The Indian financial press loves talking about mis-selling but nothing about mis-buying. Most people who buy financial products do not understand what they are buying. However, this is not a one-sided affair. Luckily (or unluckily) most of the clients do not know what they are buying. You will admit that is a fantastic combination.
Let us look at the forthcoming problems in the Indian financial world:
1. The Ulip mania (in the 1700s it was called the Tulip mania!): All bank guards, clerks, assisstant managers, vee pees were now busy filling up forms for selling them a unit linked plan. In case all the moneys are invested in equities, and the equity market gives negative return for 2 years, at the end of the plan there will be almost nothing left in the plan – no money, no life cover.
2. The mutual funds are cheaper syndrome: If you do not understand financial engineering – and you do not take the trouble to see the charges, mutual funds look cheaper. However over a long period of time you pay MORE than you pay in a unit linked plan. Hey that does not make Unit Linked Plans cheap or good, far from it. IRDA has done nothing to make it a good product. Fund manager risk it too high in ULIPs – because of the cost structure..
3. Cheap loans are available: at the bottom of the pyramid (or say even in the middle!) there are many people who borrow for too many things. The rates at which such loans are available is usurious. Of course the press, the bankers, every body knows it. But is the story worth doing unless the “book” built is at least Rs. 10,000 crores? No way.
Who are the banks who are in the business? You must be joking. Just visit the RBI site.
4. Financial Planning: the latest buzzword for selling homes, credit cards, home loans, life and general insurance, mutual funds, personal loans and of course the plan itself. A nice new business (some even call it a profession) which pays you both ways – you get the client going and coming. Of course this is still an unregulated industry. Some people have a different opinion.
5. Learning from the media: When people in this country think they can “learn” from the media i.e. buy a news paper for Rs. 2 and hope to handle all your investments, or pay Rs. 200 a month for a cable tv and learn “fund management” I guess the joke is on the common man is it not?
Well I may not be around long enough to see the end result of all the above problems but hopefully some reader will comment – ah you said so!
Will I be happy that day? No. If i cannot change something, I should not be writing. Or is that too much to expect? You write cause you like to write, people read for fun. God bless the writer and the reader. Long live the advertiser. God bless the reader who thinks the advertiser is the teacher. Blurred vision I guess.
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