Skip to main content

When it comes to Financial Planning Trust matters most



Trust is important while you approach a planner.


Imagine a scenario… you go to a doctor, who examines you and comes up with a diagnosis of what the ailment is and what medicines you need and for how long. Would you turn around and tell the doctor that the ailment actually is something else, the medicines suggested are therefore not suitable and that you want a different set of medicines. Could he kindly prescribe those?


Obviously, this sounds silly. No one in his senses would do that… and yet it happens when it comes to people's investments.


Investors assume they know well enough to dictate what they would want to take up for investments. As financial planners, we do come across such clients occasionally… can we change our recommendation to . 1 crore of insurance instead of . 2.5 crore, which we have recommended? Can we suggest investments in FDs & NSCs, instead of mutual funds we have suggested?
You understand what I mean… people who have come to us for advice, pay our fee and get a comprehensive plan done, tell us what they want to do! It's frustrating that after spending around 30 hours to complete the plan to hear them say that they want to do something entirely different. Why do they want to do that? Because, their helpful friend had told them that they would be chumps to invest in some mutual funds suggested by some third party. Shaken, by this revelation, they seek out another colleague to get a third opinion!


Now, this colleague has the reputation of being a wizard of stock markets and has several pearls of wisdom on investing. His take… just investing in equity - mutual fund is for wimps and FDs are for grandfathers.


By now, confusion reigns supreme and they come up with a compromise. They would not want to invest in MF schemes as suggested, but would want to invest a portion of it in equity, in a few stocks they have heard of in the office and the rest would go to FDs! Our analysis and strategy be damned!


In any endeavour, things will work out only if advice is followed completely. Trust is important. If you are not able to trust your planner to come up with a good plan, why approach them in the first place?


That's why they used to say that if you approach a guru, you need to stay the course with him and do all that he asks you to do. A guru can take a student to the destination only if the student is willing to walk the path chalked out by the guru. Each guru's path might be different. If a student were to jump from guru to guru, he will learn nothing and go nowhere. It is like digging two feet at 20 places and expecting water to gush out.


There are others who choose to execute a portion of the recommendations, but ignore some others. For instance, one may complete investments as per the suggestions but choose to ignore insurance recommendations, as the life cover recommended seems too high. This again is like a patient having only two of the four tablets suggested. It will not lead to a complete cure.


In finance, this problem exists as investors tend to think that if they are familiar with some products, they can do it themselves. So why did they approach a planner? Because they were not sure if they are right in the first place. Then, they argue with the planner about the merits of what they have in mind, about investments and insurance. And then take a call to do some of what the planner has suggested and some as per their predilection.


That does not work. It works only when the relationship is a trusting relationship… just like in a marriage. It makes no sense if the spouse constantly keeps a tab on the significant other. Trust in these relationships has to be complete… like the trapeze artist who is willing to let go the bar and leap with the full trust that his partner will catch him. We have seen that in circuses. That is trust. Before trusting anyone so much, of course do the due diligence. But once you have satisfied yourself, you have to let go – like that trapeze artist! Nothing works like trust.
 

Popular posts from this blog

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 ...

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Birla Sun Life MIP II Savings 5

  Birla Sun Life MIP II Savings 5 - Invest Online   Have you traditionally been a debt investor but now wish to test waters in equities? Then, debt-oriented funds such as Birla Sun Life MIP II Savings 5 (Birla Savings 5), which have limited exposure to equities, may fit your requirement. With a five year return of 10.5 per cent compounded annually, the fund managed a good 3-3.5 percentage points more than its benchmark Crisil MIP Blended Index, as well as its category average. The fund appears well poised to capitalise on a falling interest rate scenario and has increased the average portfolio duration of its debt instruments in recent times. Suitability Birla Savings 5 is suitable only for conservative investors. If you want to make a beginning in equities and cannot take any short-term declines in your stride, then this fund will suit you. If you are already an equity investor and want to use a debt-oriented fund merely as a diversifier, then you may prefer peers from the HDFC and Re...

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...

Stock Market Concepts: Derivatives and taxation

DERIVATIVES refer to an instrument, which derives its value from the value of something else — that is, an underlying asset. In India, the derivatives space has traditionally been the playground for large institutional investors who use it for hedging or for speculative activities. However, with time, we have seen a steep augmentation in the per capita income of an average Indian. Consequently, the appetite for investment in alternative instruments has transcended into the need to explore untested territories, and one of the most lucrative of all the available options, is the derivatives. Taxation Of Derivatives: Let's have a sharp overview of how taxability impacts the dealings in futures and options: Futures: Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head "capital gains". Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income...
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