BackSuper regulators can take integrated view on financial services
We look at a client holistically across products and a super regulator can do that too.
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Financial Planning Standards Board (FPSB) is a non-profit association that establishes, upholds and promotes worldwide professional standards in financial planning. Its Indian associate, FPSB India, locally offers the certified financial planner qualification for professional financial planning. Noel Maye, FPSB’s CEO, was in Mumbai and spoke to Mint Money about the challenges faced in the industry and the need, now more than ever, to rely on professionals for comprehensive financial planning.
In India, financial planning is at a nascent stage. What about other developed countries?
We are in 24 countries. While in some, there is a large independent population offering this service and in others, people come through firms such as banks and insurance companies. India has a strong entrepreneurial culture, hence the opportunity exists in financial planning through firms and through independent advisors (IFAs).
Traditionally, we have focused on a competency certification that prepares individuals to deal with clients, but I am not sure that we have done as much to help them establish a successful financial planning set-up, which is an opportunity for us, especially as the regulatory environment here starts to split product and advice.
The IFA segment here faces a roadblock in terms of getting a client to agree to paying fees. Is that a trend globally as well?
That’s a fundamental issue as we develop and promote financial planning in each of the new markets, but it actually comes down to price and value. Value is on two sides: the financial planner has to truly believe that the service has chargeable value and as consumers are we willing to pay for this advice. One of the stumbling blocks is that while consumers have always paid, the cost was not visible earlier. And the way the market got built up, it was okay for service providers to not say what the product cost was. Regulators are now saying that financial services providers didn’t serve consumers well as there was no transparency.
People will pay. In India, people pay for accounting and legal and medical advice. But first they need to value it and understand there is a community of professionals who also value what they are providing.
Regulatory framework here is moving to a more consumer centric approach and also trying to make the distinction between distribution and advisory, but should regulation decide what the advisor should charge or should it be left to the client after full disclosure?
I think there is an opportunity for negotiation between a lot of parties—regulators, professional associations and the market. The fundamental principle and the thrust of the regulation are excellent and as a professional body we fully support that.
Yes, informed clients, who can differentiate between kinds of advice and products, should be able to choose what they want to pay for. It’s hard to say that commission is bad and fee is good. There are some environments where lines are blurred. Also, I personally feel it is a simplistic argument to equate a compensation type with guaranteed ethical behaviour.
Part of the problem is also the number of regulators. How complicated does that make training under your program?
To some extent, when financial planning first emerged, regulators were “siloed". There was an insurance regulator, banking regulator and so on and they hardly spoke (to each other) and also the products and services they provided were distinct. Over a period of time, we have seen that the products and services are starting to merge. When it comes to financial planning also, the process for a financial planner cuts across different products. There are some complementary aspects for the planner and the regulator in the traditional set-up, where the planner is more concerned about the professional aspects of planning and the product regulator focuses on the licensing and other tools for buying and selling.
What we find now is that super regulators can really move more effectively to take a more integrated view on financial services. We look at a client holistically across products and a super regulator can do that too, so it makes for easier conversation between us.
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