A Regulatory approach to financial product advice and distribution
AbstractFinancial 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.
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Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2011-029.
Length: 53 pages
Date of creation: Dec 2011
Date of revision:
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More information through EDIRC
Consumer Protection; distribution regulation; mutual funds; insurance; pensions; investment advice;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-IAS-2012-01-18 (Insurance Economics)
- NEP-REG-2012-01-18 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Gabaix, Xavier & Laibson, David I., 2006.
"Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,"
4554333, Harvard University Department of Economics.
- Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 505-540, May.
- Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
- Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
- Renuka Sane & Susan Thomas, 2012. "What should regulation do in the field of micro-finance?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-012, Indira Gandhi Institute of Development Research, Mumbai, India.
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