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

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...

Health insurance guide - Part I

Insurance, by definition, is morbid. What if I die suddenly? What if my home caught fire? What if I had to undergo expensive medical treatment? What if something that I thought happened only to others befell me? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. However, the possibility of you undergoing some kind of expensive medical treatment during your lifetime is far more likely than you dying suddenly or your house burning down. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years 10 months or so, the rest of your money life could easily go out of whack if you had to incur such expenses. Just 12 per cent of India's population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insu...

Use Mutual Fund SWPs for getting fixed payments

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Investors time withdrawals optimally to save on tax The systematic withdrawal plan, or SWP, could be called the lesser known cousin of the much talked about and publicised systematic investment plan (SIP). There's yet another cousin — the Systematic Transfer Plan ( STP ). In SIP, you invest a fixed sum of money at regular intervals (monthly/ quarterly) to buy some units of a mutual fund scheme. In SWP, as the name suggests, you do the opposite: You redeem some mutual fund units from your portfolio to get a fixed sum of money at regular intervals (monthly/quarterly/half year/yearly). In SIP, you get a higher numbers of units when the markets are down, and lesser in a buoyant market. In SWP, going by the product logic, you redeem higher number of units when the markets are do...

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
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