On the one hand India has a large population, and on the other hand a big portion of this population is getting well educated – financially too!

Does one look at the size of the middle class, the upper class and the real rich and say “there is a fantastic market for banking products – remember mutual funds, insurance, etc. are part of this….? Or does one say that thanks to the many books, blogs, reviews, people will get more aware and buy only the best products?

Really beats me. The quality of advice that is available to the retail investor – or even the HNI is so poor that only the worst products get sold. So called financial planners can come up with 30 page financial planning action plan without even meeting you! And sadly for most of the customers, ‘More is Good’ ! I recently found a person justifying the fees he paid to a planner saying ‘Oh he gave me such a big report’…I can assure you most of it is a cut paste from a ‘standard output’.

Similarly the quality of mutual funds available – whether debt or equity – is not bad at all. However, they are STILL very, very expensive. Most surprising thing is that no mutual fund house is willing to drop rates to get more business! Out of the 5000 odd schemes that exist if about 4000 were to be shut down, the world would be a better place. The only mutual fund product which is competitively priced is the FMP. This is because the FMPs are the easiest way to increase the AUM. The chase for Assets Under Management -even at the cost of profitability is another employee ego enhancing and shareholder value destroying activity by the Mutual Fund industry.

Similarly in the life insurance industry the best product is a cheap term insurance – and that is a product that the industry is not too keen to sell. What they like to sell is the much more opaque Endowment policy. LIC of course leads the way. The stories that the LIC agents can tell you are amazing – ‘we are helping in building the nation’ , ‘it is a form of compulsory savings’, ‘you get insurance and WEALTH creation in one instrument’………..but the basic question is NOT ANSWERED.

In the brokerage business there is still a lot of money to be made if you are either a small broker or if you are a bank with an online brokerage. How does this happen? Well, whatever SEBI can regulate, they cannot regulate the churn of the portfolio. So brokers will keep churning your portfolio – without telling you the benefits. However the brokerage margins are so low that the big players like HSBC are now getting out of it!

PMS business? well, the less said about it the better, right?

Banking – this is one helluva business! You can charge the customer for a cheque book, cheque bouncing, cheque deposited, cash deposited, …………and what have you. The regulator who cannot improve penetration of banking beyond 10% of the country’s population is happy to protect the sick sector PERMANENTLY.

So now YOU decide – the wealth industry has a great future, right?

To me the answer is YES.

People will continue to lose money in all these instruments but continue to believe that RE appreciation will take care of their wealth for the next 100 years.

RIP honest simple consulting.

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