Financial Adviser: Cheated!

Two interesting conversations with two different Independent Financial Advisors was very interesting. It is worth mentioning here!

Normally the word cheated or cheating is assumed to be associated with the client being cheated, but in these cases it was the adviser who was cheated.

When I started my articles for doing my Chartered Accountancy in Sharp & Tannan it was believed that you should give your advice only when it is sought, and when somebody is willing to pay a price for it. As life went on most of us forget the basics, do we not? So one of my old friends had this experience.

He was referred to a decently successful couple who wanted some financial advice. As usual in his first meeting he took the sketchy details – and simplified their lives. He shifted them from 20 fund schemes to 4 schemes, got them out of expensive life insurance to cheap ones, and did all the chotta motta work. Then he wanted more details – which never came. Whether they did this to avoid paying his fees or for anyother reason is not known, but that is the last he heard from them. Now they may be implementing the suggestions elsewhere!

The second case is of another financial planner who told his client IN WRITING not to buy certain policies, and not invest in certain mutual fund schemes. Then there was a lot of emails exchanged – but when it came to implement, they went directly to the fund house. Innocently they said ‘BUT YOU DID NOT SAY YOU SHOULD EXECUTE THROUGH YOU’. He said fine, then pay my fee – logically it had to be ‘either’ or. They said we already paid the bank Rs. 200 for handling the documents!! Funny if this couple thought that 3-4 hours of a planner were worth Rs. 200 – only thing is I cannot believe it!

Moral of the story:

1. Impress your customer in the first meeting, but be vague. Do not say XYZ fund. Just say ‘a large cap equity fund’

2. Be clear – are you in it for a fee or trail commission. If the client does not know – or you give him a chance that he did not know, you are creating (albeit unwillingly) a escape route for the slimy client.

3. If it is a pure portfolio review engagement, take the fees in advance if you do not know the client.

4. Be clear that you are not in the business of  ‘professional mental satisfaction’ but in the advisory business for a fee income.

5. If you are seeking information from a client – rest assured that all the information will not come in a nice tabulated form which you are used to dealing with. It will come in haphazard form and you will spend a lot of time organising it. Non accountants think they are doing you a favor  when they give you info….this can be taxing on both sides. Those who have filed income tax returns can shed light on this.

6. Once you give away your formats clients will cut, paste, forward, abuse, and misuse the info – rest assured it will go to all their friends. If you do not like this collect fees in advance.

As and when I think of more….or somebody tells me more..I will write.

Thanks A and K for all the inputs – both of them did not want their names revealed.

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9 Responses to “Financial Adviser: Cheated!”

  1. I’m telling you, you should write a book with all these stories…you are wasting precious stuff by giving it away for free in this blog…:-)

  2. Will take this as a compliment to my writing skills and a kick in the butt to my business skills! However writing a blog can be a precursor to a book! by the way my book ‘Retire Rich – Invest Rs. 40 a day’ should hit the market in 2010. Hopefully moneycontrol will push it hard in the retail space…u can find it in Odysey or Crossword!

  3. Dr Mohammed Ali Khan on December 12th, 2009 at 12:45 pm

    @ Srikanth
    I told subra the other day that he is underestimating himself..
    (He was saying that no one will read his books)
    There a lot of people (like me ) who start their day with a cup of hot coffee and subramoney..
    Looking forward to all his books..

  4. Subra sir, i know a person who curses my IFA till date & me because i referred him. He went to the IFA & put to execution only the first step of the plan making losses in equity funds in Jan 2008 & ignored the rest of the plan.

    Another lesson, never refer an impatient & egoistic rich person to your good IFA.

  5. Subra,
    the Ist thing I do on the morning when I log onto the laptop — > check the Subramoney site… It’s an addiction ( for the better … this time). We like things free and making the customer ( be it educated or literate) pay for the financial advise is a huge ask. So not surprising to read the posts of this kind.

  6. Agree partially on the post. Wealth creation can happen only if a good client gets a good adviser. Many advisers do not understand what they are speaking. Many clients are ego driven, listen to too many peopl and get confused.

    So when a confused customer meeds a confused adviser…disaster is waiting to happen, and it happens.

    Subra how do you manage do do one post a day..I am stunned at the regularity of the post. Agree with Dr. Khan waiting to buy the book – please price it at < Rs. 500. To me it is a price bar – but yours I will buy even if it is higher!

  7. Nice points .. I would like to add one if it adds value

    Tell them what kind of clients you like to work with .. if you are emailing them your fees and clients doc , have a section which says “What kind of clients i like to work with” and be genuine .. Some times even Financial Planners have to be careful with what type of clients they are working for 🙂

    Thoughts ?


  8. Didn’t realize about your upcoming book. Look forward to reading it.

    Thanks for sharing with us.

  9. Subra Sir, You have hit the nail on the head. This happened to me too. I had this client who wanted to invest Rs.1 crore in ‘safe’ asset yet get more than Bank Fd(8%). I gave him in writing and he coolly made a neat Rs.1 lakh extra in a year., yet he gave me the only the minimum of Rs.500 when actually my fees (in writing) I asked was Rs.3000/-.

    By the way, I am eagerly waiting for you book ‘Retire Rich – Invest Rs. 40 a day’. book me a copy!!!

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