It is no secret that in the evolution of India’s financial services, the last mile of delivery —- the retail distributor — has been playing truant with regulators. But India is not alone in this slackness.

In a paper by the UK based Financial Services Authority (FSA) released yesterday after “six months of work to address the root causes of persistent problems in the retail investment market”, the single regulator for all financial markets including securities, mutual funds and insurance, seeks to implement three big ideas:

• Improve the current standards of professionalism in the advisory and selling space,

• Find more cost-effective ways of making advice available to a wider range of consumers, and

• Improve consumer understanding of what they are getting for their money.

“Tackling the root causes of the problems within the retail investment market is a challenging and complex issue,” said Clive Briault, managing director (retail markets), FSA, adding that this was not “something that can be solved overnight”.

To implement these ideas, the paper seeks to divide the regulated investment advice market into two — professional financial planning and advisory services, and primary advice. The former will deal with the holistic picture of financial planning involving “most highly qualified advisers”. Their remuneration structure will depend upon their qualifications. The most highly qualified could negotiate “their remuneration directly with customers and could call themselves independent”, the paper suggests.

For the lesser qualified, commission form of remuneration and a stricter regulation would apply. They will also not be able to call themselves “independent”. This, according to FSA, “would provide regulatory incentives to all firms to operate with higher standards”.

... contd.