Almost everybody talks about ‘fixing the regulator’ , fixing the “regulator”, or fixing the distributor. I think we will need none of these..if we can fix the INVESTOR!
I finished an IAP and an investor came and asked me “can you suggest any schemes”. I said no. I said you need an independent financial advisor who will be able to help him…
He then said “but you never covered how to pick a good adviser” or “how to make a financial plan”. I said what is covered in such free sessions is decided by the regulator and the fund house, I just deliver.
He said “good lecture, I learnt something…”..but completely USELESS…I don’t know how to pick a fund scheme, I don’t know how to pick a fund advisor, ..so I will go home guilty that I am not investing and feeling foolish that I do not know what to do. I guess it is not changing. Our industry (I man AMFI, The regulators,…etc.) are doing everything….except FIXING THE INVESTOR.
What is there to fix for the investor?
- Legal communication – like offer document, key information memorandum, life insurance documentation should be made simpler.
- Products should be defined as per the duration.
- Even mutual fund forms should suggest “this fund is for a 10 year duration” kind of stuff.
- There should be an online form which the first time investor has to fill in if he is coming direct.
- Questions like “do you have Term insurance of at least 8x your annual income” or “interrupting a SIP could cause a lot loss, did you know that”…are important for the DIY also to tick off.
- An audit of why people withdraw has never been done by Sebi, Amfi, or the various IFA bodies.
- A small test if not a full fledged test may have to be launched.
- Have products available as direct, and in case of complicated products take the IFA sign off saying “I have explained the features…..” from the IFA. Like the life insurance industry does.
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