'Financial plans should have simple commission structure'

Financial products should have an -easy-to-understand commission structure to make it attractive for lay investors, a senior Finance Ministry official said today.
The present-day high fee structure is impeding the penetration of financial products among common men. Hence, there was a need to simplify them by putting in place a not-so-complex commission structure, said Manoj Joshi, Joint Secretary in Union Finance Ministry.
A panel, headed by former Revenue Secretary Sumit Bose, has found in its study that commission charged by distributors was less in case of simple financial products and high with regards to complex schemes.
"We have come to know from the Sumit Bose Committee's ongoing study on commission being charged by distributors of financial products that more complex the financial product was, higher was the commission. On the contrary, simpler the financial product, less was the commission," he said.

Joshi was addressing a function organised by Financial Intermediaries Association of India.
"The only reason for the fixed deposit in banks being most popular among various financial products was that its structure was very simple. Any investor can easily understand the savings implications of these funds," he added.

Later, while talking to PTI, Joshi said the Bose-led panel is yet to submit its report to the Finance Ministry.
The committee, looking into the commission structure across financial products has already held a series of interactions with various stakeholders.
There are various classes of financial products which have different commissions and the committee is looking if any kind of synergy could be established on the fee being charged by distributors for selling them.

The committee is expected to suggest measures to rationalise the incentive structure across financial plans and also to prevent mis-selling. It would focus on issues of hidden costs and identical financial products being under different regulatory jurisdictions.
"We are still working on the report, which we are likely to submit to the government within a week or two," Bose told PTI over phone.