Regulate financial planning, says FPSB, wants the job

The FPSB points to the lack of laws to govern the financial planning industry and proposes a supervisory mechanism with a well spelt-out code of ethics. Such a code should comprise matters of integrity, objectivity, competence, fairness, professionalism, diligence and compliance among financial advisors.

The paper recommends separating 8216;selling8217; from 8216;advice8217; and has proposed different certification requirements for the two. Says Ranjeet S Mudholkar, CEO, FPSB India: 8220;Advice and selling are two different tasks and require different skills set. They should be certified separately by different regulators. They should also acknowledge a common certification that fulfils the requirement of an investment advisor like certified financial planner CFP or associate financial planner AFP to bring about some uniformity.8221;

To gain consumer confidence in the absence of a new law to curb unauthorised, unlicensed practice of financial planning activities by unqualified individuals, the paper suggests a minimum qualification requirement 8212; a base level certification of AFP and a higher level with CFP, with membership of an authorised entity such as FPSB.

Financial planners deal with a variety of products and services like insurance, stocks, asset management, accounting and estate planning. However, each of these services falls under its own ambit of regulation 8212; insurance under Insurance Regulatory and Development Authority IRDA, stocks and funds under Sebi, pension products under Pension Fund Regulatory and Development Authority PFRDA and so on. The paper suggests having a single regulation and authority regulating intermediaries in general and financial planners in particular.

But creating a new regulator needs approval by Parliament. Till such time, therefore, the paper suggests interim amendments to the current regulations governing licensing procedures and requirements in the respective financial industries.

The paper proposes a rating of organisations that sell financial products by the regulator. The mechanism will evaluate and rate parameters like processes, risk management systems, policies on compliance and infrastructure. Says Mudholkar: 8220;The idea is to ensure efficient practice, not to gain control. So having a regulation on an already regulated industry will only lead to duplication. Rating is preferred as it will give some indication to the consumer about the efficiency of that organisation.8221;

Set up in 2001, FPSB India, comprises the coming together of 41 of the country8217;s leading financial services firms, including banks, mutual funds, insurance companies and intermediaries.

Why FPSB

8226; Showcases its education-examination-experience-ethics model

8226; Proposes a Code of Ethics and Rules of Professional Conduct for investment advisors

8226; Suggests a single authority for regulating intermediaries

8226; Recommends rating of organisations engaged in the business of financial advice or sales