For financialisation of India more advisors, distributors and agents needed

We often make wrong investment decisions based on the advice of our friends and relatives and later regret when the deal turns loss-making. To remove the ambiguity between distributors and advisors, the Securities and Exchange Board of India (Sebi) brought regulations last year proposing that mutual find distributors cannot be advisors and advisors cannot be distributors.

While India has started taking small steps in the right direction, one of the worrying points is the small number of advisors and distributors in the country. In an interview with Mint Rajesh Krishnamoorthy, India head, Financial Planning Standards Board, said India has just around 1,400 Sebi -registered investment advisers and around 2,000 CFP professionals. China has more than 11 times our number and a smaller nation like Indonesia has almost as many CFP professionals.

Similarly, at present, there are only about 1,00,000 mutual fund distributors. Compared to this, life insurance industry looks more promising but still, insurance penetration is low at around 2.82% in the country. Consider this: the number of individual agents associated with life insurers as of March 31, 2020, were 22.78 lakh as against 21.95 lakh as at March 31, 2019. Out of the total 22.78 lakh individual agents, male individual agents form 72.98% and female individual agents are 27.02%.

As we seek to achieve financial inclusion, we need to have more investment advisors and agents reaching out to the remotest areas of the country. Moreover, it needs the effective implementation of the Sebi guidelines. Lovaii Navlakhi, founder, International Money Matters, said “new guidelines aim to bring differentiation between a distribution and advising business. We are registered investment advisors. We have been registered as advisors since 2014. Now as a corporate or a non-individual category, we were allowed to say that we can have clients who decide to pay us a fee and take advice and we are allowed to have a separate division that executes those products. Earlier, there was no compulsion that all those products have to be invested or put into places where there was no earning of a commission. Now it is compulsory that any new investment that I get from an advisory client cannot be into things where I am earning a commission. There are also a bunch of other things like entering into service level agreement with every client.”