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

Am you Required to E-file Tax Return?

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   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
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