When in the space of one month you get three calls all asking for inputs on the same issue, you know that the dollar pipeline behind the question is green and flush. The callers wanted to better understand ‘financial capability’. What happened to financial literacy? That used to be the buzz word till recently. It seems that after the spectacular and expensive failure of financial literacy efforts, the new thing that is soaking up attention, effort and, of course, money, is building financial capability. I think we’ll see marginally better results in this, but five years and millions of dollars later, they will move onto something else. But let’s understand why literacy became the buzzword, why it failed and why building capacity is doomed.
Would you buy an insurance policy or a mutual fund on Flipkart or Amazon or Paytm? While you chew over the question, regulators that watch over these two industries are gearing up to frame regulation that puts in place some rules of the game. The capital market regulator had constituted a committee led by Nandan Nilkeni to work this out six months ago. The Securities and Exchange Board of India (Sebi), it seems, is just a month away from a draft that allows e-wallets to vend funds. The inter-regulatory approvals are currently getting worked out. The insurance regulator uploaded a draft insurance e-commerce regulation on 7 June. You can read it here:http://bit.ly/28KdHMg.
Recently, I attended the 50th wedding anniversary celebration of the parents of a dear friend. Just the relatives numbered over 100 and they made it a point to come and be a part of the celebration. The obvious outpouring of joy at the event was also in part due to what her father had done for the family. Uncle was in the railways, and my friend tells me that it was this one job that funded the education and marriage of an extended family cohort. Many of us can identify with this story of that one job and its ability to lift an entire extended family out of genteel poverty. For many of us who grew up in households where the primary bread winner worked not just for the nuclear family but an extended family know the pressures it put on the house. Many of us, who rode up the rising tide of prosperity unblocked after the 1991 reforms, cannot scratch out our tight-money growing-up years. We cannot ditch the risk averseness that was built into life as it was. And I believe it did us good in terms of teaching the value of things and money.
RRR exit, hmmm. Brexit, meh. Shrugging off plenty of bad news, the Sensex hit an 11-month high this week. What’s going on? The story for India is the thickening of the retail equity pipeline, not directly in stocks, but through institutions such as pension funds and mutual funds. Sustained flows of retail money is coming in. And it is coming in a staggered manner. Indian household money has traditionally been in real assets such as gold and real estate, in bank fixed deposits (FDs) and to some extent in life insurance policies. The organised sector contributed to their provident fund, which again went into bonds and other fixed return paper. Think about the change in our own investing behaviour—we swore by FDs and Life Insurance Corporation of India policies, but are now die-hard SIPpers (investors into systematic investment plans of mutual funds). What changed?
I’m reading two books on managing money. The first, All Your Worth: The Ultimate Lifetime Money Plan, written by mother-daughter duo Senator Elizabeth Warren and Amelia Warren Tyagi, is about finding balance in your money life as that leads to emotional peace and financial well-being. The second, The Index Card: Why Personal Finance Doesn’t Have To Be Complicated, is by Helaine Olen and Harold Pollack. Olen is also the author of the superb book, Pound Foolish, that showed the dark underbelly of the personal finance and financial literacy industry.