When I began doing a personal finance show on TV about seven years ago, I was inundated by stock tip seeking questions. But I was clear that what we were setting out to do was financial literacy and not giving cheap stock tips. It took work to nudge the questions in a particular direction, but within a few weeks of the show, the questions changed. They changed from asking if they should buy or sell a particular stock to the “I have so much money, what product do I buy?” questions. A product sales driven model of retail finance, fuelled by commission bearing products, had framed the market in a certain way. So instead of using products to solve financial problems, manufacturers and sellers aim to soak up all the surplus money by selling a product that gave the highest commission to the seller. Smart Money on Bloomberg India TV is my fourth show and we (co-anchor Vivek Law and I) began with portfolio-driven questions—where viewers were writing in to ask if their portfolios were Ok. And now within 15 weeks, we see a pattern emerge that tells me that people are finally asking the right questions. Though half are still driven by questions around a portfolio check, the rest deal with issues around individual financial situations. We’ve moved from trying to find a product to hit with our savings to a place where we want a plan that we can follow for the rest of our lives.
I’m watching Jolly LLB (and if you write columns as a profession, you can’t just watch anything without the brain firing away and looking for raw material to chew on for future work) and as the movie me-lords its way to the end, where the small town guy wins against the corrupt five-star lawyer and against his own initial lower morality, I thought I saw a pattern. The last few years have seen several movies with this theme—the moral choices faced by an average guy in a country where the elite are complicit in a deeply corrupt nation—of choosing between staying with middle class values or joining the system of corruption. Rocket Singh: Salesman of the Year was about doing business the right way against the established system of cheating the customer and bribing to get corporate business. Do Dooni Chaar was about a lower middle-class teacher overcoming temptation to do the right thing.
Imagine this: there is a large hospital chain of national scale. Doctors are salaried employees and they’re found to be prescribing medical products that are harmful to their patients. They recommend these products as they carry higher kick-backs from the drug companies. For example, they prescribe drugs that are known to cause sugar in diabetics to rise — not very different from bankers who sell life insurance products to those above age 60. They recommend expensive muscle enhancers instead of multi-vitamin to economically weaker patients suffering from poor nutrition, not very different from selling sector funds to fisherfolk who come looking for a bank deposit. What would you say if the regulatory authority that oversees hospitals said this: “If there was negligence in the medical care, we are responsible, but correct drugs are the responsibility of the drug makers – it is not our problem. Go to the drug regulator.”
Ramesh Kumar is disgusted. At 55, he’s had a long innings as the administrator of the Indian Paneer Board. (For those unacquainted with paneer, it is a milk product that used to be in short supply in the glorious socialist years of the 1960s and 70s and the government had set up a Paneer Board to facilitate procurement.) Kumar is just one of the many that suck away at the milk and honey as it flows through the system, he works hard to keep the system intact. Right now Kumar’s surfing channels in his office cabin, he’s just got the latest flat screen installed, right next to the 3.8 horsepower treadmill that he will surely use soon. He’s watching the second episode of the Cobrapost.com expose (http://bit.ly/15vUzy8). The first, he remembers, had bank officials of three private sector banks across 20 cities secretly taped offering to turn black money into white for a person fronting for a politician. Episode two expands the sting to include 23 banks and insurance companies—both public and private.
If you drive down from Chennai to Pondicherry, it is not unusual to see a furry, beaked head poking out over a high wall, looking quizzically at the world go by the yard in which it lives. The six-feet bird came as an import from Australia and, unknowingly, became a part of a multi-crore scam in Tamil Nadu that defrauded hundreds of thousands of people. Emu farming promised super normal returns – invest in emu chicks, they get fat on your money and are then sold for their meat and oil, doubling or tripling your initial money. Sounds far-fetched? It may to you, but some Rs.500 crore of real retail money bought the scheme. It isn’t as if people only in the south are gullible; 1,600 kms north of Chennai, in West Bengal, an even larger bunch of people at the bottom of the pyramid collected every rupee they could and invested in real estate deals, teak farms and in products as bizarre as potato bonds that offered to double money in a short time. And it isn’t as if it is the rural poor that are gullible, Indians in urban areas have got burnt taking online surveys or trusting their money to a stock guru for multi-bagger rewards. One newspaper report (http://bit.ly/15TnxY8) puts the size of fraudulent deposit-taking schemes just in West Bengal at Rs.70,000 crore. There is no estimate for the size of the problem across the country but we can conjecture that it will be in trillions and not billions.