There have been sweeping regulations affecting financial advisors. While some IFAs have begun to adopt financial planning model, others are finding the going tough. Cafemutual met up with Ranjeet Mudholkar, Director of Finanical Planning Standards Board of India (FPSB), to get his perspective on the role of FPSB in helping IFAs make this transition.
FPSB has reduced the CFP course from three years to one year. What was the reason behind this?
The duration has not been reduced. The exams were held twice a year, and we gradually moved to three times, and now six times a year. The examinations are held live. The robustness of the curriculum remains the same. Our examinations are standardized as per the global platform. The curriculum is frequently assessed by the principal body which is based in US.
We understand that the US financial planning body is keen to adopt some practices followed by you. Which practices they wish to emulate?
Everywhere else in the world only written examinations are held while we have taken the course online. India has ranked as tier one affiliate in the world in financial planning. All our global affiliates came to study our system. They really appreciated it. They are in the process of adopting some practices followed by us. Firstly, they want to adopt our online examination model. CFP originated from US but now they have found our system quite superior. It’s mutual learning. Our systems are much more evolved.
How many students have cleared CFP so far? Are they easily absorbed in the industry?
CFP is cleared on four parameters: examination, education, experience and ethics. There are around 4000 students who have cleared the examination. Around 2000 people are renewing their certificates annually by paying a fee. CFP is a certification programme. It cuts across all age groups and profiles. CFP provides you with the knowledge required to be a successful financial advisor.
We believe that FPSB was trying to get an SRO status from SEBI. Are you still planning to become an SRO?
We are not planning to get SRO status for FPSB. We are trying to advocate bringing an SRO model. There are different qualifications mandated for SRO. The need of the hour is that there should be an SRO no matter which organization it is.
What kind of support and inputs do you receive from your 50 charter members?
We are a body of knowledge about financial planning. Our objective is to establish various epicenters of financial planning. We are a non-profit organization. The media, government, students and education providers are also our stakeholders. All of them should talk a common language. We don’t want a charter member just for the sake of being a member. A charter member should speak the same language which we speak.
Industry experts say that SEBI’s concept paper has many gaps. The concept paper did not recognize CFP as an education qualification for advisors. What are your views? What kind of feedback did you give SEBI on this?
We have submitted a detailed paper to SEBI which is available on our website. It’s just a draft paper now. There was no mention of even an IIM degree in the concept paper. We need to wait for the final regulations.
So far, financial planning is a free add-on value. Very few advisors/firms are charging for it.
It’s more about one’s own conviction and ability to charge. If one advisor is charging that means others can also charge, provided they follow a correct approach. Today, we all pay a fee to doctors and architects and lawyers. Nobody tells us that we need to pay.
FPSB recently started a rating system for financial planners. How has the response been to it?
The rating is not about good, bad, or ugly. It is about the processes and approach towards business. It is good from client’s perspective. Many financial planners have shown interest in getting themselves rated. It helps them improve their own internal systems. You have to be good at whatever you are doing.
Recently, some companies have announced their plans to get into financial planning business. Do you see the competition heating between individual financial planners and large firms?
There are different business models followed by everyone: from boutique planners, distributors, online platforms to full-fledged financial planners. There are clients for all types of players. India is a huge market. There are a lot of opportunities across all asset classes and income levels. Small hotels don’t face competition from five star hotels. Both operate efficiently and have a set of clients to cater to. People will have more choice.
Currently, students have to go to the education providers. Is FPSB planning to bring out its own study material?
We have an option of self-study. We have received a lot of request to develop our own study material. We will certainly like to develop our own modules.
What is the roadmap for FPSB?
We would like to get more students get CFP certificates. We want to spread the word about financial planning across the length and breadth of the country. We do a lot of events to achieve this. It’s a journey. We have started bringing out our journal on a monthly basis which was published on a quarterly basis earlier. We have been trying to organize study tours abroad. We bring international guests in India to share their experiences. We have also undertaken workshops where practicing financial planners come and share their experience.
If we are sick, we see a doctor. How long will it take for people to believe that they should go to a financial advisor if they have problems managing their finances?
We need to understand that a financial planner cannot bail you out of a financial crisis. Advisors can’t do a surgery. People should plan well in advance to avoid any financial crisis.
Your advice to IFAs.
IFAs will need to change their mindset. But, more importantly, they will have to change their entire business model first. Today, businesses cannot be run as they used to be run 20 years ago. One needs to adapt to the changing environment. To adopt financial planning they need the right certifications first.
Your advice to CFP aspirants.
The financial services sector is one of the fastest growing industries in India. As the country progresses a lot of people will need the help of financial planners. There is already a dearth of financial planners. There cannot be anything better than CFP. Financial planning has a lot do with maintaining relationships. It encompasses sociology, psychology and mathematics. It’s a great delight to help people manage their finances better. You make a journey with families and, in the process, help them achieve their life goals. Having financial discipline helps people live life with dignity. It has a direct bearing on people’s positive outlook.
