The Indian government has a target of turning India into a developed economy by 2047. From a generational point of view, Gen X (those born between 1965 and 1980) and Gen Y (born between 1981 and 1997) are seeing tectonic shifts during their peak earning phases, and their aspirations, tastes and preferences are undergoing similarly rapid changes. Gen Z (born between 1997 and 2012), the so-called natives of the internet era, are driving these changes through consumption. By 2047, Gen Z-ers who are entering the workforce today will be between the ages of 35 and 50.
Those in the wealth-creating generation are also thinking about how to increase their post-tax income for retirement. They will inherit wealth from the previous generation and pass on some of theirs to the next one, so tax planning is essential. This is especially true for those who own foreign assets. The price of geographical diversification is increased compliance requirements and costs, since tax laws differ by country.
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A developed nation is one where land, labour, capital, entrepreneurship and technology are liberated from the mindset of an under-developed, frontier, or developing economy. India has a golden chance to achieve this, but Sebi’s role in market development, capital development and investor protection will be crucial.
Developed countries are easier to do business in, and have lower fees for financial services. Their laws ensure that investors can choose their financial intermediary and aren’t lumped with several ones, which ultimately reduces costs.
What India needs
In India, too, Gen X, Gen Y and Gen Z will be able to accumulate, preserve, inherit and distribute their wealth effectively only if they are provided comprehensive financial planning and advice within the regulated investment advisory space, and any overlap or regulatory arbitrage from incidental advice by any other market participant is removed. In other words, regulations must be designed to provide investors with single-door access to these services, with the required disclaimers and disclosures of course.
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A confused investor is a sign of a developing economy. As we move towards a developed India, empowering investors through education, disclosures and disclaimers, and clear boundaries will be essential. This means we need more registered investment advisors to protect investors.
At a time when regulators are worried about the increase in speculative investors, comprehensive financial planning can help improve investors’ behaviour. Those who sign up for these services will tell others about their benefits, leading to more demand for registered advisors and setting in motion a virtuous cycle.
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Vivek Rege is the founder and CEO of V R Wealth Advisors Pvt Ltd, a registered investment advisor under Sebi.