Indians don’t like to pay, even if they are referred to a good advisor. Every other day I get calls from people who want financial advice but are unwilling to pay. Consider the case of Mr. Shobitt (50). His child has just entered medical research. Shobitt wanted to exit the Public Provident Fund (PPF) and invest in equity funds. He did not take out loans for his son’s education and thought a stock fund would be a better way to increase his educational wealth. In his view, PPF returns 7.1% (annualized), while equity funds could return 13% to 14% a year over the next two years.
Indians don’t like to pay, even if they are referred to a good advisor. Every other day I get calls from people who want financial advice but are unwilling to pay. Consider the case of Mr. Shobitt (50). His child has just entered medical research. Shobitt wanted to exit the Public Provident Fund (PPF) and invest in equity funds. He did not take out loans for his son’s education and thought a stock fund would be a better way to increase his educational wealth. In his view, PPF returns 7.1% (annualized), while equity funds could return 13% to 14% a year over the next two years.
Most of the time, investors just want their opinion to be affirmed. Mr. Shovit also wanted to know if his investment strategy was right for him. Without knowing his full portfolio and his financial goals, it would have been impossible for him to give my opinion. Mr. Shovit was reluctant to work with his financial planners because despite his multiple goals and lack of knowledge, he didn’t want to spend money on financial advice.
Most of the time, investors just want their opinion to be affirmed. Mr. Shovit also wanted to know if his investment strategy was right for him. Without knowing his full portfolio and his financial goals, it would have been impossible for him to give my opinion. Mr. Shovit was reluctant to work with his financial planners because despite his multiple goals and lack of knowledge, he didn’t want to spend money on financial advice.
subscribe and read more
We see the same attitude when it comes to tax returns, where people are not ready to pay. ₹It costs between $8,000 and $10,000 per year to file properly. I receive many inquiries from holders of foreign stocks (including in the form of ESOPs and employee stock options). They are looking for someone who can do this at a low cost, despite being told about the complexity of Income Tax Return (ITR) filing and the consequences of improper disclosure. This is just penny wise and doing stupid things.Omission of disclosure of overseas assets leads to disadvantages ₹A fine of 10 million will be imposed, with an additional tax of 30% and fines for inaccurate declarations. Defaulters can also be prosecuted under black money laws. Saving thousands of dollars on tax returns for complex transactions like this means exposing yourself to bigger problems down the road.
Poor investment choices, such as investment-linked insurance plans and schemes that are not tied to your financial goals, can cost you much more than financial advice. Investment-linked insurance plans have an annual rate of return of 4-5%, while equity mutual funds have long-term returns of 9-10%. Investing in stock funds for his 2-3 years based on recent performance means exposure to high volatility and negative returns. Constantly changing schemes based on past performance causes investor returns to lag fund returns. The gap between the best and worst performing funds is about 6-7% per annum, which is much more expensive than advisor fees.
Due to lack of knowledge and overabundance of information, investors believe they can manage everything on their own without professional help. The emergence of private equity-funded digital platforms with a value proposition of free advice does not solve the problem. You get nothing for free!
It’s amazing how Indians have changed their thought processes over the years in so many ways, but not when it comes to economic matters. Traditionally, financial advice is not available, and the general feeling is that financial advisors trick people into charging them hefty fees and investing in products that do not work in their favor. Financial advisors also have a negative image on social media.
Not all advisors can be painted with the same brush. We have honest, highly qualified and trusted financial advisors. First of all, please understand that financial advice is not just about choosing a scheme, it is professional guidance on how to plan for your financial goals and how to deal with uncertain times. You want your expertise in your field to be valued and rewarded accordingly. The same is true for financial professionals. Free stuff in the long run will cost him twice as much or turn out to be worthless.
Next, find a paid financial planner or ask for a referral from your circle for a financial advisor. A good financial advisor talks about financial goals and long-term plans, and does not impose insurance plans or other financial products. Always understand how you will be billed for your services. Prefer fee-based pricing over fees.
Read on to become a savvy investor (Mint’s personal finance page is a great resource!). Stay away from social media videos and reels. For those looking for entertainment rather than serious learning. Have a solid financial plan with your advisor. That is the value that advisors add.
A combination of knowledge and sound advice can make a big difference in your financial life.
Mrin Agarwal is the Founding Director of Finsafe India.
