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Mint
6 days ago
- Business
- Mint
India must streamline rules for the institutional trustee industry
India's wealth management ecosystem is undergoing rapid transformation, with institutional trustees playing a pivotal role in safeguarding assets, enabling succession, and ensuring fiduciary compliance. Yet, the regulatory framework governing institutional trustees remains fragmented and outdated, exposing the system to significant risks. As the volume of wealth under institutional trusteeship soars—estimated in the range of tens of thousands of crores—there is a pressing need to establish robust, uniform regulations to protect all stakeholders and foster sustainable industry growth. Also Read: How PPFAS is trying to change wealth management with simple advice Institutional trustee services in the country are primarily governed by two main statutes: (i) The Indian Trusts Act, 1882, which provides the foundation for the creation, administration, and duties of trustees in private trusts; and (ii) SEBI (Debenture Trustee) Regulations, 1993, administered by the markets regulator, specifically governing debenture trustees. Despite these frameworks, there is no comprehensive, unified regulation or certification regime for all institutional trustees, especially those operating outside the debenture and securities space. This regulatory gap exposes the industry to inconsistencies and serious risks. Why institutionalization is the need of the hour Enhanced professional standards and accountability: Institutionalising the industry would introduce mandatory certification, training, and ongoing education, similar to how chartered accountants (CAs) are regulated by the Institute of Chartered Accountants of India (ICAI). CAs must pass rigorous exams, adhere to a code of ethics, and undergo regular peer reviews, ensuring high professional standards and accountability. This structure has led to greater public trust and fewer instances of malpractice in the accounting profession. Improved transparency and investor protection: A regulated institutional trustee industry would require robust disclosure norms, regular audits, and transparent reporting, reducing the risk of fraud, mismanagement, or conflicts of interest. As seen in the CA profession, regulatory oversight deters unethical behaviour and builds investor confidence. Uniformity in practices and reduced legal ambiguity: Currently, the lack of standardization leads to varying practices and legal uncertainties, particularly in private trusts and family offices. Regulation would harmonize procedures, documentation, and dispute resolution mechanisms, reducing litigation and confusion. Better risk management and systemic stability: With thousands of crores of wealth under trusteeship, unregulated practices pose systemic risks to the wealth management and financial services sectors. Regulation would enforce risk management protocols, capital adequacy norms, and contingency planning, safeguarding both beneficiaries and the broader economy. Also Read: Can this mid-cap company take the lead in the exploding $1.2 trillion wealth management business? Facilitated market growth and global competitiveness: A regulated and institutionalized trustee industry would attract more domestic and international capital, as investors prefer jurisdictions with clear rules and protections. This would enable Indian trustees to compete globally and foster innovation in trust structures and estate planning. International precedents: Lessons from abroad UK: The UK's trust industry is regulated by the Financial Conduct Authority (FCA), which mandates licensing, compliance, and anti-money laundering checks. This has resulted in a transparent, reliable, and globally respected trustee sector. Singapore: The Monetary Authority of Singapore (MAS) regulates trust companies, ensuring high standards of governance and investor protection. This has made Singapore a preferred hub for wealth management and family offices. US: Trust companies are state-licensed and subject to regular audits and capital requirements, ensuring safety and soundness for beneficiaries. In all these jurisdictions, regulation and oversight has benefited all stakeholders—trustees, beneficiaries, and the financial system—by reducing fraud, enhancing professionalism, and boosting investor confidence Risks of delayed action in India If India does not move swiftly to institutionalize and regulate its institutional trustee industry, the following risks loom large: Increased incidents of fraud and mismanagement: Without oversight, unscrupulous operators can exploit loopholes, leading to financial losses for beneficiaries and reputational damage to the industry. Legal and operational risks: Ambiguities in trustee duties and the lack of oversight can result in costly legal disputes, delays, and reputational damage. Loss of investor confidence: High-profile scandals or disputes could deter both domestic and foreign investors from using Indian trustee services. Regulatory arbitrage: Inconsistent rules could lead to regulatory arbitrage, where entities exploit gaps between different legal frameworks, undermining the integrity of the financial system. Systemic risk: The sheer quantum of wealth under trusteeship—estimated to be in the range of several lakh crores—means that failures could have ripple effects across the financial sector. Competitive disadvantage internationally: India may lose out on attracting global capital and trust business if it does not adopt internationally recognised governance standards. Also Read: Mastering wealth management: The role of psychology in decision making and financial success The institutional trustee industry in India stands at a crossroads. While there are a handful of institutional trustees currently operating per global best practices, several are not. To protect the vast wealth under their stewardship and to foster a robust, transparent, and globally competitive wealth management ecosystem, there is an urgent need to institutionalize and regulate trusteeship. Establishing a certification or regulatory body would professionalize the sector, protect stakeholders, and unlock long-term benefits for trustees, mirroring successful international models and established Indian professional bodies. Tanmay Patnaik is partner-private client practice at Trilegal.
Mint
22-05-2025
- Business
- Mint
5 timeless lessons from Parag Parikh's 'Stocks to Riches' on investor behaviour
First published in October 2005, Parag Parikh's ageless book, 'Stocks to Riches: Insights On Investor Behaviour', still remains a crucial read for both aspirational equity investors and investment professionals alike. Parag Parikh was a well renowned visionary investor in India. He was also a behavioural finance professional, author, and the founder of the Parag Parikh Financial Advisory Services (PPFAS) mutual fund. He was admired in the market circles for his deep and intense insights on human psychology and investing. Not only this he was an ardent follower of Warren Buffett and advocated long term value investing. His legacy lives on through his work and writings and the immense success of PPFAS mutual fund, which continues to uphold his investment philosophy. His book focuses on blending behavioural finance with practical equity market wisdom. It details how human psychology and biases influence investment decisions in the financial world. With decades of experience in well planned value investing, Parikh draws on real-life examples to spread awareness among investors against unproductive and flawed investment behaviour. Here are five core insights from the book that continue to hold immense value even in today's volatile markets: Parikh throws light on loss aversion as a key emotional trap. 'The pain of losing is psychologically about twice as powerful as the pleasure of gaining,' he elaborates. The objective of writing this is to explain why investors often sell winning stocks early and hold on to losing ones. This instinctive fear distorts prudent decision making and rational judgement. Hence, on the part of investors one should consistently review their portfolio objectively. Focus should be on building long term wealth and not on short term market fluctuations and swings. Wealth can only be built by maintaining calmness, long term vision and composure throughout the investment journey. Mental accounting simply refers to treating money differently based on its origin or purpose according to Parikh. He strongly warns against this bias stating that, "People invest bonus money more recklessly than salary savings because they see it as a windfall." Such practices can push investors to poorly thought-out and erratic financial decisions. Therefore, as an investor you should consolidate your funds and base investment decisions on clear financial goals. You should also be careful while spending apparently 'free' looking money such as a lottery win in a responsible manner as per your long term financial goals. Many investors are reluctant to sell underperforming stocks because they have already put money into it and are on the losing end, due to this they are unable to take fair calls in a short period of time. To deal with the same challenge, Parikh urges readers to 'ignore the past and evaluate the present potential.' This difficult to overcome behavioural bias keeps people tied to bad investments. The focus here is to exit loss making positions in stocks and mutual funds after carefully analysing their fundamentals. The book quite intensely discusses the perils of following and going with the crowd. 'Investors are often influenced by what others are doing rather than what they should be doing,' Parikh writes. This can result in the creation of asset bubbles and consequently result in panic selling. The dot com bubble of 2000-01 and the housing bubble of 2007-08 in the US are some of the most recent examples of the creation of asset bubbles. If not side-stepped efficiently, such bubbles can even result in epic wipe out of wealth. Parikh hence wants investors to carry out thorough research and avoid participating in such market bubbles to conserve wealth. Parikh firmly supports long-term value investing. He argues that short-term market movements often reflect emotion, not logic. 'Markets are driven by greed and fear, not by fundamentals.' This simply means that one should ignore temporary noise, market declines or fluctuations and invest in only those businesses that have sustainable value. This is the simplest way to build wealth on a long term basis. The focus at all times is on the power of compounding and investing in those businesses that have the potential to showcase solid results and strong earnings compounding. For more details on the same you can refer to the official link of the book: PPFAS Knowledge Centre – Book Section Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers should consult a qualified financial advisor before making any investment decisions.
Mint
01-05-2025
- Business
- Mint
Investment of ₹1 lakh in 2013 in THIS mutual fund would have grown to around 8 lakh now. Check how
It is not uncommon to examine the past returns of a scheme before you decide to invest in it. Typically, investors assess the historical returns of a mutual fund scheme across different time lines before deciding to invest in it. Here, we assess the past returns of Parag Parikh Flexi Cap Fund, which was launched on May 24, 2013. For the uninitiated, a flexi cap fund is the one where fund manager is free to determine the ratio of allocation to stocks across market capitalisation i.e., large cap, mid cap and small cap as long as total exposure to equity and equity related instruments is 65 percent or higher. Tenure ₹ 1 lakh becomes Return (%) 1 year ₹ 1.13 lakh 13.85 3 years ₹ 1.59 lakh 16.88 5 years ₹ 3.75 lakh 30.35 10 years ₹ 4.8 lakh 17.07 Since inception (May 24, 2013) ₹ 7.89 lakh 19.04 As we can see in the table above, if someone had invested ₹ one lakh in Parag Parikh Flexi Cap Fund one year ago, it would have grown to ₹ 1.13 lakh by growing at the rate of 13.85 percent. In three years, the investment of ₹ one lakh would have grown to ₹ 1.59 lakh by delivering a return of 16.88 per cent per annum. And if someone had invested ₹ 1 lakh five years ago, it would have grown to ₹ 3.75 lakh, thus delivering a return of 30.35 percent. In 10 years time, the same invesment of ₹ 1 lakh would have grown to ₹ 4.8 lakh, thus delivering a return of 17.07 percent. And if someone had invested ₹ one lakh at the time of scheme's launch in May 2013, the investment would have grown to ₹ 7.89 lakh, giving an annualised return of 19.04 percent. This 12-year-old scheme has a total asset size of ₹ 93,440 crore as on March 31, 2025, as per the information on PPFAS website. The benchmark index of the scheme is Nifty500. And the scheme is managed by Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani and Mansi Kariya. Its constituent stocks include HDFC Bank, Bajaj Holdings and investment, Coal India, Power Grid Corporation, ICICI Bank, Kotak Mahindra, ITC and Maruti Suzuki. Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision. Visit here for all personal finance related updates. First Published: 1 May 2025, 01:55 PM IST
