Posts Tagged ‘financial advisors’

IRDA Shot-Downs FINWEB Proposal :)

Irda has rejected FINWEB's proposal :)

Irda has rejected FINWEB's proposal 🙂

IRDA, the insurance regulator has rejected a proposal to register all financial advisors with the Financial Well-Being Board of India (FINWEB).

FINWEB is an agency to write rules on the common minimum standards for over 3 million sellers of insurance, pension and mutual fund products.

The proposal was aimed to protect interests of 188 million investors in the country.

🙂

In addition, it features in a consultation paper of a panel set up by the High Level Committee on Financial Matters (HLCCFM), an apex forum for financial sector regulators.

🙂

The IRDA has powers at present to license insurance agents and brokers.

The proposal is being interpreted as a back-door entry for FINWEB to take over this function.

Besides, FINWEB will also have a self-regulatory arm to bring all financial advisors under one common standard going by the consultation paper on ‘minimum common standards for financial intermediaries and financial education’.

🙂

But the IRDA has opposed any new arrangement to create a new architecture for financial sector advisors.

IRDA Chairman was quoted as “The mandate of the insurance regulator is to find the fine balance between the duty to regulate, promote and ensure the orderly growth of the insurance business, re-insurance business and protect the interests of policy-holders.
The insurance regulations have achieved this balance”.

🙂

Sebi’s Another Jolt to the Fund Houses – MF Exit Load for 1st Year !!

MF Exit Load Charges


Within weeks of shaking up the mutual fund industry by abolishing entry load in all schemes and moving to a uniform exit load regime, Sebi has given another jolt to the fund houses.

😉

The Securities and Exchange Board of India (Sebi), in a meeting with mutual fund heads, has recommended that the tenure for charging of exit loads be made uniform at one year.

This move is seen as Beneficial for Investors.

🙂

Sebi suggested fund houses to move to a regime of charging exit loads only for the first year of investments.

🙂

After Sebi mandated that all entry loads should go and exit loads should be uniform across-the-board, fund houses had gone into a rejig mode with their finances so that they could compensate MF distributors.

The change in the compensation structure was done with the assumption that exit loads could be there for perpetuity.

But “the recent Sebi suggestion on exit load has sent all those changes to the compensation structure for a toss,’’ said a top official at a fund house.

😦

The Sebi chairman C B Bhave advised that increasing the exit tenure beyond a year would not be in keeping with investor interest.

🙂

MF industry officials said that limiting exit load to a year could lead to increased inclination among investors to move out of a scheme if the returns over one year are good.

😦

Earlier, as part of the rejig exercise to change the compensation structure, a host of fund houses had increased exit load period.

Now if Sebi’s advice becomes a rule, all those will have to be reversed, industry players said.

🙂

However, as the CEO of a fund house pointed out that so far Sebi has not come out with any formal letter. “It’s still evolving. I believe a lot of things can happen before it is formally notified,’’ said the fund house CEO.

🙂

Within weeks of shaking up the mutual fund industry by abolishing entry load in all schemes and moving to a uniform exit load regime, Sebi has given another jolt to the fund houses.

The Securities and Exchange Board of India (Sebi), in a meeting with mutual fund heads held on Tuesday, has recommended that the tenure for charging of exit loads be made uniform at one year.

In a late evening meeting on Tuesday, Sebi suggested fund houses to move to a regime of charging exit loads only for the first year of investments.

After Sebi mandated that all entry loads should go and exit loads should be uniform across-the-board, fund houses had gone into a rejig mode with their finances so that they could compensate MF distributors.

The change in the compensation structure was done with the assumption that exit loads could be there for perpetuity.

But “the recent Sebi suggestion on exit load has sent all those changes to the compensation structure for a toss,’’ said a top official at a fund house.

“Our capacity to pay to the distributors will reduce substantially,’’ said the head of a local fund house.

“The Sebi chairman C B Bhave advised that increasing the exit tenure beyond a year would not be in keeping with investor interest,”

MF industry officials said that limiting exit load to a year could lead to increased inclination among investors to move out of a scheme if the returns over one year are good.

Earlier, as part of the rejig exercise to change the compensation structure, a host of fund houses had increased exit load period.

Now if Sebi’s advice becomes a rule, all those will have to be reversed, industry players said.

However, as the CEO of a fund house pointed out that so far Sebi has not come out with any formal letter. “It’s still evolving. I believe a lot of things can happen before it is formally notified,’’ said the fund house CEO.

Consumer Confidence In India?? Excellent & On Upswing ;)

Indian COnsumers Most Confident

Despite below average monsoon, INDIA has emerged as the second most optimistic nation across the world in terms of consumer confidence level.

Majority of people have expressed their positive opinion about job prospects, personal finances and their willingness to spend in the next 12 months. 🙂

A survey conducted by global consultancy firm Nielsen throws light in this regard.

🙂

According to the survey, consumer confidence in India is on upswing, registering a 13-point rise to 112 index points in the second quarter, second only to Indonesia (113 points).

🙂

“The recent elections in India have had a positive effect on Indians’ sentiments towards its economy.

With the UPA government back in power for the second-term, consumers are more confident that political and policy continuity will help recover the Indian economy,’’

🙂

The consumer confidence in India witnessed an uptrend on three parameters—

Job Prospects,

Personal Finances and

Willingness to Spend.

🙂

In terms of job prospects, Over half of Indian consumers are optimistic that job prospects will either be excellent (13%) or good (55%) in the next 12 months.

India ranked second after Indonesia in this regard. 🙂

🙂

When it comes to spending habit, about 4% Indians think this is an excellent time to buy the things they want and need, and 39% think it is a good time to buy things.

🙂

Regarding personal finances, Indians are the most optimistic globally as about 9% of Indians think their personal finances would be excellent in the next 12 months and 65% consider they would be good.

🙂 😀

“A stable economy has refurbished Indian outlook on the job market and their personal finances. Indians are relaxing their hold on money and are spending more than they were willing to spend in the last eight months,’’ an expert from Neilsen quoted.

🙂

However, more or less consumer sentiments are positive all across the world, with the Global Consumer Confidence Index, rising to 82 points from 77 points in March.

😀 🙂

Despite below average monsoon, India has emerged as the second most optimistic nation across the world in terms consumer confidence level, with a majority of people having bullish opinion about job prospects, personal finances and their willingness to spend in the next 12 months, a survey conducted by global consultancy firm Nielsen, said on Tuesday.

According to the survey, consumer confidence in India is on upswing, registering a 13-point rise to 112 index points in the secondquarter, second only to Indonesia (113 points). “The recent elections in India have had a positive effect on Indians’ sentiments towards its economy. With the UPA government back in power for the second-term, consumers are more confident that political and policy continuity will help recover the Indian economy,’’ The Nielsen Company associate director (consumer research) Vatsala Pant said. The consumer confidence in India witnessed an uptrend on three parameters—job prospects, personal finances and willingness to spend. In terms of job prospects, India ranked second after Indonesia. Over half of Indian consumers are optimistic that job prospects will either be excellent (13%) or good (55%) in the next 12 months.

Regarding personal finances, Indians are the most optimistic globally as about 9% of Indians think their personal finances would be excellent in the next 12 months and 65% consider they would be good.

“A stable economy has refurbished Indian outlook on the job market and their personal finances. Indians are relaxing their hold on money and are spending more than they were willing to spend in the last eight months,’’ Pant said. When it comes to spending habit, about 4% Indians think this is an excellent time to buy the things they want and need, and 39% think it is a good time to buy things.

Globally consumer sentiments are positive, with the Global Consumer Confidence Index, rising to 82 points from 77 points in March.

Shape your child’s future through MF investment

child investement plans

Retirement and children’s education are the biggest worry of young parents in metros these days. 🙂
Financial advisors say most queries they receive are related to these two crucial issues.

It is rare to find a parent who hasn’t thought of or bought a children’s insurance plan.

🙂

Children’s education is one of the top priorities of urban couples these days. They rightly believe education will be a costly affair, especially if the kid wants to study abroad.

However, when it comes to planning for the event, only some get it right. Most people buy the wrong products without realising that they won’t be able to achieve their goals.

Wrong products may range from fixed deposits and public provident fund to insurance plans.

Interestingly, these experts are unanimous that the equity route, especially via mutual funds (MFs), is preferable to fund the child’s long-term needs.

🙂

We get long queries from parents who want to plan for their children’s future. Though many people opt for insurance products, there are several others who go for mutual funds,’’ says an expert.

“We ask them to take the equity route generally if it is a newborn baby or a very small child. This is because they can benefit from the possibility of higher returns and power of compounding during the accumulation phase,’’ he adds.

🙂

There is a number of schemes in the equity domain. How does one go about it?

For example, you have the option of large-cap funds, mid-cap funds, diversified schemes, index schemes, sectoral and thematic schemes among others under the equity umbrella.

A diversified large-cap scheme is also recommended. One should also avoid thematic schemes that may not last longer as we are talking about 15-20 years here.

🙂

Other experts too advocate index schemes as an option for novices in the stock market.

Since many of these young parents don’t have the experience of investing in stocks, they can go for index schemes with low tracking error (the difference between the index and scheme’s performance) and lower cost.

🙂

Index schemes invest in stocks that form a particular index, that too in the exact weightage each stock has on the index. It is a passive form of investing and considered a cost effective option.

🙂

There are a few things experts want you to remember while investing for children.

🙂

One, always pick up a scheme that has been around for at least five years and been a consistent performer during bull and bear phases.

Also take the money out of equity investments and park it in a safer avenue at least three years before the actual event.

Once you have accumulated the corpus, you should focus on preserving it till the actual event.

You can use the entire corpus if you have to make lump sum payment or use the proceeds from it to fund regular fees.

🙂

Child’s higher education is top priority for urban parents.

Many parents rely on wrong products to achieve the goal.

Equity route is considered best if you have at least 10 years.
You can consider investing in diversified equity scheme or index scheme

Make sure you are picking up a consistently performing scheme.
Transfer money to safer avenues three years before the actual event.

🙂

Retirement and children’s education are the biggest worry of young parents in metros these days. Financial advisors say most queries they receive are related to these two crucial issues. It is rare to find a parent who hasn’t thought of or bought a children’s insurance plan. “Children’s education is one of the top priorities of urban couples these days. They rightly believe education will be a costly affair, especially if the kid wants to study abroad,’’ says a wealth manager, who doesn’t want to be named. “However, when it comes to planning for the event, only some get it right. Most people buy the wrong products without realising that they won’t be able to achieve their goals,’’ he adds. Wrong products may range from fixed deposits and public provident fund to insurance plans. Interestingly, these experts are unanimous that the equity route, especially via mutual funds (MFs), is preferable to fund the child’s long-term needs.

“We get long queries from parents who want to plan for their children’s future. Though many people opt for insurance products, there are several others who go for mutual funds,’’ says Hemant Rustagi, CEO, Wiseinvest Advisors, a wealth management firm. “We ask them to take the equity route generally if it is a newborn baby or a very small child. This is because they can benefit from the possibility of higher returns and power of compounding during the accumulation phase,’’ he adds.

There is a plethora of schemes in the equity universe. How does one go about it? For example, you have the option of large-cap funds, mid-cap funds, diversified schemes, index schemes, sectoral and thematic schemes among others under the equity umbrella. “I would recommend a diversified large-cap scheme. One should also avoid thematic schemes that may not last longer as we are talking about 15-20 years here,’’ says Rustagi. Other experts too advocate index schemes as an option for novices in the stock market. “Since many of these young parents don’t have the experience of investing in stocks, they can go for index schemes with low tracking error (the difference between the index and scheme’s performance) and lower cost,’’ says the wealth manager. Index schemes invest in stocks that form a particular index, that too in the exact weightage each stock has on the index. It is a passive form of investing and considered a cost effective option.

There are a few things experts want you to remember while investing for children. One, always pick up a scheme that has been around for at least five years and been a consistent performer during bull and bear phases. “Never go for ‘flash in the pan’ kind of performance. You should make sure the scheme is actually looking to generate long-term returns rather than taking unnecessary risks to post huge returns during a particular phase,’’ says the wealth manager. Hemant Rustagi also wants you to take the money out of equity investments and park it in a safer avenue at least three years before the actual event. “Once you have accumulated the corpus, you should focus on preserving it till the actual event. You can use the entire corpus if you have to make lump sum payment or use the proceeds from it to fund regular fees,’’ he says.

NO KIDDING WITH JUNIOR’S EDU

Child’s higher education is top priority for urban parents

Many parents rely on wrong products to achieve the goal

Equity route is considered best if you have at least 10 years

You can consider investing in diversified equity scheme or index scheme

Make sure you are picking up a consistently performing scheme

Transfer money to safer avenues three years before the actual event

Sebi’s MF ruling may lead to service tax loss !

Mutual funds

Sebi’s decision to abolish entry loads in all mutual fund (MF) schemes can have certain implications as discussed below :

😦

While there could be huge slippages of service tax paid by the fund industry, it could also lead to proliferation of bogus independent financial advisors (IFAs) without proper certification, and in turn mis-selling of MF schemes, industry officials said.

😦

They also believe that in the long run, the decision could lead to cartelisation in the MF industry with just a handful of large funds houses and distributors ruling the market.

🙂

Currently, when an investor opts for a scheme, the fund house directly deducts service tax from the commission it pays to the distributor or IFA.
In turn, the fund house deposits this with the government.

🙂

But very soon, fund houses will not have anything to do with the service tax over distribution commission, since under the new structure, investors will pay the commission directly to the distributor/IFA.
So the onus of paying service tax will now be on the distributor/IFA.

🙂

Chances are that there will be substantial leakage of revenue for government through under-reporting or non-reporting of advisory commission,’’ said a top fund industry official at an AMC.

Industry estimates that in the last financial year total service tax paid by the fund houses was about Rs 160 crore. ‘‘A large chunk of this could remain with advisors now’’ the official pointed out.

😦

Another fallout of the changed fee structure could be proliferation of advisors without proper training and registration in the fund industry.

After this ruling and change, anyone can become an advisor and charge the investor for advice,’’ a top official at a local fund house said.

😦

Another fallout could be squeezing out of AMCs and distributors with limited financial resources and growth of larger players.
In the changed scenario of no entry load, AMCs will have lesser funds at their disposal for marketing and business expansion.

😦

The fund industry is on way to suggests a way to get out of this situation.

Stay tuned ! 🙂