With the gradual liberalisation of financial products, there are many investment avenues available to the investor today.

The big question for the investor is which products to opt for from a burgeoning list that includes mutual funds and insurance products to pension funds in the near future.

It would, therefore, be worth the investor's while to start taking financial advisory to arrive at the appropriate recipe for his risk-return needs.

Interestingly, in India, the concept of financial advisory is almost absent. The little advisory that is happening comes from vendors, agents or distributors of insurance or mutual fund products.

This is very limited and there is no guarantee that it would be an impartial advise for the investors.

This is so simply because all the vendors, agents or distributors can sell only one product at a time and they get commission for selling such products.

Now under Indian laws, passing on these commissions is illegal. So even if an advisor wants to pass on the commission to the investor and in return charge a fee for impartial advice, it is not possible!

Interestingly, some time back, the Securities Exchange Commission of the US conducted investigations after which it fined mutual fund selling organisations for pushing high-cost funds to earn higher commissions.

In India, such a practice is rampant as various mutual fund companies offer not only regular commissions for selling their products but also offer target-linked incentives either in cash or in kind (foreign trips, et cetera).

The worst part is there is complete non-transparency as to how much commission is offered and the investor has no way of finding this out.

What is intriguing is that in India, if an advisor charges fees from his client and agrees to pass back all the commission that he gets from a mutual fund for the sale, it is an illegal act and he can lose his licence. So doing the right thing is illegal.

The better thing would be do allow a financial advisor to charge his fee from the customer and the customer should be able to demand whatever commission that a mutual fund seller gets from the fund to him.

India needs to wake up before major problems crop up in the financial advisory system and before retail investors lose money heavily for investing in products that are pushed by vendors solely with the intention of gaining higher commission.

Not only do the investors need to wake up to this fact, but regulators also need to be proactive.

The most important role can be played by consumer protection organisations.

Though, currently financial and investment-related issues are not handled by consumer courts because of prohibitive laws, a voice of investors and consumer organisations may open up the eyes of regulators on the need for independent financial advisory system.

In the investors' hands

The onus of a successful financial advisory system is in the hands of investors.

Investors must be willing to pay the fees for impartial advice, just the way they pay doctors for diagnosis. There is no practice in the world where doctors don't charge for consultation.

A doctor can't prescribe a medicine based on such commissions from a pharmaceutical firm. He has to diagnose the patient need and then prescribe a medicine. Investment decisions, too, merit such a system.