A Regulatory approach to financial product advice and distribution

M. Sahoo and Renuka Sane
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M. Sahoo: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: Financial distribution, where the distributor is the agent of both the product provider and the customer has been found to inherently work against the interests of customers, in the form of high service fees and perverse incentives in sales practices. This paper proposes segregation of financial advice from financial distribution. It proposes a Financial Advisers Bill, 2012, to promote the development of a market for advice. The Bill suggests that financial advisers be recognised as professionals and be regulated under a new statutory body called the Institute of Financial Advisers of India. The paper suggests that regulation of distributors continue to remain under the purview of product regulators. It outlines alternative models in which the distribution market may be organised. It also points out that the Ministry of Finance and the Financial Stability and Development Council need to play an active role in co-ordinating the setting of common standards for distribution across all product regulators.

Keywords: Consumer Protection; distribution regulation; mutual funds; insurance; pensions; investment advice (search for similar items in EconPapers)
JEL-codes: D14 D18 G2 G28 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2011-12
New Economics Papers: this item is included in nep-ias and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2011-029

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