Thoughts on financial advice

by Manshu on December 7, 2011

in Opinion

I’ve read a number of articles talking about paid financial advice lately, and I get emails from readers asking about some services as well, and I’m writing this post as a result of those questions and what I’ve seen here over the years.

My general impression is that good financial advise is rare, and when available it is not easily affordable.

I have interacted with a large number of people who call themselves financial advisers in the course of writing this blog, and my perception is that a lot of them have no clue of what they are talking about.

There are people like Shiv, Hemant, and Furqan who are extremely knowledgeable, and also unbiased, but for a lot of others – I wouldn’t take their advice if they paid me, let alone me paying them.

If  you end up with one of these advisers then you are screwed out of your money because most often, the folks who know little are also guided by fat commissions and will suggest only those products that will fatten their wallets the most.

I also think that you need to figure out a lot of this stuff on your own. If you really want to be financially successful – you have to have some things figured out like the importance of having no credit card debt, value of term insurance over other plans, benefits of diversification, asking about risk when someone talks about returns, and other such important things.

They are simple concepts if you are willing to give the time to learn them and there is a lot of information already available for free in the public domain about these topics.

If you understand these things then you are already quite ahead of the game and if and when you do take financial advise – you will be able to extract the maximum out of the consultation and really benefit from it.

You don’t need paid advice to tell you that you should have zero credit card debt or that you should have some money in equities or the benefits of diversification, but if you don’t know about these things then your adviser will need to spend time to explain these things to you and that’s time taken away to move on to more advanced things like planning for goals and all that good stuff.

This is not to mean that there is no value in financial advise – I truly believe there is and that’s best showed by a comment Deepak left here some time ago. Let me reproduce that here:

Hi Manshu,

I would like to take opportunity to thank you for giving Nisha a really wonderful gift
(comprehensive financial plan by “Hemant Beniwal”), this is just not worth Rs 15000, it is really undervalued b’cos this is a gift for the lifetime.

I must tell you that Hemant is really a true professional to work with, he has immense knowledge in the field and his concepts are really very clear, he has given very clear paths to achieve our goals. He got so involved in the plan..I felt that my elder brother was teaching me the way of taking financial decision in life..thank you Hemant for great advice and i’ll always remember ‘if you can have honeymoon in manali don’t think of goin to Mount everest.’

I would once again thanks “One Mint” for giving our life a great direction. I wish you both all the success in life.

Kind Regards
Nisha/Deepak

Clearly shows the benefit, and in my view you will benefit from it when everything falls into place – you meet an adviser who is knowledgeable, has a long term approach, most likely such a person will have a good fee, so you should be able to afford to pay the price, and finally you should have a lot of the basic and important stuff figured out already so you can make the most of your consultation.

{ 17 comments… read them below or add one }

ANIL KUMAR KAPILA December 8, 2011 at 8:19 am

Hi Manshu
I completely agree with what you have said here. I also must thank you because it was through you only that I came in contact with Hemant and TFL.
It is true that even after hiring the services of a professional financial planner one must always try to gain knowledge in handling financial matters.
It is a pity that most people even do not want to take the trouble of reading very informative articles available on TFL. They want only spoon feeding.

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Hemant Beniwal December 8, 2011 at 6:44 pm

Thanks Manshu for adding Deepak’s Comment – I think client’s positive feedback is the biggest motivator for any Advisor.

Thanks a ton Anil 🙂

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Manshu December 8, 2011 at 9:32 pm

It’s a lovely comment and it is my pleasure to share it here.

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Manshu December 8, 2011 at 9:49 pm

Actually sometimes it seems like people want to be spoon fed when they really are at such a basic level that they can’t really figure stuff out themselves. I mean today I got an email from someone saying that this is what my MF statement shows – am I making a profit or a loss?!

One year ago I would have been surprised but now I’m used to these type of emails and also appreciate that these folks can’t really read the stuff written and fully grasp what’s written. I think among the readership here – these type of comments are the minority but they exist.

I don’t know what the solution is to bring these folks up to speed – but it is a problem and an opportunity at the same time.

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ANIL KUMAR KAPILA December 9, 2011 at 7:36 pm

Hi Manhu
I have learnt that kids are finally going to have financial lessons in their schools.
According to a news report Indians may soon start getting schooled in financial literacy, as the Central Board of Secondary Education (CBSE) is readying to integrate it into already taught subjects from the next academic year.
With financial literacy being included in school curriculum, I think that we are on right path of financial inclusion where interesting methods would be adopted to educate children on money matters.
Hopefully , in the long-run this would also help in curbing the rampant mis-selling which prevails at present.

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Furqan December 8, 2011 at 10:57 am

Hi Manshu,
Appreciate your positive comment.

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Manshu December 8, 2011 at 9:51 pm

You’re welcome and your comments answering other’s queries are appreciated as well.

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bemoneyaware December 8, 2011 at 11:48 am

I am reminded of conversation between Cheshire cat and Alice from book Alice in Wonderland,.
Alice asked “Would you tell me, please, which way I ought to go from here?’
`That depends a good deal on where you want to get to,’ said the Cat.
`I don’t much care where–‘ said Alice.
`Then it doesn’t matter which way you go,’ said the Cat.
`–so long as I get SOMEWHERE,’ Alice added as an explanation.
`Oh, you’re sure to do that,’ said the Cat, `if you only walk long enough.'”

Approach of a common man or ordinary guy seems to be similar. When we are growing up we are told “Get good grades in school, get a good job and your life is settled…” And when we start working we get busy earning and then spending money and get caught up in the grind called life. We are left alone to deal with our finances..though we are not allowed to drive without a license test but enter the complex financial world without any basic information on taxes, equity, bonds, form 16, form16A, 80C….. We do need a helping hand someone who can help us out through the maze.

Now-a-days people are ready to pay for the financial advise too but finding a good adviser is still difficult. And if we find one and get a financial plan made then we sticking to the plan seems so difficult. When the market crashed lot of my friends stopped their SIPs. We also have to learn about behavioral aspects of investing in finance. Infact today read an interesting article on getrichslowly:Why financial literacy fails and what to do about it/

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Manshu December 8, 2011 at 9:46 pm

haha I love this quote you bring up here – I have always seen references to this but never seen the whole dialogue so it is fun to see it here. Comments like this make writing worthwhile!

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bemoneyaware December 9, 2011 at 10:14 am

Thanks Manshu..articles like this make commenting worthwhile :-).
Alice in Wonderland is excellent book and every dialogue is open for interpretation…

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Manshu December 9, 2011 at 7:28 pm

I have never read that – think it’s too late to read it now….

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Shiv Kukreja December 8, 2011 at 2:47 pm

Hi Manshu.. many thanks for this post!

I think the Financial Advisory business is suffering from the biased acts of Financial Services Agents and investors are just not ready to trust unbiased Independent Financial Advisors. The investors are just not ready to give any value to an unbiased financial advise. I’ve come across many people asking for a passback against the services we provide and precisely that is the reason these people get cheated by the same lot of greedy agents who pass on some money to the clients and in turn sell them inferior products which are absolutely unwarranted by the investors. Ultimately we suffer because we have to work a lot harder in the initial few months of our introduction to the new clients and clients deal with us with a lot of suspicion and the whole purpose of Financial Planning gets defeated. Insurance regulator IRDA is very much responsible for all this.

These are very difficult times for the Finacial Services industry and if the regulators dont act in time, unbiased Financial Advisors will become very difficult to find. People should understand that the quality comes with a price. In order to remain fit (financially), people should approach Doctors (Unbiased Financial Advisors), pay them a reasonable amount of fee and use chemists (agents) just to buy medicines (financial products).

Thanks again for the post Manshu!

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Manshu December 8, 2011 at 9:42 pm

I think these are very interesting times in this space and what it looks like ten years from now will be completely different from what it looks like now. People who are working hard to build a reputation right now will reap rich rewards then.

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Deepak December 9, 2011 at 9:41 am

Hi Manshu,
I have always been follower of Om and tfl ever since I hv discovered them, I am so lucky that I am being showred by such wise advise. You people carry power to open third eye of wisdom. This is the real hard work which you guys put in, anyone who is following you cannot deny.

I always try and read whatever you recommend, I am half way through Steve Jobs, I don’t know how you do so much of research this is beyond my thinking.

When words r said from the heart u feel them, for u guys I don’t hv to think, they come out straight from the heart.

You guys hv such a coaching ability that u can mk maninder singh bat like tendulkar, I hv felt it in my decision making over a period now. I feel so happy and satisfied now that I left perfios contest also to mk someone lucky like I am now.

I hv been reading lot of others also but none of them hold power to stand in front of you. These r the results u achieve when u do consistent hard work I guess. My best wishes r always with u.

Regards
DM

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Manshu December 9, 2011 at 7:30 pm

Deepak – you’re always very kind and shower me with praises that I’m truly not worthy of but of course your kind words are much appreciated and it feels great to know that I can make a tiny bit of positive difference!

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N.M.R.Shreedhar December 17, 2011 at 11:29 am

Hi Manshu, great article !!!! could,nt agree with you more, especially on the bit regarding “good financial advise is rare”. In my opinion we indians have got so much tuned to looking for quick returns that we overlook the hidden costs/future damages involved. This get rich quick mentality keeps us away from Insurance term plans ( you don’t get anything if you outlive the term, so it is a loss, right ?
conveniently forgetting the very purpose of life insurance) . Similarly, we are always on the lookout for cheap Financial advise– so if the advisor is charging you less, you can be absolutely sure that he will make up elsewhere either thru brokerage or comissions. Once this funda is clear, which can only come about thru’ financial awareness or thru’ a bitter experience, people will willingly seek and pay more for good financial advise.
regds

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Pankaj Kapadia December 17, 2011 at 5:27 pm

I think many investors are innocent investors. The tax saving is the only reason for buying insurance or investment. They buy insurance policy mutual fund to help their friend, relatives etc.
The problem is that many of those insurance agents are asked to 1st approach to whom people they know personally.They are given targets and incentives to get the business even before they have understood the alternatives. The so called agent advisor does not even know what is simple and compounded interest. For him if rs. 100/- triples in 20 years it is 10% pa.!!. This is what he communicates and this is what (10%) registers in investors mind. For years he would not realise the losses. He feels cheated when some of like Hemant thru his articles or planner like me would bring to his notice and thereafter he will curse the industry.
Unless u make ur investor knowledgeable with some basics… the community is awaiting for exploitation knowingly or unknowingly.

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