifications eligible for registering as an “Advisor”

3.   Give 3-5 years transition phase for all the current intermediaries before implementing the proposed regulations

4.   Support the transition with financial literacy programs educating the consumers about hiring a good investment advisor and the value of paying fee for advice.

5.   Ensure intermediaries in transition get to earn from past trails before moving 100% to a pure fee-based advisory model

6.   Promote low cost investment products across all investment avenues so that end cost of both getting advice and buying products remains same or comes down for investors.

7.   Create a level playing field for Independents and Institutions. Both have their respective strengths and weaknesses.

8.   Prevent agents from styling themselves as advisors in reality after implementing the proposed regulations.

9.   Ease the capital adequacy and infrastructure requirements. Financial Advisory and Planning is about knowledge, understanding clients and analysis. Encourage young blood to opt for this profession.

10. “Investment Objective” and “Financial Goals” are as important as “Risk Profile” and should be documented before giving advice.

11. Address the danger of majority of the intermediaries choosing to remain “Agents” under the new regulations. This will go against the investors interest.

It will be highly in the interest of financial consumers, the advisory community and financial planning profession if the above points are duly considered for debate by the regulation drafting authorities.

Although the intentions and motives of the regulator in brining proposed regulations are undisputable, the implementation strategy of the new regulations is a cause of anxiety for the advisory community.

The above responses have been drafted by Network FP after taking feedback from numerous practicing and aspiring Financial Planners through its website’s discussion forums, informal meetings with Senior Financial Planners, phone calls and during an open forum at Network FP Annual Conference held on October 19 in Mumbai.

Also kindly find appended the List of Advisors with their contact details who have shown support to  “Collective Response from Financial Planners to SEBI”.

Request for Meeting

Network FP would to be glad to facilitate a Meeting of Senior & Established Financial Planners with SEBI Authorities to discuss the above mentioned points and offer views of the Financial Planning community. We request you to allot a convenient date and time for the meeting to help us co-ordinate.

Thanking you

Yours sincerely

__________________________________________________________________________________

You are requested to offer your feedback and suggestions to develop the response further. All the feedbacks would be duly considered before sending the Final Draft. If you would like to support this “Collective Response from Financial Planners to SEBI”, you can do it in the following ways. (Also please provide your name, city, mobile number and email id. We will include them in attachment along with the letter as a show of support)

  1. Leave a comment/reply on this page below showing your support to “Collective Response from Financial Planners to SEBI” and also offer your suggestions if any.
  2. Send a mail to editor@networkfp.com showing your support to “Collective Response from Financial Planners to SEBI” and also offer your suggestions if any.
  3. Physically Sign up and offer your suggestions if you are attending “Network FP Annual Conference 2011” on October 19 in Mumbai

41 Thoughts to “Collective Response from Financial Planners to SEBI’s Concept Paper”

  1. Devang Shah says:

    Hi Sadique. I really liked the tone of the letter. I also think the list of points is too long and we should cut down our suggestions to LESS than 4 or 5 important suggestions. The rest can be an annexure.

    Two specific changes I wanted to suggest –

    In the fourth paragraph instead of “…so that the interests of investors, intermediaries and the financial planning profession are served….” should we simply say “….so that the interests of the investors is genuinely protected.”

    and

    Rephrase point no. 7 to say “create a watertight framework so that Advisory practices, through a complex network of ownership structures, donot own a distribution business/MF agency that ALSO earns commissions”

  2. Dear Sadique,

    Appreciate your initiative and have following comments:

    a) Firstly, I think you should correct the spelling in your above write up from ‘herd’ to ‘heard’. Both mean different.
    b) All your suggestions are sane and eminently coniderable. But I have my own doubts. Let me give my feedback to you as to what happened during Aug 2009. In one of the road shows organised by SEBI, a gentleman director of SEBI informed the audience of which I was a part, that SEBI had to ignore similarly worded petitions on the assumption that they were generated by vested interests. I am not sure if SEBI would take cognisance of your petition or reject it on the same grounds as explained by this gentleman director.
    c) Suggest you to go through FSA’s work before sending the petition. SEBI has heavily borrowed from FSA’s work including some pronouns. FSA has meticulously documented the feedback received from various stakeholders and they are very much revealing. You will find the FSA’s contents at this link:
    http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/008.shtml. These documents enunciate the data points and decision points so unambigously and clearly little is left for doubt. I am cynical about our regulators being so thorough and transparent.
    d) I have already commented in LinkedIn (http://www.linkedin.com/groups/Is-FPSB-India-Sleeping-Zzzzzz-2117494.S.72843752?qid=280e4d76-2380-4d35-8b75-65386956254b&trk=group_most_popular-0-b-ttl&goback=%2Egmp_2117494) and I stick to that. I am of the strong opinion that SEBI is prejudiced and has pre-decided the outcome. Seeking opinions, that too within one month window on such an existential issue, itself is the indicator to this. As the concept paper itself laments about the India’s illiteracy, is email feedback the only mechanism available to SEBI? Let it organise seminars, talk shows and roadshows so that people with vernacular language abilities can also participate and contribute. It should also allow investors to give their feedback, document the feedback and be gracious enough to publish them transparently before deciding.

    Best of luck.

    Regards
    Narendra

  3. Bhavesh Patel says:

    Sadique,

    The Insurance Agents in many cases represent themselves as an Investment Consultants or Advisors. Can SEBI regulate such so called and self proclaimed Advisors who are otherwise regulated by IRDA? What about the ‘advisors’ who are advising people to invest in “PACL” and Speak Asia etc? For investors,whatever they are paying in such companies are “Investment”.

    The SEBIs proposed regulation will have no meaning, as far as the interest of Investor is concern, if there is no level playing field. The list of response should also include this matter in more serious way. Also you should include issues like penalty or punishment for default. If the defaulter can not be penalised then there is no meaning having such regulation. What if the advisor starts acting as an agent in a direct or indirect ways? Is SEBI considering such issues? If yes, how and what?

  4. Sanjay says:

    Namaskar,.

    I am learning so much from Best Brains in the industry.

    Thank You Network FP.

    Sanjay Tiwari – Bangalore

  5. SUJITH NAIR says:

    I have some doubts in my mind, seeking all ur guidance –

    1) If implemented, who is an Advisor ? advisory function for the SEBI regulated financial products like equity, MF, commodities etc.., What about Insurance, real estate, NPS etc.. any other new products not in the ambit of SEBI ? Would other regulators approve the SEBIs definition of ADVISOR? Would there be a co-ordination between regulators ? Or is it the case that Financial Advisor is going to be regulated by SEBI only? Waiting for other regulators comment on this topic…..

    2) OK, if distributor / advisor is different, what about the income to the distributor in the case of Mutual Funds, the bread and butter is already taken away 3 years back of 2.25% entry load. Can any body share – without any brokerage how the distributor is going to distribute the financial products ? So there will a two fees – one Fee to the Advisor and another to the Distributor.

    3) Why not the Indian system can create an environment for different models to flourish and giving an opportunity for the entrepreneurs to innovate like eg. Fee-only, Fee + commission etc.. with enough disclosures and stringent regulatory framework.

    4) If an Advisor / Planner is also suggesting & implementing, in the case of Mutual Funds where is the conflict of interest? ( a) No tied agency model, ( b) No upfront brokerages only trail brokerages… , but good part is the easy implementation. Take the example to FMPs.. we all know that mostly FMPs opened only for a day / few days.. Decision and immediate implementation is very important in these cases.

    5) Would the AMCs / Financial Institutions also enroll Advisors / Planners, so that any new innovative product launches / information shall be available to the Advisors and accordingly suggest to the customers.

    6) Mr. Narendra Kondajji’s many points are valid. Is there only one way for the feeback system, is it going to be consensus driven or rule based / system driven implementation of any new regulation ?

    Thank you,

    Regards,
    Sujith

  6. I. There is one major transition point, which almost every person in the Financial services field has got to grapple with…

    Most people who are completing CFP certification and moving into advisories are either MF distributors, Insurance agents, other financial product distributors. These people truly want to make the transition. Now, they can do that over time. If they are asked to choose today, between an agent or advisor, it is not really a choice – for it is a choice between a rock and a hard place!

    Most people just cannot afford to give up on the commissions they would be receiving till date- for they are only now making the transition and their fee income is either small or is expected to come in future.

    Hence, time is of essence for this transition to happen. A minimum of 5 years is required. A more suitable timeframe for making this transition is 10 years, in my opinion.

    Those saying that investors are being duped by agents and distributors and hence this model should be implemented immediately are missing one essential point. Nobody is against a regulation against misselling, misleading clients or other devious practices. That can be implemented across the financial services on an immediate basis.

    SEBI needs to get into the mode of educating investors about the merits of going to “investment advisors” and then introduce the regulation several years down the line after preparing the ground.

    !!. Someone had compared medical profession and brought to my notice that Doctors just offer advice and don’t sell medicines, which is done by chemists. That is right. The same model should come in here. There is one important thing that I would want to point out.

    A chemist cannot dole out medicines, without doctor’s prescription ( except for some OTCs ). Hence, everyone has to anyway got to go to a Doctor. Will SEBI make it mandatory for everyone to go to an “Investment Advisor” first? This is such a major difference, that this comparison is meaningless unless this parity is achieved.

    Without a culture of paying for any advice in the country, it is premature to ring in such a regulation.

    • SUJITH NAIR says:

      Yes, sureshsir rightly pointed out all the ground realities. I would like to add the doctor – chemist comparisons. Yes normally its perception that doctors only prescribe medicines, but look into pediatric doctors, Advice and at the same time providing vaccination. Recently when i paid 4,000/- for the vaccination to my daughter, I asked to the doctor is it inclusive of your fees? the answer was Yes! Parents are also happy that the same is implemented by the doctor bcoz worry free from storage issues, batch no. issues, no necessary to run from pillar to post for the drug. I think we all need to look into the broader picture of the issue.. Where is ground work done by the SEBI towards this transition? Many planners also shared that after the Written plan presentation, majority of the investors are not implementing timely, just procrastination … and at the same time majority of the clients are also interested in review of the plan also… again advisor search for new clients…. all of these reasons bcoz of financial illiteracy prevailing in our country, first SEBI tried to educate the public through vaious media… thanks.

  7. Stealth says:

    Hi Sadique
    Also add one more line ” CFP certificants will be exempted from Insurance and MF advisory exam conducted by IRDA & AMFI” as it is there in the CFP curriculum.

  8. dugarins says:

    Suggest to focus on point nos. 1/2/5/7&11.
    Add: Provision of penalty to agents who work as advisors after implementation of this concept paper, by way of 1st time warning & 2nd time cancellation of Agency Licence, through IRDA/AMFI, subject to giving an opportunity to the advisor to be heard.
    Thanks.
    N.DUGAR

  9. divyengada says:

    Hi Sadique,
    I think the idea is great but I would suggest to cut down the recommendations to 5-6. And also we should mention a point as:
    CFP with sufficient work experience of 3-5 years and an agent who is not CFP/CA/MBA,etc.. but with a work experience of 10 years and above can also become “Investment Advisor” reason being there are many MF/Insurance agents in non-metro cities/tier-II cities who do not have these qualifications but have great amount of experience to advise their clients as per there needs/wants.

    Regards,
    Divyen Gada, CFPcm
    Head – Financial Learning Programmes
    MT Educare Ltd.

  10. Chetan Marde says:

    Hi
    I fully give my support to ‘Collective Response from Financial Planner to SEBI”.
    But I would also like to bring to notice a point where large amount is invested in such a product which not at all suitable for the investor in the name of planning by the agent to get large commission.
    For Example, an investor is ready to pay a premium of Rs. 100000/- p.a. for a sum assured of Rs. 10 Lac whose Annual Income is Rs. 5 Lac as per Agent’s advice in an endowment policy for retirement planning. Or any person investing Rs. 250000/- lump sum in mutual fund equity fund in the expectation that it will get double in 3 years as per M F. Adviser.
    In this case a certificate of viable investment should be made compulsory from “Investment Adviser” as proposed by SEBI. So that at least mis-selling may be curbed to some extent.
    Also all investment product should be brought to the level where they can compared on the basis of commission.
    And finally, a life or general insurance agent should be allowed to do business of any number insurance companies as in case of mutual fund adviser. So that he will be in better position to sell life insurance product as per need, price, servicing of the insurance company.

    Regards,
    Chetan Marde, CFPCM
    Good Win Financial & Investment Consultancy
    Dahanu, Thane

  11. Why there are few exemptions ?. Actually Banking channel and NDs propelled mis selling becoming hot debate day in and day out.

    Currently So many people doing all financial business even without basic qualification or certificates through national distributors as sub brokers.

    Most banks put sales target on their entire team. Don’t they require same regulations as individual adviser have?

    Why not proposing a word, Sales agent / Sales Executive instead of Agent?.And making it mandatory to print in applications. If implemented at least people recognize them faster as sales only people.

  12. Shankar S says:

    1. This needs lot of thought and time for an advisor optee to give up on all commissions and even then i think it needs to be prospective and not retrospective..i have a contract with the manufacturer having agreed to pay a certain % as trail how can that be changed retrospectively?
    2. I have some clients who want only advise i charge based on time for them, others who want only products for say tax savings ( no charge only commissions) and still others for whom i run almost like a small family office, some who pay a retainer, some as a % of assets and others who dont pay at all.. I have a menu and let them choose I cant fit into any neat role called advisor or agent here..I have been disclosing commissions well before it was mandatory and now have a partially fee based and partially trail income set up. If only fee based i may have to change my entire set up and that would not be an easy task for me and i think for anyone else.While we all would probably like to be there one day that day is not in the near future.

    3. People will find loopholes if they cant survive in this set up by setting up dummy distribution companies where they can get fees from one end and also get trail by the distribution companies floated by them. Else they can be agents and get fees cheque in their spouses name etc..this will only lead to unnecessary license quota raj system.

    4. Finally i dont think even MFs have schemes that are meant for no trail no upfront scenario tehy need to come up with normal funds for agents like 12b-1 in US and advisor only funds that pay no upfront or trail.
    5. As market evolves people would tend to move towards ETfs or other low cost options and advisors would move towards a more fiduciary role like FPAnet in US, while its good to have a distinction between agent and advisor its very bad for the SRO to tell me where my income should come from especially in a fractured market like ours with low levels of financial literacy.

    6. Instead of this concept i would be happy if they strengthened the licensing process so that only sufficiently educated and interned or experienced can become advisor and they have to disclose both commissions and fees as a % on SRO site along with articles published/research undertaken would we have an healthy system instead of this either or approach. We need lots of advisors and even more salesmen to bring in the savings of the people to the markets in a disciplined manner

  13. Rajesh Bhatia says:

    Dear Sadique

    All the points are valid but I will like to go about certain changes like please make it minimum 10 years in point no 3 as indian investor mindset will take atleast a generation to absorb the change. 4 point to be merged in point 3. leave point no 6 and 8 for time being as it may dilute our main objective. let us go in with 7 points.
    Real estate market is worth billion of $ still no concrete regulation , Insurance ( IRDA) hitting the stick when snake goes away ( misselling issue) and all the focus is on mutual funds which is still at its nascent stage. My last querry to SEBI is what was the fun in creating and setting up FPSBINDIA when you want MBA’S and CA to work as investment advisor.On the contrary the whole world recognizes CFP certificants to be at the pinnacle as for as advisory part is concerned . So my request to SEBI is to pave way for all the intermediaries from agent /advisors etc to FINANCIAL PLANNERS.
    Regards
    RAJESH BHATIA CFPCM

  14. Dear Sadique,

    I totally endorse all the points stated perfectly by you in the Collective Response letter and specially lay stress on points 1 & 2 mentioned therein.

    A distinct line needs to be drawn between identifying an Investment or Financial Advisor on one side and a Certified Financial Planner on the other as 2 different identities.

    Once this demarking is done, a lot of ambiguity will be cleared and in doing so will we able to create a niche and identity for our financial planning profession in particular, which needs to be recognised and identified by more and more people in time to come.

    We surely need the regulators to support us in doing so.

    Regards
    Kalpesh Ashar

  15. Himanshu Maheshwari says:

    Hello Sadique,
    That proposed regulations are only going to devastate investors’ interest is anybody’s guess.My strong conviction is that we should also devote some energy of ours to collectively make out as to what is the game behind the scene.Hardly our concerns are going to be heeded as to the best of my experience and knowledge, what is purported to be “concept” is going to be reality.Milk is spilt.As it has been happening at least since Aug 2009, there should hardly be any doubt over the ‘concerted’ nature of such an attempt.If we figure out and disseminate this ill-intentional game plan, it will help us to decide the course of our future career decisions (read shifts).If Mr. Sinha can fall prey, is there any hope left…..! Let’s make room for FIIs… … …!

  16. Hi Sadique,

    All the points in the letter are important. On transition period from commission to fee in my opinion at least 8 – 10 years are required only if SEBI starts educating investors immediately. It’s a huge task. Also in my opinion misselling can be prevented by effectively regulating product manufacturers. Like no NFOs from mutual funds for at least 1-2 years, banning existing schemes from accepting fresh subscription until they show at least same performance as their benchmark.

    I think more than anything else advisor’s intention is important whether he /she is MBA,CA , CFP or just a agent.

    Regards,

    Sanjay

  17. AnkurCh says:

    The most important aspect of growing the Financial Planning Advisory is to make the public aware of it. Unless people understand the importance of paying fees for advice, stoping commission with immediate effect might hamper the Advisory profession to grow on fee only. Hence a strong financial literacy initiative should be considered by SEBI. Transition phase should be around 8-10 yrs.

  18. Hi Sadique,

    Great effort.

    Its very dissapointing that SEBi has come out with this concept paper without giving a thought.They should have taken examples from other countries too where these regulations already exist.

    In any country the Financial planning understanding among consumers has itself taken 8-10 years and so should be in India.But you need a drive from the higher ups to make this successful which currently not happening in our country.If SEBI is really interested in a fee base model then i do not see any better model than Financial Planning.

    I hope with our comments and feedback SEBI takes some good steps.

    regards
    jitendra Solanki

  19. abhinav0115 says:

    Hi Sadique

    I think the discussion thread consists of enough of thinking points, but will still mention some below.

    a) As a person starting out in this line, I will like to say that instead of stressing on the fee-only model ONLY, SEBI should allow the advisor to select the fee-only, fee offset, or a commission only model, along with strict and stringent disclosure requirements as to the commissions and conflict of interest.

    b) Something should be specifically forward regarding no mention of CFP qualification: it is shocking, to say the least – CFP should be a qualification recognised.

    c) By minimum infrastructure, does SEBI intend to propose say xx lacs of capital or something(!!). In that case, what about an ethical entrepreneur, who only has a laptop, a cellphone and good intentions to boast of an infrastructure- will such persons have no right to provide sound advice?

    Just a thought…how can SEBI be so insensitive the ground realities, and are we to see a repeat of 2009? …

    Thanks to Network FP and all eminent members for the proposed collective response to this exposure draft.

    Regards
    Abhinav

  20. rahulranjan says:

    Dear Sir,

    I have only one concern, SEBI is going to take such a destructive step towards CFPs and FPSB India is just sleeping and doing nothing in favor of all CFP members!!!

    I request FPSB India to get up and do something for us. It is important other wise no body would like to be CFP in future. And persons who are already CFP will feel cheated because they have invested their time and money for hope of improving professional standards and income.

    Regards,

    Rahul Ranjan

  21. Hi,

    I agree with all the points discussed above.

    We need to look at the investor or client point of view. It will be more convenient for clients to do the implementation part through the planner. If there are any specific product which we do not deal, clients are willing to share the information with the planner before proceeding with the investments. Hence, people should be given a choice to deal with the planner for implementation part. It would be easy for the review.

    Real estate in India is not regulated. But we still recommend clients on purchasing land/flat/house for investment purpose. How can we classify this as advisory or agency related service?

    You need minimum 5 years to establish your profession. So SEBI should provide a longer transition time considering the efforts to be taken by people.

    Regards
    Sridevi

  22. Sandeep Pawar says:

    Hi Sadique,

    I appreciate Network FP’s efforts to put CFP’s side on SEBI’s concept paper.

    I feel SEBI would like to change Indian Financial Service world over night which is highly impposible.

    As all senior member mentioned, both parties (Investor and Advisors) are not ready for this change and hence SEBI should implement this in phased manner than in one shot.

    Thanks for your efforts.
    Sandeep

  23. Hemant Beniwal on Forums

    Hi Sadique,
    I am surprised or say shocked that no one has added a single comment on such an important thing. This is going to decided fate of Financial Planning profession in India.
    If planners or prospective planners are thinking that this is a good initiative by SEBI – they are seriously mistaken.

    Read what Suresh Sadgopan have to Say:
    CFP Certification, warts and all, is still an internationally recognised certification. This course prepares us for Financial Planning & Advisories. Yet, SEBI has chosen to not even mention CFP certfication and has chosen to mention MBA Fin/ CA and others, who are not trained in this area at all. Also, NISM certifications are sought to be recognised rather than CFP Certification, which is unfortunate. This smacks of pushing their course rather than doing what might be actually be good for investors or what is fair.

    Also, the appellation Investment Advice is a misnomer. Financial Planning is far more overarching than just investment advisory. So why do they want to take two steps backward and call us investment advisors. This is a race to the Nadir! We constantly compare ourselves with advanced countries. In US, Financial Planners call themselves just that and can be a fee only, fee + commission, fee offset or commission only FPs. They can also get commissions and incentives. Only that, there should be sufficient disclosure.

    Why do we think we are ahead of US in this regard, where this profession has been there for close to four decades?

    Many agents and distributors have begun to slowly make the transition into advisory model. This regulation, if it were implemented in it\’s current form, will cryo-freeze this transition in it\’s tracks and will ensure that India is just a land of agents / salesmen.

    I have also started a discussion on FPSB India Group
    http://lnkd.in/m5W2RB

  24. Ankur Chakraborty on Forums

    Immediate implementation of this concept paper might affect adversely to the overall concept of Fee Only Advisory. Regulators should provide enough time of say 5-6 years before implementiing complete fee based advisory. Overall the existing IFAs should not be at loosing end. Instead of Implementing immediately SEBI should come up with massive financial literacy programs accross the country and bring awarness among the investors about willingness to pay fees for financial advice. Unless people understand and feels for paying fees this movement can not be a success overnight. Instead it may harm the overall mission of bringing fee only advice. Certification of CA and MBA seems childish because non of these are specifically for this profession. Either mentioning of CFP or CPFA or both would have made more sense. Moreover experience of 10 yrs to seems very high, instead 2-3 yrs relevant experience is enough to have the understandig of the Financial Market and its products.

    No doubt the basic purpose of bringing this concept paper is necessary but should be drafted and brought into place considering various factors and business senses to help grow the Financial Advisory profession.

    One more point is that, instead of creating SRO under SEBI, it would make more sense if SRO is created independed of SEBI,IRDA or PFRDA because an Advisor doesn\’t only do investment advise , but includes all aspects of finance including insurance, pension, real estate besides MF or Stocks or derivative. Making an SRO under SEBI itself is making the whole concept narrow.

  25. Suresh Sadagopan on Forums

    The transition period in my opinion should be between 5-10 years, given the low level of financial literacy in the country and hence the inclination to pay fees for advice, facilitate smooth transition for those who are slowly making the transition to advisory model.

    The regulation is not that easy on the \”Investment Advisors\”. Maintainign records of all advice given to a client is bad enough… maintaining a record for 5 years of all conversations pertaining to advice is virtually impossible for everyone, but the biggest organisations.

    Also the regulation, intentionally or unintentionally, is friendly to big organisations. They are just mandated to have two employees with relevant experience exclusively for this activity. This really leaves out their army of relationship managers who are free to continue in their ways.

    Also, for execution \”they must make appropriate disclosures, clarify the investor is under no obligation to use their services and maintain arms length relationship through creation of chinese walls\”. This essentially means nothing changes for institutions and everything changes for the rest of us !!!

  26. Sridevi Ganesh on Forums

    How can a CFP be called only an \”Investment Advisor\” where we recommend our clients on areas like foreclosing a liability, getting in to a new liability & related. Financial Planning is not just nor a part of Investment planning. It is the other way round. We will degrade ourselves by calling us Investment Advisors.

    CA or MBA finance do not focus on Personal finance. The courses are designed to make the learner to focus on corporate finance and accounts. With due respects to their profession, I believe this is not their domain.

    I really do not understand what the role is played by FPSB India to protect the interests of CFP practioners. CFP is an internally recognised certification, why can\’t FPSB talk to SEBI on this.

    Once the concept paper is out, i strongly believe, SEBI will implement it now or later. Asking for comments from the general public and closing the issue is becoming a formality these days & I really doubt how SEBI will be an exception to this. SEBI and its associates are erudite enough to understand and differentiate the roles played by a Financial Planner & an Investment Advisor. FPSB should take adequate steps in educating general public and governing bodies (if need arises), to differentiate the roles played by a Financial Planner vis-a-vis roles played by CA, Advocates, MBA Finance Graduates in personal finance space.

    CFP is not recognised by GOI or SEBI. A serious point to be raised to FPSB. Rest of the things like Fee or Fee plus commission or only commission come next. The concept paper clearly favours institutions, where they can have one advisor desk & an agent desk in parallel, to sell their products with only 2 CA or MBA at the head office. We need to get FPSB\’s view on this first.

  27. Sujith Nair on Forums

    We are all happy that senior planners have commented on this important topic. It\’s ramification is going to be far-flunged. I am not able to get answers to the following thoughts-

    1) If the same is implemented, banks / institutions will put different sections for advising and distributing. How the mis-selling is going to be curbed. All under one-roof… one section supporting another section…

    2) As sureshsir rightly mentioned where is the transition stage?

    3) Regulatory bodies keep on comparing with UKs regulatory bodies action… Economy, culture, demography etc.. all are different… compare apple to apple… UK regulatory body also given the time frame for the transition…

    4) I can understand that CFP, CFA, CPA etc.. is not going to be recognised in india because our nation always created own degrees in the respective profession. Take the example of CA, ICWA, CS, IMMs, IITs, AIIMS etc.. Does the regulatory bodies have also in mind of creating different indian origin degree for advisors? Doctors also take further degrees of foreign origin to enhance their knowledge apart from indian degrees… patient is only concerned about the cure to the disease and not the origin of the degrees… If the individuals has no objection to the origin of degrees and only concerned about the type of advice and service provided… Regulatory bodies should concentrate on creating the atmosphere for professionals to enter this area to enhance the professionalism and indirectly give impetus to economic/savings/investment climate in our country…

    5) In the current situation is it possible for the inviduals/institution only to survive in distribution of financial products or by just sticking to advisory model? As Mr.Hemant rightly said lets give option to individuals / institution to choose different paths to serve the customers…

    We all can hope that regulatory bodies will understand the ground realities of our country facing…

  28. Prabir Sharma on Forums

    I am not a CFP Certify, But I agree With all of you That MBA Fina/CA Not Eligible For Taken Care Of Personal Finance Issue Of Individuals.I am also agree with SEBI That somehow a mis-selling in financial products by individual distributor.SEBI can Mandatory Of CPFA Of NISM For Distributor.
    Why All Regulation For For Distributors.I have a question is who is important in our industry Clint(consumer),IFA,AMCs. I think Clint(consumer)is most important member in this industry.But they how look his/her Advisor.As a advisor or as a agent.Are they aware about what his/her financial need in his life. Why they more aggressively concentrate on Product Not for Proper planning.So as the first thing Consumer will Aware of his/her financial life & need(Goals).
    Once Majority Of Consumer will aware there is not a issue about Commission & Fees.Everywhere happy with right planning and taking beautiful fees.

  29. Abhinav Gulechha on Forums

    I completely agree with Suresh Sir, and other respected members of the forum on the concept paper.

    Its really surprising how come a proposed legislation, that shall define the way financial planning will work in future, ignore CFP as a qualification.

    Would also be wanting to know whether SEBI has taken views from FPSB India prior to releasing the concept paper?

    Also, it will be very different for starting-out financial planners, as it will be some years before fee-only model becomes a reality!!

    A strong representation has to go either individually/ through this forum to SEBI.

    Thanks and Regards,
    Abhinav

  30. Vivek Sharma on Forums

    SEBI deserves kudos for its move to regulate investment advisory business in India. I am extremely delighted that CFP certification has not been recognised as one of the qualifications required for investment advisory. I have always maintained that CFPs are most incompetent of the lot as far as financial advisory is concerned. I feel that Ministry of HRD needs to be ban CFP certification once for all as this provides an individual for no competency at all. CFP certification is a money generating tool for selected few. I feel that a 10th pass LIC agent is more competent than a CFP. SEBI has done good to include MBAs and not PGDBAs. However to include NISM certification is also unfair, but considering the fact that NISM is a SEBI run institute, it is on expected lines.

    As per me only CFA, CA and MBA from IIMs should be allowed to do financial advisory. Else people have atleast 15 years of experience in financial advisory business in managerial capacity should be allowed. Going ahead all articles in newspapers on financial planning should be banned if not written by above category of people. Also TV programs on financial planning should be subject to the approval of SROs.

    Some people have started looting gullible individuals in the name of fee based financial planning. Some institutes/portals have come up which offer training in the name of financial planning and fool participants. The sole objective of such portals/institutes is to make money. Many institutes have mushroomed which, are offering CFP courses and looting individuals.

    Financial planning/advisory should be brought separately under the purview of CrPC/IPC and people found offering illogical suggestions/recommendations to their clients should be jailed or fined. However, unfortunately SEBI has limited judicial power in this area.

  31. Jitendra Solanki on Forums

    Hi Sadiqque,

    Just to give an idea how well can a country placed regulation like these -Newzealand is a classic example.There everyone including CFPs has to be registered and has to clear a certification exam.There is a code of conduct created in line with CFP code of conduct which each registered advisor has to follow.Once cleared they call it \”Authorised Financial Advisors or AFA\”.See any CFP in Newzealand and you will find CFP,AFA written in front of their name.

    Now what stops our regulator to take a lesson from such regulations.Its very dissapointing to see that our regulator has a love for investments and what has been the cause of so many regulations across financial services, SEBI wants to repeat it now.

    Regulations are good if it can serve the cause. Its high time SEBI should work towards the investors interest in a more thoughtful manner.

  32. Abhishek Leekha on Linkedin

    Yes we definitely want the regulations to change to suit financial planning profession. But being called as Investment Ad visors is also not correct as the meaning of financial planning is totally lost in the word Investment Ad visors.

    What we need to focus here in my opinion is: We should be allowed to built our practice just like the financial planners are doing in the USA wherein one is free to have fee only, combination of fee + commissions etc.

    SEBI should recognise CFP certification.

    Jumping the gun may not be the right approach at this stage. India is still not prepared to pay the financial planners in upfront. People may be ready in metro’s but that again would be very small percentage.

    Would like to know what would be the fate of existing trail brokerages on the AUM’s that one has built over the years in case we opt for being Investment ad visors. This clarification would help in case we think to convert our practice from the current fee + commissions to only fee model.

    As investment ad visors we have only one option i.e. fee. Looks difficult in a non metro city.

  33. Anil Gaur on Facebook

    Most points covered. Only thing to add: What makes CAs and MBAs qualify as investment advisors? Is a CA familier with the concepts of Asset allocation, risk profiling etc? Is an MBA conversant with the behavioral aspect of finance? Of course, many of them are quite familier with the high cost insurance plans. should they not be subjected to specialised courses like CFP, CPFA etc?

  34. […] Sadique Neelgund 17/03/11 Kartik Jhaveri Inter… 38 Comments Kartik Jhaveri 28/03/11 Collective Response … 34 Comments Editor – Network FP 05/10/11 Do it Yourself Vs. H… 27 Comments Sadique […]

  35. No feedback as such..but I just wanted to check a few things:
    Assuming, we hv helped a client make a complete financial plan- who has a disposable income of 25000/- pm…we help him do a liquid sip of 5000/- or emergency funding, 5000 * 3 equity mutual funds for his retirement and his child’s education (which includes 2 tax savers to help him save tax as well ) and the balance 5000/- for his life and health insurance..(he is an moderately aggressive investor)

    6 months later the client comes back and says he has bought a house worth 35 lakhs, for which he has borrowed 25 lakhs housing loan, 5 lakhs from his PF/PPF and wishes to withdraw all his existing mutual funds which amounts to about 60000/-.the balance,.60,000 cannot be withdrawn as he has invested in a tax saver…he stops all his 25000/- of sip and insurance premiums as his EMI is now=his disposable income.. We help him make changes in his existing financial plan- now he has become a very conservative investor as he has nothing to fall back on.

    Another 3 months later, he gets an increment at work and has an additional 10000/- as disposable income..out of which we help him revive his life insurance plan, and start another sip of 5000 in liquid fund- some changes made in the last modified plan.

    Each plan is 2 MB file if saved in a soft copy and about 25 pages if saved in a hard copy..

    I just wanted to check, when SEBI says an investment advisor should retain this for 5 years, what does it mean ? All the 3 plans to be stored for 5 years ? there might be so many dynamic changes in the plan of the client- they may just have another baby which is another change in plan- because of the baby, his spouse who was working decides to quit after 8 months (until then her parents were there with her to take care of the kids) – another change in plan…
    bus itna clarification chahiye tha ..if you can word it and check, please

    Regards
    Jaya

  36. Sanjay Dixit says:

    SEBI concept paper has mentioned about minimum infrastructure for advisors. It should not apply to non-corporate independent financial planners/advisors.

    Once person identifies himself as product agent he should not be allowed to charge any additional fee from investors.

    Sanjay

  37. vinay7 says:

    hi,
    among all suggestions i think MR. Suresh Sadagoppan’s comment are most valid of giving a transition period and educating Indians on importance of financial planning. To all those who say a CA is not capable of financial advisory i want to tell that they are completely wrong as all complex calculations involved in arriving at figures while writing down a financial plan to clients is understood by chartered accountants in seconds and can be explained by them in minutes. As far as having knowledge of various financial investment products is concerned they can easily grasp and obtain that by reading quality books and finance journals available.As of today Chartered Accountants are most competent of the lot as far as advice on finance(personal finance and corporate finance) is concerned in India.

  38. sandeepbhargava says:

    Please ask for atleast a five year transition period during which an initiative for investor education could be launched all over the country.

    Also the existing income of the adviser should be not be barred as the adviser has built up his business over many years. Future business could move to an investor pays only scenario.

  39. Pankaj Singhal says:

    I appriciate your intiative on protecting and promoting interests of Financial Planners. I fully agree on all the points you have included.

    1. Strict Laws and penalties are needed against agents and others posing to be investment advisers
    2. CFP certification should be given a high recognition to practise as investment advisor

    BR
    Pankaj

  40. wealthcareinvestments says:

    1) I think any profession has ethical grounds so one should be self regulated therefore CA/MBA/CFP degree doesnt matter.. Today in many org- CM or MD are not even graduate. This point comes purely from an angle of tier 2-3 cities where the IFA has been in business for yrs and has acquired skills to do business!! or someone who is in metro but has doesnt have PG degree or CFP degree.. How good it is to state that only DEGREE HOLDER IS QUALIFIED and BONAFIDE 🙂 I disagree..

    2) Why this profession(only the MF part) is only attacked severely?? What abt ponzy land schemes/small saving schemes/chit funds ?? Isnt HNI or poor being looted here? who takes responsibility to save those investors or regulate these agents or scheme owners. MF is only product of mass distruction and mis selling??
    3) SEBI should implement the rule WIEffect on large distributors(like Banks/WM outfits/NBFCs as the fixing repsosibilties and regulating them is tough to impossible and should have leniency on IFAs(small or big). This will help small but effecient guys to ADAPT.

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