Financial Planning Industry In India
India is one of the emerging markets across the world. It is reaching new highs daily, be it technology, infrastructure development, or its financial markets. India always had a high savings rate when it came to investments/savings but it was limited to securing cash flows in the perceived secure fields like - Gold, Real Estate, bank savings, and others. Very few had the heart to invest in Indian equities. These tables are turning slowly; if you look at recent figures, our mutual fund industry is growing by leaps and bounds. The AUM (assets under management) of the Indian Mutual Fund industry has grown from Rs. 3.26 trillion as on 31st March, 2007 to Rs. 19.97 trillion as on 31st July, 2017. This is a remarkable more than six fold increase in the last 10 years.But,what are these investments without proper planning.You can easily compare non-planned investments to a dart game where each dart is thrown to a dart board but it never hits a bulls eye. It is only when investments are done and managed with proper financial planning that they achieve the life goals hence creating clarity and adding direction to one’s investment portfolio. Financial Planning is an on-going process to meet your life goals with proper management of your finances. It is already a big industry in developed nations with people knowing its value. In India, Financial Planning is still at its initial stage of development.
Let’s discuss the major challenges this industry faces today.
Investor Awareness: As per global financial literacy survey done by Standard & Poor,only 24 percent of the Indians are financially literate. That means 76 percent of our Indian population is not aware of even basic financial concepts. And then there is our blind faith towards real estate and gold. Without realising how time consuming and mind boggling these modes of investments are, we still continue to own them and buying more of them. There is very little awareness
about concepts like asset allocation,risk profiling, financial planning, and others. Government has already set up National Centre for Financial Education(NCFE)to create financial awareness across various sections of the population.
Trust Factor: Since ages, Indian investors have suffered avoidable losses due to misselling either in their insurance schemes or mutual funds while the people they trusted(agents)gained the maximum through commissions. And now, these investors are wary of trying out any investment other than Post office savings scheme or Bank FD’s. It has become difficult for an individual investor to believe in financial planning as a concept because it asks for long term commitment from investor’s ends. Through financial planning, an advisor ensures that his clients meet all their financial goals well in time and also create alpha returns through proper money management. But,one year is too short a time to evaluate the success of a financial plan. One has to be patient,and financial planners need to educate their clients on this. If you plant a tree today will it begin yielding fruit from next week?
Changing Regulations: Since this Industry has been exposed to various misselling activities, Securities and Exchange Board of India’s(SEBI)main motive is to remove these malpractices and bring ethical advice based system to this industry for investors' better interest through various regulations. In long run, these regulations will be good for both the investors and this sector, but in the short run, it is creating chaos all over. This is a difficult task when it comes to implementation, and we can see the effects of the same in the Industry.
FinTech Evolution: Financial industry is changing at a very fast pace. Innovation in FinTech companies is changing the landscape and redrawing the boundaries. There are new business models in place which claim to operate on lower costs, hence saving substantially on investor’s money. Customers are getting attracted to these new non traditional online modes of investment as it makes their lives easier with no paper intervention and mobile friendly applications. Most of the Financial Planners have shown their uneasiness towards online platforms and believe that financial planning is a very customized process, the success of which highly depends on the quality of interaction between planner and the client. But due to online availability of all the products, expectations on the service and innovation levels have changed dramatically. We no longer wish to wait for weeks to get our things done. As per a research report on‘Global FinTech Report:2017:FinTech's growing influence on financial services’by PwC, 67 percent of the industry incumbents acknowledge that these FinTech’s post a threat to their business.
The success lies in merging both fin tech and conventional financial planning practice.
Most of the Financial Planners have shown their uneasiness towards online platforms and believe that financial planning's success highly depends on the quality of interaction between planner and the client
Trust Factor: Since ages, Indian investors have suffered avoidable losses due to misselling either in their insurance schemes or mutual funds while the people they trusted(agents)gained the maximum through commissions. And now, these investors are wary of trying out any investment other than Post office savings scheme or Bank FD’s. It has become difficult for an individual investor to believe in financial planning as a concept because it asks for long term commitment from investor’s ends. Through financial planning, an advisor ensures that his clients meet all their financial goals well in time and also create alpha returns through proper money management. But,one year is too short a time to evaluate the success of a financial plan. One has to be patient,and financial planners need to educate their clients on this. If you plant a tree today will it begin yielding fruit from next week?
Changing Regulations: Since this Industry has been exposed to various misselling activities, Securities and Exchange Board of India’s(SEBI)main motive is to remove these malpractices and bring ethical advice based system to this industry for investors' better interest through various regulations. In long run, these regulations will be good for both the investors and this sector, but in the short run, it is creating chaos all over. This is a difficult task when it comes to implementation, and we can see the effects of the same in the Industry.
FinTech Evolution: Financial industry is changing at a very fast pace. Innovation in FinTech companies is changing the landscape and redrawing the boundaries. There are new business models in place which claim to operate on lower costs, hence saving substantially on investor’s money. Customers are getting attracted to these new non traditional online modes of investment as it makes their lives easier with no paper intervention and mobile friendly applications. Most of the Financial Planners have shown their uneasiness towards online platforms and believe that financial planning is a very customized process, the success of which highly depends on the quality of interaction between planner and the client. But due to online availability of all the products, expectations on the service and innovation levels have changed dramatically. We no longer wish to wait for weeks to get our things done. As per a research report on‘Global FinTech Report:2017:FinTech's growing influence on financial services’by PwC, 67 percent of the industry incumbents acknowledge that these FinTech’s post a threat to their business.
The success lies in merging both fin tech and conventional financial planning practice.
