Once upon a time long long ago there was a village doctor. He examined you, made the medicines and you were all right. The air was clean, people worked hard, and died quite young.

Then it evolved…..to where we are today.


In the wealth ‘business’ we are still at the village doctor stage – you go to Goldman Sachs. They do financial planning for you. Ask you to invest in alpha, beta, omega…synthetic CDO, S&P rates them, then you buy the CDO. Unknown to you there is a vested interest for GS FOR THE SAME CD TO FAIL. So working at a cross purpose is not unheard of in the financial services world.

Now imagine in India you walk into a doctor’s clinic. He treats you and then says “I will not charge you  a fee because the pharma company is paying me money to recommend their product”. WE may feel jiterry. Actually we should. However we accept this scenario in the financial services industry. If a consultant tells us…’I charge Rs. 10,000 for a first meeting’ there is a good chance that the meeting will not happen.

Do doctors get good money to recommend drugs? Well Indian scenario as usual is murky -foreign jaunts are considered too cheap anyway, laptops are passe, using the company guest house in Ooty or Shimla is too less….so what works? Hard cash?

well take a look at what happens in USA…note the names – they sound Indian :). Mera Bharat Mahan…


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  1. Subra,

    Agree broadly with the column, but

    I have seen the doctor consultation analogy several times, and I don’t think it is quite right. The way the doctor and the financial advisor charge the client makes a big difference.

    Suppose the doctor would say, “OK, you have high fever. I will make you completely alright in three days. But I’m going to take half of your little finger as a fee”. Now, THAT, apart from being totally awesome, would make the analogy fit right. 🙂 Because, the financial advisors insist on charging as a percentage of the money they are managing, and not a fixed fee.

    There is no reason the financial advisor should charge 10,000 rupees just because he is managing a portfolio of a particular size (say 1 crore).

    My thought is if someone opened a financial clinic and charges everyone who comes in between 200 to 500 rupees (like a Metro doctor), he will find many takers.

  2. the doctor quotes the fee, the client decides whether he can afford. I have had coffee at Sharavana bhavan, at Hotel Park and Taj Coromandel.

    I cannot ask Taj why should I pay 10 times more than Sharavana. I can only choose to go or not to go. Smart customers know how much fees to pay. One friend with a Rs. 10 cr aum is currently arguing with a fund house for a ‘NO TRail nav’ but it is not available. He does not want to take it as a rebate from the distributor (the easiest route suggested by everybody).

    When a fund adviser gets a %age of the amount invested it is the CUSTOMER who helps the agent move up the slab. If the client knew the total trail + upfront he should then be allowed to decide. This will not happen.

    I know managers who charge 25% of the profits and

  3. As John Templeton (bless his soul) said famously “price is what you pay and value is what you get”, the intelligent client knows where his focus should lie. To my mind this sums up the argument.

  4. My take is..It is not a good idea to mix Financial planning with Portfolio Management.
    Financial planner should analyse your financial health and make suggestions/build up strategy (and charge for these services)..on the other hand Portfolio Manager should identify scripts and execute them based on your Financial Plan..

    Subra, Do I make sense?

  5. Exactly. Price is what you pay and value is what you get. Paying fee for a financial advise is the way forward. Pay peanuts and you get monkeys.Penny wise and pound foolish ( Does it remember one of ULIP’s). A fixed fee component + say few percentage points above the huddle rate is a fair fee.

  6. agreeing with Puneet means not agreeing with Brijesh. A financial planner helps you with goal setting, goal quantifying, etc. He leads you to a portfolio manager who can do stock / fund picking. Brijesh there is no proof that paying a HIGHER price gives you good service. If I ran a high profile financial planning and portfolio management service, I will sponsor golf and tennis tournament – all that will lead to more business, higher fees,….etc. that is not a sign of competence. Just like a restaurant – behind the expensive Taj hotel in Mumbai is the famous Bade Miyan 🙂

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