Expense Account, Mint
India is not alone in blindly staggering around for a solution to the problem of getting the last mile correct in retail financial products. I’m back after a week in Seoul (pronounced to rhyme with Yowl), South Korea, as a spousal add-on to a global financial planning congress. Spouses, luckily, were invited to the gala dinners and other evening events and I used the time effectively to wrangle information out of different parts of the world. Some of the information was alcohol-soaked, but is still worth consuming. The brief upshot is this: retail financial products have always been sold with commissions and charges embedded in them. This has led to an information asymmetry with the person facing the consumer having more information and knowledge than the buyer. This has led to sales of products carrying higher loads to be sold more rather than those that are actually good for the buyer. Paradoxically (and in a beautiful ode to behavioural economists), consumers are wonderfully irrational: as long as charges are embedded into the products, they are fine with paying even very high costs. But take costs out of the product and charge the consumer separately, the hand signing the fee cheque freezes. The consumer of financial products, globally, finds it very difficult to pay for advice. But if embedded, is happy in ignorance—as long as the final amount in whole numbers looks larger than what is put in. Consumers are oblivious of the effects of inflation, taxes and costs; they compare one whole number (what I put in) to another whole number (what I get out).