The greatest topic for discussion in financial circles – especially the elite ones is a) financial literacy and b) financial inclusion. In this article I am about to debunk the ‘financial literacy’ joke that goes around.

First of all it must be understood that any change can come ONLY and ONLY if society wants it, and leaders are willing to do it. Like a upper caste Raja Ram Mohan Roy who spearheaded the anti Sati movement. His OWN community was against him, but he still did it. Or Jyotiba Phule working for the upliftment of women in Maharashtra.

The average investor is happy in his state of bliss and is NOT seeking to become financially literate. Or if he thinks that by passing the exams like the ones conducted by NSE he will become literate, dear dear me, he is up against shit creek.

Let us start at the basics.

1. Who should be interested in financial literacy?
OBVIOUSLY the investor. Well he is not. He is busy watching IPL and T-20 world cup.

2. Who else should be interested in financial literacy?
The regulators like RBI, SEBI, and IRDA. It will mean they will have lesser frauds, and thus lesser headache – well this is what you thought, right?
Hell NO. The more the frauds the greater the work that the regulators WILL BE CALLED to do. More branches, more people, more budget, – see the drift? The regulator is interested in increasing his ‘kingdom’ and is no hurry to reduce frauds, cheating, etc. Unless of course Narendra Modi starts a system of imposing FINES on the bureaucrats PERSONALLY ….well this will not happen.

3. The manufacturers like mutual funds, banks and insurance companies?

Well at a superficial level yes, but if every customer became a Sucheta, Debashis, then the real lucrative products will not sell. So there is a little interest in financial literacy – enough that they come AND BUY financial products (current manufacturers cover about 10% of the population) BUT not too much that he/she ask questions about why, what and whether of a product.

The brokers, the real estate industry etc. are now happy that the REGULATION is not hurting them where it should, so they do not want a very ‘informed’ customer. Imagine a customer asking a broker for a MONTHLY p&l statement where the brokerage is shown separately!

So no the manufacturers do not want it.

4. What about the intermediaries?

Well the intermediaries are of 2 types – banks and IFAs. Banks obviously have no time and are interested in selling a myriad set of products – from loans to pensions. So it is easy to see a bank asking a client to invest in a pension plan which pays 8% while at the same time sell a car loan at 14%p.a. Obviously such games will go out of the window if the customer gets educated. So banks are out.

The IFA is in a precarious position – the client does not know what is the Value Add by the IFA. So there is no element of ‘relationship’ for the client to learn from the IFA.

So who is there to ‘teach’ the common investor the tricks of the trade? WELL NOBODY.

So if a person really wants to be financially literate, he has to learn it himself.

As they say when the need arises, the Guru appears.

Reading Subramoney is a good step towards financial literacy. However you need to realize that at the back end of Subramoney is a fat man trying to improve his fitness, relaxed and having financial freedom to be arrogant, has a terrible equity bias, hates people who do not wish to help themselves. He entertains, provokes, tickles, irritates, ridicules you on financial matters. Amongst all this if YOU can educate yourself, you are welcome. If you do not wish to read, change, accept, please be my guest. As they say in Arabic – Khalli Valli……

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  1. Good worldly wisdom. Always nice to look at what motivates people, where the incentives are. This is hard, since so much public advertisement is meant to camouflage intentions. For example, politicians are incentivized not to serve the country, or improve citizens lives. They are incentivized to seek votes. So they will look at the least painful way to get votes. Today, there are easier methods to garner votes than working hard to develop the country such that the lives of its citizens improve. To predict the behaviour, look closely at the incentives driving the behaviour.

  2. Very true subra.
    But I have a different point for which I would like to know your opinion – if everybody is literate, it becomes situation like no one is literate. Some people make money in MF/direct equity etc because some people loose that money. So, there has to be a different set of people with different level of literacy, only then the market would work.
    Suppose everyone knows company A shares are going up, no one will sell it. For a sale to happen, there has to be a guy thinking it will go up and one guy who thinks it will go down. Isn’t that the case?

  3. And Subra

    I have one more reason to add. SEBI also does not want investors to PAY for financial literacy. All the workshops which AMC’s wants to do in their name , they dont want to charge a penny and still want quality investors to come . Almost everyone in those financial literacy seminar and camps are there to eat good food and take the tshirt or mug . and nothing else

    We have done 1 day workshops and we charged people anywhere from 2,000 to 4,000 and the best investors come there and take back some valuable thing back .

    If customer does not pay for financial literacy, he will never be serious about it .

  4. Manish

    I am yet to see a full paid NO SALES AT ALL financial literacy lecture happening. All the lectures are initiated by somebody with some motive of sales. It is initiated by mutual funds, financial planners with a view to signing up, banks with a view to selling ulips, ONLY my employer initiated a financial planning lecture (on the few of us asking for it). It was a nice HALF DAY session done by a planner – who did not ask us to sign up. Neither did he try to sell us anything. He charged a bomb, I believe – about 48,000 for a full day. In one day he did 2 sessions.

  5. Financial literacy, I think is more than basics.

    There is a fine difference between knowledge and wisdom. Knowledge is the fact. Wisdom is the skill/understanding to use that knowledge for personal gain.

    Any knowledge, for it to be of real use, should become a second nature. For example, I know the way to drive a car, and road rules too. But for me to apply and get benefit from that knowledge, I have to improve it to such an extent that I am fluent in driving.

    Similarly, financial literacy also can be improved to such an extent that it can become a habit. At this level, it will help the person having that knowledge.

    But many people, after knowing/learning some basic rules, consider themselves as literate and start doling out advises. These types will not only harm their listeners but also will be come a problem for themselves in the long run.

  6. Cant agree with you more…you have hit the nail! There are hardly any interested parties…and the change definitely needs to come from the top…which is general public in this case (who are busy watching IPL!!)

  7. Hi, great article on investment. I am a prospective investor and was wondering, is cibil score important for investors as well because it is a dreaded word in the borrower’s community?

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