Skip to main content

Should you pay for financial advice?

Yes, a good financial advisor costs money. But he takes the responsibility of ensuring your financial stability

The word 'free' has a soul-stirring universal ring. Something for nothing is music to the ears. Yet, there are no free lunches. So, the one-on-one free offer or buy-a-shampoo and get-a-soap free kind of offers have already been priced in the costs. Some of them may be genuine offers, where they may offer "something extra" by reducing their profit margins. But a promotional expense, not altruism.

It is, then, surprising that people are looking for 'free' advice, when they invest. Managing finances is a very important function. We all work to earn our money, to be able to meet goals. Then, why be callous about how to manage the money earned ? Either the person concerned should go through all the appropriate options, do a proper study of the products available and go for the one best suited for the goal in question. A lot of times, this is only on paper. Most investors are just not interested in doing this due-diligence. In fact, most do not have any specific plan to achieve goals.

Hence, in financial services, the various distributors play a role and decide what investors get to invest in. If it is an insurance agent who approaches and convinces a person, then it is an insurance product which gets sold. If it were a mutual fund advisor, the investor would have been convinced about the ability of one or the other scheme that will solve his problems. The point is, the investor is investing depending on who is approaching him and convincing him and not according to any well-thought strategy.

Most take it for granted that the financial advice and counselling is a "free" service from the advisor. But any advisor will have a vested interest in selling his product, as that is what is going to earn revenue, especially in a situation, where advisory fees are conspicuous by their absence. Hence, there will be an inherent bias in the recommendations. Also, many people buy from their friends and relatives. Here, even the rudimentary matching of client goals with appropriate options goes out of the window. Typically, in a meeting where a friend/relative is the advisor, most of the time is spent on extraneous matters and very little on discussing the product features and benefits. Even lesser time is spent on matching with goals. The client himself says in most cases - You know about us and will know if this suits us. Just tell us where to sign and you handle the rest! Proper advice can make a world of difference. But good advice may have to be paid for. Most people are unwilling to do so. They have never paid for financial advice. They have paid doctors, lawyers, architects, etc., but never a financial advisor. Without appropriate advice, one tends to make many mistakes, like getting into costly or patently inappropriate products. Such actions can really be costly for the investor -the price he would pay would most probably be far in excess of the fee which he would have paid to a advisor. Again, assuming you are willing to pay, you still need to choose a good one to advice you.

You should do due diligence before hiring one. Ask relevant questions, seek references, and importantly see if he/she is throwing numbers at you or genuinely understands your financial situation.

QUESTION HOUR

 

Ø       Does he/she understand your specific issues?

Ø       Does he/she have knowledge about the product, its benefits and costs?

Ø       Does he/she have the necessary experience. Has he/she invested in people, systems and processes?

Ø       Does he/she answer tough questions such as – Will you be paid a commission for selling this product?

Is he/she willing to provide references?

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...

Sundaram Mutual Fund new plan Sundaram Fixed Term Plan CJ

Sundaram Mutual Fund has announced the launch of a new fund named as Sundaram Fixed Term Plan CJ. The new issue will be closed for subscription on January 30. --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available are: 1. HDFC TaxSaver 2. ICICI Prudential Tax Plan 3. DSP BlackRock Tax Saver Fund 4. Birla Sun Life Tax Relief '96 5. Reliance Tax Saver (ELSS) Fund 6. IDFC Tax Advantage (ELSS) Fund 7. SBI Magnum Tax Gain Scheme 1993 8. Sundaram Tax Saver   -...

Choose gold ETF over Physical Gold

Investing in gold is overall a good portfolio hedging strategy as long as gold does not account for more than 5-10 per cent of your investment portfolio. Between physical gold and gold ETF, investing in gold ETF is a better proposition because these funds invest in physical gold making them the closest to investing in physical gold at no risk of holding physical gold.   You will need to have a demat account to invest in gold ETFs and there is little to choose between any of the gold ETFs, you can pick any fund that you wish to as long as you pick the fund with the lowest expense ratio.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Reliance Mutual Funds: http://prajnacapital....
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now