When it comes to buying a financial product, consumers are largely hesitant and cautious. Their biggest fear is being taken for a ride. This perception is a result of the sales-based advisory approach that has been operating under the garb of ‘hidden pricing’ for so many years. One of the side effects of hidden pricing is mis-selling. The result is that products that should be self-adopted by most people—such as like mutual funds and insurance, given the prevalent need and conducive target market—score abysmally low on penetration. It is wrong to quote the lack of financial literacy among Indian consumers as a reason, since the real underlying issue is lack of right perception about these products.
It’s not enough to say “Mutual funds. Sahi hai”. The industry also needs to welcome the changes that Securities and Exchange Board of India (Sebi) has proposed in its investment advisory guidelines and the fiduciary responsibilities that registered investment advisory approach brings. This will pave the way to enhancing investor confidence.
The industry’s support may be half-hearted, but one can draw a parallel with demonetisation and GST implementation. If the government had asked for ‘industry opinion’ before taking these decisions, such bold policy decisions would have never been taken. Sebi must, however, conduct an investor survey to understand the seriousness of the situation.
