Nirav Panchmatia's Blog

Who’s got your ear?

“ A king should choose his Council of ministers wisely as they can make or break him ”

                                                                                       — Chanakya in Arthashashtra

A PM or President is made or broken by his council of Ministers, as they are the ones who influence him the most on his policy decisions…

OH oh!!! Is it sounding philosophical or political ??? So be it but I shall come to the moot point soon…

So let me come back to the heading of the article once again… Who’s got your ear?

The dictionary meaning of the above phrase is: “If someone has the ear of an important and powerful person, that person is willing to listen to his or her ideas & as a result that person tends to influence ones decisions & hence the future course of his/her action…”

So why this topic on a financial planning blog??

Because as an Investor you tend to get influenced as regards your Savings, Investing & financial decisions by what you read & Watch (Media TV & Print) & by whom you go around with (friends, relatives or colleagues) or by the Agents (Bank RM, Insurance Agents, Share Brokers etc..)..But can you rely on agents primarily motivated by their Commissions & least interested in their Clients well being…

Some Examples of Bad Influences:

Here are a few REAL LIFE Examples of Investors being wrongly influenced by somebody near to them & paying a heavy price later on…

In all the below cases they managed to get the Investors “WRONG” ear…

 *** A clients sister-in-law newly became an Insurance Agent and convinced /cajoled him to buy some very expensive and irrelevant Insurance Plans just to complete her yearly quota and the client ended up committing funds for next 10 years in an unwanted, expensive Insurance Plan yielding pathetic returns…

*** A local Stock Broker convinced a young Client (who was new to the market) to trade in Futures & Options (F&O that otherwise require a very deep knowledge, study & experience) and the fellow ended up loosing his shirt literally in the market volatility as he was miss-sold a derivative product but not informed on how to exit…Later his father had to shelve out a handsome amount for his sons folly..

*** A Clients Accountant who was with him for more than a decade was hands-in-glove with the clients Banker & clients Insurance agent and would take kick-backs from those agents regularly for bringing clients business to them; the client in this case was a high profile businessman with frequent travel & hence left his investment decision to his decade old accountant whom he trusted more than his spouse but not realizing that he was earning commissions at the clients cost…not only the loss due to commissions but client also ended up accumulating unwanted loss-making bad investments in his kitty…

***A friends CA coerced him to buy up to 8 Insurance Plans from a pvt sector company of whose the CA is also an agent during last week of filing Income Tax Returns citing Tax Saving Investments (80C) reasons & the client had no choice to oblige as otherwise he would have ended up paying heavy Income Tax…

***A friend got duped by his childhood friend who was a reputed builder in town…the builder during real estate industry’s brighter years managed to sell multiple units in his next forthcoming project to his dear friend at peak rates promising extraordinary returns…neither the Project got competed 4 years after payment, nor were the title clear on the property & neither are the prices anywhere near the original purchase price even 4 years later…& this builder was a childhood friend…

Now in all the above cases the Investor had reposed full faith & trust on the opposite party (banker, Insurance agent, his own Accountant & his CA & his Builder) yet his trust was breached…  WHY ???

Well, the relationship of a Client & his Financial Advisor is a “fiduciary relationship” & lot of trust goes into this relationship…once this trust is breached it is very difficult to regain the same…But in modern times, in a dog-eats-dog world, when emphasis is less on right advice & more on Targets & how much one has sold  this relationship thing takes a back seat…

Investors grossly underestimate the Importance of Good, Unbiased, fair & correct financial advice & the right Financial Advisor…We think we can avoid going to the Best Financial Advisor in town and replace him with our Banker, Insurance Agent, CA or with our own expertise notwithstanding the fact that these are not experts in the world of Investing but in a different area altogether that is at best loosely related to Investments…also an Independent Professional with correct Educational & family background & Expertise can bring a lot on the table that cannot be measured in monetary terms…

What to watch out for before choosing the right Financial Advisor??

Well here is a quick & handy CHECKLIST that YOU can use before selecting a good Financial Advisor… Please ask a prospective Advisor the following Questions…& do not feel shy, guilty or ashamed to ask these questions…after all if chosen he shall be influencing your financial decisions…

  1. What’s in it for you?

How are you going to benefit from this relationship? How will you earn? Commissions or Fees? How much Commissions, on what basis? Will it go from my pocket or are you being directly compensated by the Company?

2. Are you giving me unbiased Advice?

This is a very tough question and the answer to this question is NO in 90% cases but 90% of so called Advisors will give yes as their answer…The way to catch them on this is by asking the Justification for products recommended.

3. Is it a WIN-WIN or a WIN-LOOSE proposition?

Financial Advisors & even Commission agents have a right to earn something from you in exchange of good financial advice but this should not be at your cost so that YOU the Investor is bleeding & they are sucking blood of you…In biology we were taught about Symbiotic & Parasitic relationship…Advisor–Client relationship should be Symbiotic & not Parasitic…

4. Are you capable of giving Financial Advice ? (Education-wise & Experience-wise)

There is a difference between an authority to sell or distribute a financial product & the ability to give sound financial Advice…just like there is a difference between a Medicine shop owner & a Doctor. Will you ask the Medicine shop guy to prescribe you Medicines or will you go to a Doctor, take his prescription & then go to Medicine Shop to buy medicines based on the Doctors prescription… well most Investors in the financial world often & repeatedly mistake a Medicine shop guy with a Doctor…and then end up paying a dear price…

5. Will you keep my financial matters confidential ?

So you shared your financial information with your Banker either for a Loan or for gettong an account opened and next day his Insurance Advisor friend or Stockbroker friend turns up at your door…Don’t you think he was supposed to keep your information confidential?

Importance of a “GOOD” Financial Advisor & a sound financial advice…can never be Overstated…

Go to the BEST Financial Advisor in town…

Does he seem Expensive??? Well, do you know the PRICE of a Wrong, Biased, unfair Advice…Recollect that wrong Insurance product that was miss-sold to you? Or that wrong Real Estate transaction that set you back by a few years…& brought financial trouble in the family…

Uncles, bro-in-laws, sister-in-laws, Cousins, friends-in-need are good for relationships sake but you cannot rely on them for seeking financial advice on your hard earned money…for your life’s savings…Yes if he/she is financially qualified with right education, Experience & Expertise then the case is completely different…

One More thing…

Having found a Good Financial Advisor (who meets all parameters laid down in the Checklist above), Trust him completely and let him have his say, only then will you get your moneys worth…Sometimes we keep seeking people elsewhere when the best advice is available in your own neighborhood …

INVEST WISELY…& remember that IT PAYS TO PAY FOR SOUND FINANCIAL ADVICE…

 


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