M Sahoo, Renuka Sane
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Financial distribution, where the distributor
is the agent of both the product provider and the
customer has been found to inherently work against
the interests of customers, in the form of high
service fees and perverse incentives in sales
practices. This paper proposes segregation of
financial advice from financial distribution. It
proposes a Financial Advisers Bill, 2012, to
promote the development of a market for
advice. The Bill suggests that financial advisers
be recognised as professionals and be regulated
under a new statutory body called the Institute of
Financial Advisers of India. The paper suggests
that regulation of distributors continue to remain
under the purview of product regulators. It
outlines alternative models in which the
distribution market may be organised. It also
points out that the Ministry of Finance and the
Financial Stability and Development Council need
to play an active role in co-ordinating the
setting of common standards for distribution
across all product regulators. |