The US, Australia and UK have regulation that allows only a certified professional to give financial planning advice. One such certification is the Certified Financial Planner (CFP). A CFP is a license holder from the Financial Planning Standards Board (FPSB), a Denver based company that has an international board. India is one of the 17 member nations of the FPSB and the first Indian CFP will roll out in September 2004. Financial planning are new words in India, what is the time gap between the concept arriving in a country and it taking root? Planning in India is yet a fledgling industry and the market is still at the 'hunter' stage instead of the 'farmer'. A hunter kills once and moves on, a farmer tends the land, builds a relationship with it and harvests it year after year. The Indian market is still at the product-push stage. The greatest difficulty in this process is the education of the customer and move the industry from a commission one to a fee-based one. People tend to move to a fee-based model after they have been through the learning curve. Just as people are willing to pay for intangible services of an accountant, a lawyer and a doctors, they need to see value in what a planner does. In India, the responsibility of the Grandfathers (the heads of the financial sector have been made honourary CFPs) is very large. They have to become the role models without which progress will be very slow. Which are the first age and economic segments to use financial planning? It is typically the high net worth individuals who understand the value of a planner and have the ability to pay for the service. In mature economies, this comes down to the middle class level but not below. The age groups that come first to a CFP are those who have already accumulated wealth, the people near retirement or the upwardly mobile young professionals who have seen the value of hiring a professional to save time and get integrated advice along a structured plan. Financial planning is a new discipline in India and there are concerns about regulation. What role does the international body play in enforcing the regulation? The international body is the license provider and our role is not to get into the individual cases of regulation. What we do is audit the process and the results. For example, if we are auditing the Code of Ethics for say India, then we will look at the Code for India, how many complaints there have been in this year, how many resolved, in what manner. If not satisfied we will ask questions. It is for the license holders to comply with the overall regulation in place for the CFP mark as a whole. Our regulations are yet to be written for planners. What insights can you give based on the experience of countries who have been there before? Two main things. One that regulation has to be from the side of the customer, but it need not kill the industry. Over regulation is as bad as under regulation. The regulator will have to balance between protecting the consumer and the advisor. Two, recognise that the regulator cannot do everything. The regulator will have to get into a relationship with Self-Regulatory Organisations (SROs) who will help in maintaining order. The regulator will have to set the criterion, the actual policing may be done by somebody else.
