FIFA PERSPECTIVES December 2016

Recent Developments: From SEBI Press Release on 16th January 2017

Migration from Commission Based to Fee Based Advisory Model

The IAB took note of the extant framework for investment advisory business in India including role of mutual

fund distributors and regulatory arbitrage between the investment advisor and mutual fund distributor

providing advice. The board also took note of the international regulatory developments aimed at address-

ing inherent conflicts of interest and introduction of more transparency in relation to inducement and com-

missions received by financial advisers and distributors in jurisdictions like Australia, United Kingdom, USA,

Canada, European Union and Singapore. The IAB also deliberated on Robo Advisory. The IAB advised that

fee for advice is the journey which needs to be completed. The IAB however advised that the proposed mi-

gration needs to be calibrated. The IAB made the following observations in this regard: •

Commission based as well as fee based approach to investment advisory can co-exist for the time be-

ing. The transition from commission to a fee based approach has to be gradual. Such transition has to

happen in tandem across regulatory segments to have uniformity in regulatory stringency across com-

peting segments like securities market, insurance and pension businesses.

* Regulators need to keep in mind the financial viability and the business model of the advisory busi-

ness. Proper due diligence before transition in regulatory regime is essential.

* Distinction between retail and sophisticated investors should be clear. There is a felt need for greater

awareness among investors on cost of commission versus fees based advisory.

* More transparency is required on distributors’ commission in all financial products.

* Before undertaking any effective steps, SEBI may consider undertaking a study of migration to fee-

based advisory model under RDR, FOFA and robo-advisory models.

* Promote ETF investments as they entail low investment management costs.

FIFA - We did make an impact !!!

Allow MF distributors to give incidental advice to investors'

United Forum, a forum of various distributor associations across the country, believes that the pro-

posal would gravely affect the service mechanism of distributors and would be harmful for inves-

tors. It would be detrimental to the growth of the mutual fund industry as investors can move to

unproductive assets.

"To stop investors from receiving advice from distributors is clearly not a step towards investor pro-

tection," United Forum Spokesperson Dhruv Mehta said.

Read more at:http://economictimes.indiatimes.com/markets/stocks/news/allow-mf-distributors-

to-give-incidental-advice-to-investors/articleshow/56558897.cms

At present, it appears that the majority of the rate cut cycle has happened already and , we may see another around 25-bps repo rate cut. The opportunity in the long end of the bond curve is limited going forward,.Given that most of the move has happened, entering now may not yield the stellar one year re-turns seen recently.

But do remember the risks if you plan to in-

vest in dynamic bond funds and long-term

income funds. It has taken over 3 years for

the 10-year g-sec yields to move from 9% to

6.4% now. In between, there was enough

volatility and sharp moves to scare away in-

vestors or entice them into booking profits

early. Also, beware that such opportunities

aren’t there at all times, so when you enter

or exit makes a difference. On the contrary,

funds that don’t have a duration strategy

can be looked on as any-time

investments.

Good investing habits for clients:

Do a rain check of your overall portfolio:

Just as we look for leakages in our homes be-

fore the rains strike, it may be a good idea to

do a leakage check in our portfolios for invest-

ments which are either losing or have become

irrelevant in the overall scheme of things. This

shall lead to consolidation of your portfolio to

give it a sharper focus.

Do an inflation check: Is our portfolio beating

inflation after paying for taxes? If not,

then we may have to reassess our strategy

and investment options. Lot of investors

fail to beat inflation for the want of cer-

tainty and safety. There is a huge price

that we pay for this safety by compromis-

ing on the upside of the investment re-

turns.

Set up a retirement fund: While planning for

long term and short term financial goals;

don’t forget to include this important goal

in your list. This is one of the most critical

yet often ignored aspect of financial plan-

ning. Amid changing social landscape, in-

creasing life style spends and need of

maintaining the same life style after retire-

ment, it is imperative that we plan to have

adequate funds at the time of our retire-

ment, so that our retirement doesn’t be-

come a state but a statement.

Events: Mumbai

Estate Planning Workshop—Event repeated in Mumbai on 10th Dec 2016

Due to high demand in members for Estate planning workshop, on Saturday 10th December, DHFL Pramerica Asset Managers partnered FIFA again in its Monthly knowledge sharing initiative.

DHFL Pramerica in association with American Academy of Financial Management India Pvt Ltd specially de-signed a certification workshop on Estate Planning. The same was conducted by experts from AAFM and C.C. Choksi and Company a leading firm involved in Capital Raising, Business and Transaction Advisory, Legal and Tax Advisory and Succession, Trust and Estate Advisory.

Wealth transmission is important because it takes years or even decades to create and preserve wealth but the same wealth can get seriously impaired if the creator does not carefully plan transmission in a clear man-ner. It is imperative that advisors pay more attention to this third step. Dissolution is certain in life but what is uncertain is its time. Since time is uncertain, one needs to be prepared. Hence, the initiative by DHFL Prameri-ca to bring this unique learning. Initiative which enlightens about Wealth Transmission.

Learning Outcomes:

Enter into the spectrum of Trust and Estate Planning Products.

Learn more about Trusts, Estate Planning Process, Estate Planning Products, Tax Planning through Trusts etc.

Understand the various Wealth & Property Transfer Techniques.

Drive the Set-Up of the Estate Planning ad-visory Business.

Will learn the various documents associat-ed with Real Estate along with the Real Es-tate Title Verification Process,

Evaluate Real Estate as an Investment Option The members agreed that the Benefits of wealth creation and wealth preservation had been propagated for a long time. The

third step that completes the ‘wealth management’ is wealth transmission. The sessions reinforced the view that advisors must engage with clients on wealth transmission very early. IFAs stand to gain tremendously by bringing this step up-front with their clients. because normally a client invests only part of his surplus through one distributor whereas while in making a will he will have to disclose his complete wealth and there lies the trust in the IFA and opportunity for IFA. Hi Friends,

Please do contribute generously to the newsletter. Looking forward to original articles or shares meant for the distributor community. Events which you are hosting could be shared via photos and short write-ups. Do send your contribution to response@fifaindia.com

Nisreen Mamaji– Editor

FIFA WELCOMES ITS NEW MEMBERs– DEC 2016

M Type Membership Type Name of Organisation/ IFA Representative(s) NAME CITY

General O1121

N.Indv The Portfolio Shop Financial

Services Tushar Dnyaneshwar Pingle Thane

General O1122 Indv

Fiducial Financial Solutions P

L Bhooma Varadarajan Coimbatore

General O1123 Indv Sanskrutha Investments Ramesh Babu R Coimbatore

General O1124 Indv Aasa Wealth Management Aravinda Kumar R A Relekar Mysore

General O1125 Indv

Swati Investment Consultan-

cy Sathyanarayana Bhatta Mysore

General O1126 Indv Investment Funda Vivek Trivedi Mysore

General O1127 Indv Chandrashekar Narayan Rao Chandrashekar Narayan Rao Mysore

General O1128 Indv H Manohar Rao H Manohar Rao Mysore

General O1129 Indv K V Mahadesh K V Mahadesh Mysore

General O1130 Indv Sabarish Haridas Sabarish Haridas Coimbatore

General O1131 Indv N Mohanrai N Mohanrai Coimbatore

General O1132 Indv Amol Vinayak Gokhale Amol Vinayak Gokhale Sangli

General O1133 Indv R K Investments Rahul Ravindra Kirpekar Pandharpur

General O1134 Indv Shivam Investments Shailesh Haribhau Wangikar Pandharpur

General O1135 Indv Raju Banwarilal Behwal Raju Banwarilal Behwal Palghar

General O1136 Indv Nitcash Services Marketing Mangalore Prakash Hegde Mumbai

General O1137 Indv T K Prasad T K Prasad Indore

General O1138 Indv Anil Kumar Zalani Anil Kumar Zalani Indore

General O1139 Indv AVB Investments Anish Vishram Buche NAgpur

General O1140 Indv Arusa Investment Sathi Sarkar Dhanbad

General O1141 Indv Veekays Enterprises V K Sudharsan Chennai

General O1142 Indv Wealthwise Solutions Sandeep Sharad Deshmukh Aurangabad

General O1143 Indv D O Nikam Investment Dilip Onkar Nikam Aurangabad

General O1144 Indv Amit Mittal Amit Mittal Howrah

General O1145 Indv A K Naryan Associates A K Naryan Chennai

General O1146 Indv Vision 2 Wealth B E Arun Kumar Somwarpet

General O1147 Indv Sudhindra Pai Sudhindra Pai Margao

General O1148 Indv Rajesh Suresh Pai Rajesh Suresh Pai Bardez

General O1149 Indv

Investment & Plan Service

Centre Immanuel Konnur Valpoi

General O1150 Indv Dinesh Gasanan Sardesai Dinesh Gasanan Sardesai Ponda

General O1151 Indv Mahesh Manilal Shah Mahesh Manilal Shah Sangli

General

O1152 Indv Rajesh Kumar Rajesh Kumar Ludhiana

General O1153 Indv Kritika Investments Suryakant Nandalalji Bhutada Nagpur

General O1154 Indv Rakesh Dhanpatraj Ratadia Rakesh Dhanpatraj Ratadia Coimbatore

General O1155 Indv R Gopalakrishnan R Gopalakrishnan Coimbatore

General O1156 Indv Investors Café Prakash Narhar Ranade Panvel

General O1157 Indv Prashant Gurubasu Kempwad Prashant Gurubasu Kempwad Sangli

General O1158 Indv

Vijaykumar Yashvant

Dalvi Vijaykumar Yashvant Dalvi Sangli

General O1159 Indv P And G Wealth Madhusudhan S Goudar Bengaluru

General O1160 Indv

Srikanth Shankar

Matrubai Srikanth Shankar Matrubai Bangalore

General O1161 Indv Naveen Kumar S U Naveen Kumar S U Bangalore

General O1162 Indv Vinod Kumar Airan Vinod Kumar Airan Charkhi Dadri

General O1163 Indv Money Kare S Srinivasan Chennai

General O1164 Indv Master Care Lakshminarayannan Kumar Chennai

Founder F118 Indv Infinity Finserv P L Abhinesh Kumar Lucknow

Founder F119 Indv Sudhir Kumar Jaiswal Sudhir Kumar Jaiswal Kanpur

Founder F120 N.Ind

v

Imperial Investment Con-

sultancy Services P L Satish Kumar Pandey Mumbai

Anil Kumar Mishra

From April, insurance agents will get higher commission

for selling life and non-life insurance policies. Insurance

Regulatory and Development Authority of India (Irdai) has

issued a notification setting the new rate of commissions

to be paid to insurance intermediaries.

Life insurance policies—In single premium category, an agent

will get 2% for selling individual life product, 7.5% for individu-

al pure risk products, 2% for individual immediate and deferred

annuity products and 5% for group pure risk products.

For regular premium products, there are two categories: pure

risk and those other than pure risk or those bundled with in-

vestments. The first year commission for individual pure risk or

term plan will be 40%, and 10% will be paid to the agent for

every renewal premium. In case of non-pure risk cover, the

commission for the first five years will be 15% and will rise up

to 35% for policies over 12 years. Apart from this, the agent will

also get renewal premium, which is 7.5% every year. So, effec-

tively on the 12th year, an agent will get commission of 42.5%

For individual health insurance policies— commission will be

15% of premium paid and for group health policy it will be

7.5%

After these changes, from

1 April 2017, the peak

rates of payouts to inter-

mediaries go up to as

high as 48% in the first

year.

The hikes by Irdai must be

seen in context of an

overall reduction in cost in

the financial sector due to

the use of technology, the

new payment systems and

rising levels of entrepre-

neurship.

Finally, we all need to ask

this question: what is it

that they sell that needs

such high commissions?

Why does selling largely

government securities

with a wrap of a life cover

cost so much?

IS SEBI WATCHING??