Financial services market shallow in city

PATNA: "Land prices in and around Patna have shot up 10-fold or more in the last six-seven years," says a stock broker and former president of Magadh Stock Exchange Association, Suresh Rungta. If that is taken as an indicator of the wealth seeking profitable avenues of investment, one may assume that the state capital would have a vibrant financial services market, with wealth management advisory services having a pride of place in it.
Nilesh, senior manager of a private sector bank here, says, "We do provide such services. Our wealth management advisory services are customer-centric rather than product-centric. We take into account the specific needs and circumstances of customers and our services cover the entire spectrum of asset classes. There is no specific threshold level for rendering our services to customers, which is available in all our branches in the city." Some other banks and local franchisees of national financial services firms (primarily in share broking) also claim to offer such services here.
But some stakeholders whom TOI talked to painted a different picture -- that financial services market, wealth management included, is quite shallow in Patna despite the state registering one of the highest GDP growth in the country in the recent years.
Financial planning and advisory, or wealth management in other words, is not about term deposits, or insurance, or investment in equity, debt instruments, precious metals or realty. It needs taking a holistic view of one's financial goals (like children's education and marriage, buying/constructing a house/flat and retirement planning) and preparing a viable plan to achieve them in the light of one's risk-taking willingness and ability. However, specially trained financial advisors and planners, as in metros and Ahmedabad, are an unheard of tribe here.
What explains this dichotomy? Bihar Industries Association secretary general Sanjay Goenka attributes this to lack of capital formation in the state in the past 20 years or so. "The growth witnessed in recent years is largely on account of government expenditure and real estate boom, contributing about 80 per cent of the gross state domestic product. Money is moving to a handful of people and there is little growth in the overall economy."
According to him, "Dissemination of information with respect to financial services is low in the city. Some insurance brokers from Kolkata and Delhi may have set up business here, but there is no culture of investment in financial instruments. Whatever little interest was generated earlier was lost due to mis-selling of equity, mutual fund and insurance products due to agents' greed of earning fat commissions in the quickest possible time."
Having burnt their fingers, investors have taken to investment in real estate and gold, which have earned maximum returns in recent years, says Goenka. Rungta says, "Too much money is chasing scarce land and other forms of realty. The demand is mostly from financial investors and not by actual users (residential purposes)."
Goenka adds, "The regulatory framework of the country hasn't helped the matters either. While PAN card is a must for investing a single rupee in equity shares or mutual funds, real estate transactions with a threshold limit of above Rs 25 lakh only are reported to the I-T department and no PAN card is required for buying jewellery worth Rs 5 lakh. Therefore, flow of money to the latter two forms of unproductive investment is higher." The high returns delivered by gold post-2008 economic meltdown has added much lustre to this asset class, even though these returns may not be sustained in the near future, he feels. Rungta says that Patnaites have now began to buy gold mutual funds (gold ETFs) rather than physical gold.
A chartered accountant and former director of the Magadh Stock Exchange, R S Agrawal, says, "Few people are availing whatever little professional wealth management services are there. The banks and broking firms lack specially trained personnel for the purpose."
A franchisee of a national broking firm, Pramod Kumar, agrees, "Even banks provide advisory services tailored to their targets. Bank managers ought to be better trained to advise about investment in different asset classes. Sloppy Portfolio Management Services (PMS) have seen investors losing their hard-earned money." Sebi's move raising the bar for PMS to Rs 25 lakh has also been a setback.