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Noel Maye, chief executive of Financial Planning Standards Board (FPSB), USA, says the Indian attitude of “I am OK. My children will look after me” is wrong. Maye tells Masoom Gupte individuals need to take care of their own finances. Edited excerpts:
Why is financial planning so relevant in the Indian context?
The family structure is traditional and the general attitude is “I will be. My children will look after me”. However, as employment becomes less of a permanent thing, as employers pull back guaranteed pensions, as governments tell their population they are not going to be able to give guaranteed returns on their investment vehicles, the responsibility gets pushed down to individuals to manage their finances. It’s important for the Indian consumer to understand what they know and what they don’t know and then, commit to being a part of planning their financial future.
Does FPSB play a part in pricing of the service provided in the segment?
Fee-based or commission-based pricing is an ongoing discussion, as the focus of financial planning has been on selling. We are trying to encourage a shift in mentality, from transaction to relationship. To implement a financial plan, you need products. So, for us, it’s not an either-or choice. However, the consumer must choose a planner to work with after understanding if there is an appropriate level of disclosures, why are recommendations being made and conflicts being managed. Globally, we see a clear distinction between advice and selling. Within large firm structures, one sees the two functions being kept separate. For us, the financial planning space is still evolving. We don’t know yet what is an ideal model for operation. Hence, we don’t take a position with regard to any compensation structure.
In India, individual financial planners are preferred. Is that the case globally, too?
How does FPSB US develop the curriculum in tandem with new markets?
We develop global standards, framework and content for the certified financial planner programme. The proportion of localised content varies across countries. Let’s take estate planning: It is not as complicated in India as it is in the US. So, while it will be included in the Indian curriculum, it will be a far smaller module than in the US. The areas covered are consistent across the board, but the magnitude varies.