Know your customers - if they are yours!

In a piece written for this paper about a month ago, I had pointed out that risk profiling (which is now being sought to be made mandatory by the market regulator) is a pseudo-rational idea. But why should mutual fund companies and regulators embrace it? There are several reasons but the main one is another shocker: neither the regulator nor the fund companies are in touch with their core constituency – the saver – and so simply don’t know how irrelevant, or even harmful, risk profiling is on the ground. It seems hard to believe that mutual funds don’t know their investors. After all, equity mutual funds are supposed to be retail financial products. Well, think again.

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