Team FeeOnly

Appeal to ‘slow mind’ to wean investors off F&O

Can you solve this puzzle : A bat and a ball together cost ₹ 1,100.
The bat costs ₹ 1,000 more than the ball.
How much does the ball cost?

If your answer was ₹ 100, that´s incorrect.
The right answer is ₹ 50.
Nobel Laureate and behavioural economist Daniel Kahneman cites this example in his book, Thinking Fast and Slow, to introduce the concept of the ´fast mind´ (which provides intuitive answers without conscious deliberation), and the ´slow mind´ (which is supposed to deliberate and endorse or reject the fast mind´s intuitive answers).
The fast mind´s immediate answers can be frequently wrong.
The slow mind is lazy and prone to biases.
Yet, with the right training, the slow mind can be tutored to amend the fast mind´s intuitive answers.
So what does this interesting puzzle have to do with weaning Individual Indian investors away from speculating in Futures & Options ? Read Harsh’s article in Business standard to know more..

Track finfluencer earnings, and have alot more RIAs

SEBI has an unenviable task of controlling the unregulated finfluencers and also ensuring that there enough RIAs to educate investors . Information on the income of “Finfluencers” is not easily available which may be inhibiting SEBI from taking preventive action against the finfluencers. Harsh suggest a creative use of the IncomeTax Act to providing real time update on the finfluencers to allow the regulator to concentrate its resources on them. Harsh’s article in Business Standard..

Put checks in place to curb overconfidence

The ability to deceive potential mates provided an initial evolutionary advantage to our ancestors. Then the advantage shifted to those who could detect the tell tale signs of lying leading to an arm race between detection and deception. Self deception evolved to mask deception better, hiding the truth from oneself to hide it better from others. Impact of Self deception (or over confidence) is not limited to mating partners however and it impacts all walks of life including personal finance. Harsh’s article in Business Standard today.

Index fund or ETFs? Compare total cost

Harsh’s article in Business Standard on how a fixation on expense ratio has led to a preference for exchange traded funds over comparable index funds among some investors. In the case of ETFs the NAV is only of guidance value and the market price paid by investors buying the ETF is higher than the NAV and the investors selling the ETF is lower than the NAV. The difference between market price and the NAV imposes an additional cost. Besides, there is brokerage fee, which amplifies an ETF´s tracking error
Hence the tracking error based on market price is way higher than the tracking error of comparable index funds. The incipient movement towards Fund of Index funds across asset categories has been the inadvertent victim of the hastily introduced tax amendment targeting debt funds in the last budget. Hopefully we should see this corrected in the next full budget and index based FoFs will play a pivotal part in passive investing in the future.

Disclosing conflict of interest builds trust

Regulations require that Investment Advisers fully disclose any conflict of interests they have while advising their clients. Far from being an hindrance, a transparent disclosure of the conflict can assist in building the trust of clients. Disclosure of “no conflict” in situations where investors have inbuilt perceptions of conflicts of interest such as referral to Insurance specialists/law firms also help in building trust. Harsh’s article in Business Standard…

Central agency needed to curb mis selling menace

Whilst newage investors require protection from unregulated finfluencers there is an urgent need for a centralised investor grievance redressal agency that will provide protection for older investors to whom financial products are mis-sold and their grievances fall through the regulatory gaps. First mooted by the Financial Sector Legislative Reforms Commission ( FSLRC) the expert committee appointed by the Supreme Court (in the Hindenburg report matter) has reiterated the recommendation. Harsh’s article in the Business Standard.

Investor education can´t be left to finfluencers

Finfluencers have a large influence on investors which can be used both for educating them but also for misdirecting them. given their larger than life impact on investor education some form of regulation is a must. Many learnings are available from the experiences of Pranjal Kamra a “Finfluencer” with very large fan following whose firm has a RIA License from SEBI. Harsh’s article in Business Standard on how relatively relaxed regulations coupled with a strict scrutiny of those with large number of investor complaints may be one possible route to bring the “finfluencers” within the regulatory ambit but retaining their ability to educate investors. Its a complex issue and Harsh is aware there is no magic bullet solution so this is a suggestion that can be considered along with many others that the regulators must surely be examining.

An innovative approach to domestic staff loans

Middle class households are used to giving advances against salary to their domestic staff who do so much to make their day to day life easy.
spurred by a challenge thrown to Harsh by Harsh’s spouse Harsh proposing a solution that can transition these advances (and it’s repayment) to India’s formal credit system giving a big boost to availbility of formal credit to trustworthy low income domestic staff. Please assist in influencing the policy makers to consider the suggestion. It will convince his spouse that he can actually make sensible suggestions in household matters as well :). Harsh’s article in Business Standard today

Restrictions on foreign spends erode Brand India

The 20% deposit requirement imposed on overseas remittances inhibits all citizens from spending or investing overseas. The sweeping inhibitory measure is supposedly to catch a few wrong doers who abuse the Liberalised Remittance Scheme who anyways could , with a little dilligence, be identified from the mass of data that the department has. Harsh’s article in Business Standard on the long term costs of inhibiting/restricting our ordinary citizens from spending and/or investing overseas and the impact such measures have on our aspiration to be a Super power.

Podcast – How AA ecosystem can improve reach of investment advice

Harsh’s Podcast and article on AccountAggregator system and how it can help the #InvestmentAdvisory profession shed the tag of being an elitist profession and start catering to the needs of the every Indian who can benefit from the #Fiduciary advise. #AA will bring down the cost and time of collecting authentic data based on client consent and lead to the democratisation of #Investment advice.

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