There are a few things in life that fret you more than a loss you struggle to absorb. That’s precisely what the Banerjees of Delhi encountered. The couple, hovering on their mid-forties, went distraught when they had to sit down and take stock of their finances. For over 15 years of job life, they never bothered much about this, and were largely content with some fixed deposits and insurance policies. A death in the family shuddered them to reality. A quick arithmetic showed that the interest on their savings was just around 4-5 per cent of the principal amount.
With a joint annual income of around Rs 50 lakh and gifted with two children, the Banerjees realised that their financial responsibilities were far more than the time they had. The alarm bells rang.
“We went by the banks where we kept our money,” says Abheek Banerjee. “We never realised that financial products had to be unique, mixed up and tailored to your goals. Besides, even money can be put to work.” Their financial portfolio was full of standard products HDFC Bank, ICICI Bank and Axis Bank pitched to them.
The portfolio didn’t have a health insurance, their investments for the children’s education and marriage were planned without factoring in inflation, there was no option of early retirement, and vacations were a complete miss.
Both Abheek and Priya (names changed) are HR heads at two global multinationals. Their hectic schedules hardly gave them a chance to think of consulting their investments with an expert or even feel the need to do so. They were at a complete loss the day they realised the inevitable reality ahead of them. They didn’t know how to fix the issue.
Santosh Badhei became their Mr Financial Fixit soon after the couple met him through a friend. Two years on, the Banerjees of Defence Colony are much at ease, thanks to Badhei’s quick-fix solutions for their financial needs. Their money is now parked across different instruments – equity and debt mutual funds, systemic investment plans (SIP), fixed deposits (FD), health insurance, and so on. They have also investments made for their long-haul plans and exigencies.
“We are trained to manage human resources, but not financial ones,” quips Abheek, admitting that financial planning is a specialised job and better done by a professional than experimenting. The couple admits they were late, but their financial discipline through the last two years has brought in a remarkable difference to their life.
Like in most things in our lives, the West weighs heavily with India’s financial ecosystem. The emergence of Mr Financial Fixit for looking after personal or family’s financial needs is derived from the West. Mr Financial Fixit is trained to bridge the huge gap between Indian markets and its investors for financial inclusion. He deals in anything finance – from home loans to personal loans and auto loans to savings, insurance, mutual funds and stocks, and so on.
Mr Financial Fixit has different avatars across geographies and the products he services. Your agent for insurance products can be a distributor of mutual funds or a broker for stock markets to someone else. There are some classy identities, too, such as wealth manager or financial advisor. A rising demand for quick-fix solutions for the short to long haul financial planning has fostered the family of Mr Financial Fixit in India through the last five years.
In mutual funds alone, the number of individual distributors registered with Amfi has more than doubled from 50,387 to 1,10,743 between 2015 and 2021 and a good chunk of them come from Tier II and Tier III cities. There are over 22.78 lakh agents in the life insurance space, 5.15 lakh in general insurance and 6.81 lakh in health insurance.
In this country of 130 crore, financial inclusion is still in its nascent stage. Mr Financial Fixits are not only supporting the people’s entrepreneurial journey towards an Atmarnirbhar Bharat but are also making finances easy for common man who are still largely alien to terms like debt and equity and the difference between them.
When it comes to Mr Financial Fixits, there is complete gender neutrality. The brigade comprises both men and women and most of them are midcareer professionals who leave their jobs in banks or non-banking financial companies or somewhere in financial product sales. They usually work individually and mostly on a commission-based model where they receive a percentage of investment as commission. In a price-sensitive country like India, an advisory-based model is still emerging, with less than 0.1 per cent being ready to pay the advisory fee.
The way the Banerjees worked out their financial blueprint for future under Badhei’s guidance, thousands of people trust these Mr Financial Fixits for their life. The involvement of the advisors helped the mutual fund industry clock a four-fold rise in its asset base in the last decade and two-and-a-half-fold growth in the last five years.
Demonetisation has also been a big growth driver for the industry. It led to fresh inflows, especially into equity funds. Investor education initiatives by the industry and focussed campaigns such as ‘Mutual Fund Sahi Hai’ by Amfi made SIP the new buzzword in the industry. The SIP contribution has been rising at an astounding rate from Rs 43,921 crore in 2016-17 to Rs 1,00,084 crore in 2019-20. The industry has around 3.21 crore active SIP accounts and 9.10 crore folios as of May 2020. The folio count has been rising continuously on a month-on-month basis and is yet to see a fall in the last six years.
The Association of Mutual Funds in India (Amfi) is a self-regulatory organisation (SRO), a trade body of the mutual funds industry in India. “Individual mutual fund distributors provide the last-mile connectivity and represent the AMC in front of the client. They interact regularly with their clients and their clients trust them since they know them personally,” says Amfi chief executive NS Venkatesh. “It is because of the support of this network of mutual fund distributors that the industry has been able to almost double its investor count from around 1.2 crore unique investors in April 2017 to over 2.3 crore unique investors in March 2021.”
In a country of 50 crore PAN Card holders, the mutual fund industry has a wider potential to add more investors over the coming years and the individual mutual fund distributors will be a key constituent in that.
“This growth has come from your Mr Financial Fixits only and they should be credited. If you see the penetration of financial products, Tier II and Tier III cities are performing really good as compared to what it was five years back and it is these Mr Financial Fixits who are putting people’s money to work,” says a market expert, requesting not be identified.
Of course, everyone may not be as fortunate as the Banerjees. Sometimes people fall prey to mis-selling by their advisors. In the existing commission-based model, a percentage of the investment in an insurance policy or a mutual fund goes to the facilitator. And, the facilitator may choose to sell a product that would fetch higher commission to him but may not be the ideal solution to a particular buyer. Such a deal drains the investor’s wealth and may even put the capital at risk. “Till a revenue model is evolved for Mr Financial Fixits, mis-selling cannot be ruled out,” says the expert who chose not be named.
Swank offices, costly cars and lifestyles make a difference among Mr Financial Fixits. For LIC agent Ramesh Tiwari in Delhi, a fast rise in lifestyle cannot escape the attention of people who have known him for long. From a two-room rented accommodation in 2000, he has moved to a villa in the upscale Punjabi Bagh neighbourhood. Riding on his success in the role of Mr Financial Fixit, Tiwari extended his profession to his family members and got his wife and daughter into the trade as LIC agents.
In between the good, the bad and the ugly sides in the life of Mr Financial Fixit, there’s a taboo that comes as a major hindrance for them as well as for the success of financial inclusion. These agents or distributors or brokers are often perceived more as an intermediary than a facilitator.
“This shaming of distributors has to stop. The qualification and accountability can go up if there is respect for this community. If we badmouth each other, why will anyone trust either? They will invest on their own. Right or wrong, whatever. Moreover, if they have a bad experience initially, they will swear off this product, which is not good for anyone. When investors invest through advisors or distributors, they get educated, they have meaningful conversations, and can be at peace,” says Shweta Jain, a Mr Financial Fixit from across the gender divide. Shweta’s success in the trade helped her set up Investography, an investment consultancy firm in Bangalore.
With the importance of financial advisors spiralling over the last few years, an organisation has come up to certify and educate the facilitators. Financial Planning Standards Board Ltd (FPSB) produces Certified Financial Planners (CFP) equipped with certification and training.
“The Certified Financial Planner credential is the most desired and respected global certification for those seeking to demonstrate their commitment to competent and ethical financial planning practice. With its recognition in more than 27 territories around the world, it provides an opportunity to join a global network of more than 192,000 CFP professionals committed to putting the clients’ interests first,” says an e-mailed statement from Rajesh Krishnamoorthy, who has been appointed as the country head of Financial Planning Standards Board Ltd.
Krishnamoorthy agrees that the role of the facilitators will become that of the pure-play financial advisors in another 5-10 years in India’s evolving financial ecosystem. “I believe that with the emergence of newer regulations like account aggregator, for instance, by the RBI, the ability of financial planners to connect with their clients at multiple moments across the financial journey, provide highly personalised content, and review financial plans in an iterative and collaborative manner, the market maturity opportunity can take the world by surprise,” says the statement.
The Banerjees of Defence Colony were fortunate to find the right Mr Financial Fixit. But that’s not the same for everyone. Aggressive, often spurious, marketing campaigns snack on the wealth of the more gullible. There’s always a risk in choosing the right advisor and getting the best suggestion.
With social media and instant messaging coming up as a way of life, platforms like WhatsApp and Telegram are being used for advertising and marketing. Almost every day we receive several messages like ‘Premium Stock Cash: Buy XYZ Ltd above Rs xx, Target Rs xxx. (in Two weeks)’ or ‘Jackpot Stock Tips: Buy ABX Ltd above Rs xx, Target Rs xx ++, SL (stop loss) Rs x’ or Multibagger Buy: LMNO Ltd (BSE code: xxxxxx) For Non-stop target of Rs 250-350 till June 2021. It is up from Rs 33 to Rs 96 during January 2021 to March 2021. Buy 5,000 Qty’ or ‘Live Call: Buy Bank Nifty @ current level @ 80-100, single target: 240++’ or ‘(BTST Call), Do not miss call. Join India’s only stock market channel and earn every day 5K to 50K sure shot. Download Telegram and click on the link below, 100% free’.
The sources of such campaigns are always unscrupulous. There are many self-styled expert traders and advisors who mushroom in a bull run. They keep bombarding investors with such messages, emails and phone calls. These are from unknown companies and non-metro locations, whose sole objective is to capitalise on the market frenzy. “Beware of such outfits; they will disappear when the tide turns,” says the market expert.
Retail investors new to the field, the small ones in particular, tend to get swayed by the such campaigns and eventually fall victim of what is known as FOMO or the Fear of Missing Out. Statistics suggest that most people buy more at higher valuations and then sell at lower valuations, acting on the tips from such night operators.
“Investors must stick to asset allocation and regular profit-booking. This is easier said than done, but that’s the key to successful investing, after all. Markets are going through hyperactive volatile phase now. Investors should be more vigilant in such times taking fresh positions in any stocks. Any decision to buy a stock should pass through strict checks. Following gut or random recommendation will eventually lead to losses,” alerts Bhavesh D Damania, the founder of Wisdom Edge Investments, an Amfi-registered mutual fund distributor in Mumbai.
Asset allocation can be complicated at times to ensure the best returns and one needs an adept distributor to do the job. “Investing is a process that’s both a science as well as an art. The distributor not only provides timely and right insights and analytics, but also helps in providing psychological guidance to the investors in good and in bad times, and hand-holds the investors, in all market cycles,” says Rushabh Desai, a Mumbai-based Amfi-registered distributor.
Desai keeps his investors’ equity and debt portfolios separate. This helps protect the investor from market risks such as the one that saw the markets crash in 2020. “I believe timing the equity markets is very important to help investors generate higher alpha in the long run. During last year’s market crash, I encouraged many of my investors to pour in lumpsum amounts, which led them to make huge money as on date. Hand-holding and sticking to the principles of asset allocation help investors stay invested through the crash,” he says.
Sometimes people invest in an exhaustive number of mutual fund schemes that leads to overdiversification. In such a scenario the investors are usually unaware of their disbalanced allocation at funds and asset class level. This obstructs optimum returns. Possession of low-rated debt instruments often put their fixed income at risk, and unwanted high-commission products may invite risks.
Mr Financial Fixit may also have innovative quick-fix solutions for life beyond finance. Through his regular interactions, Badhei has probably passed on his wanderlust to Abheek and Priya. And, they found the best solution to rejuvenate themselves. The Defence Colony duo is now waiting eagerly for the Covid-19 crisis to stub out for their second honeymoon to East Europe.
Buy, Provoke, Sell, Make Money!
The way the spurious operators spread tips to buy and sell stocks is simple.
Regulations Against Fraudsters
Mis-selling is is akin to forgery. There are regulatory provisions to deal with such malpractitioners. Sebi’s regulations on Prohibition of Fraudulent and Unfair trade Practices, known as Sebi FUTP Regulations comes into play to deal with such frauds.
Sebi has a separate set of rules to deal with mis-selling with respect to selling of financial products like MF units and advisory services. It has drawn a clear line between selling of financial products and providing advisory services for such products. It has been made amply clear that the person who distributes financial products cannot provide advisory services and vice-versa.
The regulator has also capped the fees for providing these two different sets of services. Sebi has taken such decision in an attempt to curb mis-selling and protect investors. An entity can provide either advisory services or distribute financial products to a client. A client has been defined as a family that includes dependent spouse, children and parents.
Sebi has set enhanced eligibility criteria to register as an investment advisor, including enhanced net worth and qualification requirements. It has also capped the advisory fees at 2.25 per cent of assets under management or an absolute amount of Rs 75,000 per annum. The fee can be charged for up to two quarters at a time and cannot be fully charged upfront.
Selling is Not the End of the Job
It’s not always mis-selling that leads to an ordeal for the consumer of financial products. Even inefficiency of the facilitator or the intermediary can drive one into prolonged harassment. I knew this lady living in the neighbourhood for ages. She was an LIC agent, selling life insurance policies to support her family financially. After months of coaxing, she finally succeeded in making me convinced to buy from her.
I bought two policies back to back around 2013 with a total annual premium of around Rs 20,000. I had opted for the annual plan because it seemed convenient for me then. After three years, with more financial commitments being added to the list, I found it difficult to make this one-time payment. When I called on her, she readily offered to convert it into monthly electronic clearing system (ECS), which seemed fine to me.
She wanted 15 days to resolve the matter but there was no development at all. I kept following it up with almost every day because my premium due date was coming close. She started avoiding me after a couple of months. When I realised that it was beyond her reach, I visited the local LIC sub-office.
The LIC sub-offices only receives documents and sends them to the main branch where decisions are taken. I came to know from the sub-office that my agent had faltered in filling up the form. Based on the advice from an officer there, I filed a fresh application. Then one more and one more. I filed three applications for conversion of premium format within four months, yet, nothing happened. When I was on the verge of surrendering the policies, I had an opportunity to meet the branch manager. He advised me to write to them seeking rejection of all my earlier applications and continue with the annual plan. He suggested me to open recurring deposit accounts for the two policies and deposit the EMI amount there so that it would not be a burden on me at the time of the paying the premium.
The LIC agents enjoy their commission as soon as a product is sold but they rarely offer you the service that you may need along the years of journey.
Journalist, based in Mumbai
It’s Not a Wild World of Fight for Survival
In 2008, I was fresh into the corporate world. The new environment, higher pay structure, and interactions with people comfortably placed in their life made me interested in savings. I knew nothing about the equity markets and mutual funds.
I met this financial advisor through a colleague. I wanted to invest in a product that would give me a handsome return after five years. That was all that I knew. This man gave me an example of somebody who had invested Rs 60,000 for five years but called it off after three years. He suffered some losses yet he could take home more than Rs 1 lakh. The advisor worked out a strategy for me: pay Rs 2,000 every month for five years. He prescribed a Ulip policy and assured me that even if the markets were battered, I would get around Rs 2 lakh at the end of the term.
I never tried to track my investment and went on making my payments without a single default. When the term ended, I was handed down Rs 95,000 as against an investment of Rs 1,20,000. When I enquired, the advisor deadpanned, “If the markets crash, what can I do?”
On my next call, he cited another example, where a man had invested Rs 60,000 and received only Rs 30,000 after maturity. He advised me to be content with the fact that I was more fortunate.
A couple of days later, his senior called me up. He began with an apology and then asked me to invest Rs 100,000 afresh for five years because he had the “ideal policy” for me where he would pay the last three installments from his pocket.
I never went back to the markets because the service I received made me feel that one must have an in-depth understanding of equities and derivatives and all other things playing in the markets before investing. And I am yet to learn the trick of the trade.
Praveen Kumar. G
Graphic Designer, based in New Delhi
With inputs from Himali Patel