Financial advisors: The other side

Media loves to bash the financial advisors. The main accusations about FAs are – they sell products which the clients do not need, they sell products which have the highest commissions, they do not know all that they should know….etc.

Let me now bat for the FA. A good FA should be well qualified (let us call him a CA) so that he can understand equity markets, debt markets, financial planning, drafting of a will, pre-nup agreements, life insurance, mutual funds, real estate, and at least a passing interest in commodities. He should also have some experience.

Now we are talking about a 30 year old CA trying to make a living as a FP. Let us say he can get 4 NEW appointments a week and he is able to convince 2 people to sign up for his “FP” services. Assuming he has an office he should be spending Rs. 30k a month on the office and about Rs. 10k towards conveyance etc. Thus he spends say Rs. 500,000 a year on the office. A self respecting CA aged 30 would be able to get a Rs. 12 lakh job, so being on his own he may be targetting Rs. 15L a year. This means he has to earn Rs. 20L a year to break even with his counterpart in service.

If he gets (and retains) say 100 clients a year, he has to earn Rs. 15,00,000 / 100 = Rs. 15,000 for a cient at the minimum. Now if he has personal expenses of Rs. 12,00,000 a year, – he has to earn (thanks to tax) an additional Rs. 15 lakh. Thus he has to charge the client Rs. 30,000 a year – without any money available money for investing / saving! Let us say he is a straight forward person and he says invest money in an index (etf) and take a term insurance. This is honest advice.

I think I can count the number of people willing to part with Rs. 30k for such a simple advice. Can you count even as many?

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11 Responses to “Financial advisors: The other side”

  1. mansoor panjwani on October 11th, 2009 at 8:11 pm

    Dear subra,
    I was surprised to read funny and unreal figures about chartered accountants.
    I myself CA inter, doing my CA final, many of my friends who completed their CA in first attempt are still struggling for employment, few lucky ones who got the job are paid a meagre
    8000-25000, few who are practising prefer to share their offices and hence all the overheads,their office rent is not more than 5000 rupees.
    Many CA’s are falling on each other to file individual tax returns just for 500.
    I hope you set your figures right.

  2. Some CAs are from Mars and some from Venus! I do not know mansoor is talking about which planet, but I cannot get decent first class CAs (having done their Bcoms too), speak decent English, MS office skills for less than 6-7 lakhs as a start salary. By the time they are 30 they do hit 10 if not 12L. Currently I am looking for a CA (finance and accounts) aged 35 with MNC experience (MNC articles would be great) and willing to pay Rs. 30L – and cant get it :). So perhaps like Tea which is available at Rs. 3 on the footpath, it is also available at 397 @ The Oberoi? Tea is tea…after all? Hey Mansoor good CAs come at a particular price – but there are so many CAs are they not?

  3. I completely rest my case. Professionals decide what they want to charge – the client decides only for a few. I know a Fitness trainer who charges Rs. 35k a month. No arguments. I know a gym which charges Rs. 200 for a massage. Same GUY gives massage in another gym which charges its customer Rs. 950 for the same. Perception, geography, pricing…I know one CEO who pays Rs. 50k for maintaining his a/cs (he is salaried but wants his I&E, net worth,…etc. on a regular basis (his salary is Rs. 2.4 crore). His Exec Director gets it filed FOR FREE by his outsourced Internal Auditor. Any comments?

  4. mansoor panjwani on October 12th, 2009 at 11:23 am

    Dear sukumaran,
    99% of India population drinks 3 rupees tea with their hard earn money, rest 1% spends 397 in oberoi, i dont want to get into discussion about the source spending.
    I am talking about 99% of chartered accountants, mathematically its large in population, 1% are lucky enough to find companies like satyam,global trust bank,lehman brothers who pays them hefty.
    As per the media reports satyam paid PWC rupees 3 crores audit fees.
    My point was about fresh CA’S and not with the experience of 10 years.
    Coming to your requirement if u really need a CA [i guess it is not ], just forward a circular about your requirement to nearst CA institute and then please let me know how many CV’s u got.
    I know your requirement is just hypothetical.

  5. mansoor panjwani on October 12th, 2009 at 11:27 am

    i mean “source of spending” in my comments

  6. Dr Mohammed Ali Khan on October 12th, 2009 at 11:32 am

    “Let us say he is a straight forward person and he says invest money in an index (etf) and take a term insurance. This is honest advice.”
    Thanks Subra.. I got advice worth thousands of rupees for free..

  7. Dr Khan this is what Subra calls generic advice. You need a financial planner to help you to tons of other things. Believe me, a good financial planner is worth his weight in gold. I have one – because i understnd the cost of not having one. Mr. Mansoor we do source from your institute (if you are curious I am a member of 3 insititutes in India and one from E&Wales). We currently employ 50+ CAs, and constantly looking in @ mumbai, pune and new delhi. We source from the CA institute, but the process is difficult. We start on a salary of 4 for inter and 5-7 for qualified CAs depending on their a/cing skills, and communication skills. I drink tea in the roadside stall AND in 5* hotels. This is the last mail from me on this topic

  8. Dr Mohammed Ali Khan on October 12th, 2009 at 4:08 pm

    Thanks Mr Sukumaran
    Now Im able to understand what Subra is trying to tell us for a long time.. I will try to get the services of one..

  9. Ravinder Makhaik on October 13th, 2009 at 7:05 pm


    You have cleverly thrown a bait at the readers and now sitting back and enjoying the heated debate over the comments offered, which are self-explanatory about the contentious topic.

  10. Will you allow me to put “Wanted CA ads” on your site please? Will pay you on recruiting – willing to pay 16% of CTC or a flat Rs. 100,000 per candidate recruited!! 🙂

  11. mansoor panjwani on October 14th, 2009 at 8:45 pm

    I think you are trying your best to prove your point, but fact would remain fact, reality would reality, how hard you try you cannot change the facts and reality in the world of CA’s.
    I think you are into recruiting business, you will get around 30% from employer willing to pay 16% to subra sir.
    If i can poach bright and experienced CA from a world class company, and transfer it to the rival company, me as a middleman or in the financial lingo ‘intermediary’ would earn millions-welcome to the world of recruitment business.
    Can you please teach me how to use smile icon from my desktop.

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