I do financial planning at a more philosophical level than most other planners. I largely look at my ‘job’ of helping people help themselves. This of course is NOT a good business idea, and does not make any sensible money, but so be it.

Recently a reader turned friend had asked me to review his financial plan. I did it for a fee, and was scathing. I was convinced that this planner need a planner if he had done to his portfolio what he had done to Mr. S’s portfolio. No names please, this is not a place to embarrass people.

Let me enumerate a few of the bloomers:

1. He had PERSONALLY sold some expensive, poorly managed unit linked plans: To me this is a no-no. If you are a planner say you are a planner, if you are a salesman, say you are a salesman. A white coat and stethescope wearing pharma salesman is a fraud. Be that as it may, the plans were expensive (high load, high admin charges) and it was being managed very poorly. He could see the charges, but he could not have seen the poor management, I agree. He could have seen the poor fund management and taken corrective action. He did not, I guess it was CONFLICT of Interest.

2. He had chosen an annual premium for the ulip. To collect the money for ulip he had done a SIP in an equity fund….and he would withdraw the premium amount on the premium due date. This is clear stupidity. Nothing less. As the ITO was not seeing the returns, the short term capital gain/ loss was not even being calculated. The planner said ‘No way how the ITO will know’. The whole strategy (if this can be called one) sucks. Also the funds chosen for SIP were equity funds…but the ULIP itself was MOSTLY in debt (80%). I told the client such actions are not even worth spitting on.

Not sure how many such financial planners are going around offering their services!

Reminded me of a gathering of about 45 doctors at an entertainment program. Out of this group about 40 were obese or surely over weight. About 30 of them were drinking – whiskey, rum, gin and some beer too. Almost all of them were munching on the chips, samosas, etc.

If my doctor does not look after his body, eats junk food, is personally overweight, ….I will find it difficult to listen to him.

And I think the same holds for financial planners too. If your planner is not going to a planner to have his finances planned, ASK him why should YOU as a client go to him?

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  1. Agree with all the observations except one. I’ve never had an advisor or planner in my life. Looks like I may never have one too in future. I’ve always been DIY (Do it yourself) person, and is doing reasonably well now despite making some expensive mistakes in the initial part of learning curve.

    I’m continuing to learn from many and would like to keep it that way.

    I utilize the services of an auditor for our family for a long time. We do not have anything in black. Every single financial transaction is accounted through Tally and cash flow, P&L, Capital A/C and statement of affairs is prepared and filed at the year end.

    The service of a lawyer is utilized for anything requiring his expertise.

    If my clients want to do it themselves and see no value addition on my part; I’m perfectly fine with same.

  2. One more thing. I’ve told my wife in case of my early demise, whom she should approach for taking advice on managing money. I’ve told that advisor / planner also about this and how I would prefer the family money to be managed after I’ve gone.

  3. ‘Walk the talk and talk the walk’ i think is an ISO punchline..not sure..!!

    Muthu NO FINANCIAL PLANNER can keep bias out of his own portfolio. I personally do not do any ‘fp’ but reasonably the chunks are in place, and have always been. When a friend looked at my portfolio he was shocked to see the 80-90% equity bias, and commented on that, but I do not have any regrets. Mine is a very bad portfolio if I and my broker are not around….

  4. My argument is also at the philosophical level. All life insurance agents believe that everybody needs life insurance, all mf agents believe that all human beings need mf,..all planners believe that EVERYBODY needs a well defined, well written down, clear focused plan. How come they NEVER have one for THEMSELVES?

    It is like me screaming about equity and keeping all my money in bank FD. Nothing wrong, you will never know about what I do…but just that I do not feel comfortable doing it. In the past 3 years incrementally I have put a lot of money in DEBT instruments, and have got excellent returns – far superior to the equity markets, but surely that is not a trend I believe in

  5. “It is like me screaming about equity and keeping all my money in bank FD.” – this is exactly what is wrong with SEBI 🙂

  6. I definitely have a plan for our family; but the author is me:-) I’m aware of my biases to some extent atleast. I do not think there is anything such an objective advice. I advice others also based on my knowledge and experience. So subjectivity cannot be ruled out.

    I can be honest and sincere in my advice; but the term objectivity beats me. As Drucker said I do knowingly no harm with a hope that what I suggest would be good for clients. That is the professional ethics I follow.

    I’ve never ever suggested ULIP or even any traditional insurance product to anyone except term insurance. I took a term policy 10 years ago even before it became a buzz word in financial media. A money back policy taken in 1996 was immediately surrendered.

    The funds I recommend also either what I own or would not hesitate to own.

    Why I started doing things myself was I could not find anyone whom I could rely upon then when I started investing in 1998.

    I try my best to be sincere and truthful but objective…. very difficult sir.. either for my own finance or for that of others.

  7. “No professional, be she doctor, lawyer, or manager, can promise that she will indeed do good for her client. All she can do is to try. But she can promise that she will not knowingly do harm. And the client, in turn, must be able to trust the professional not knowingly to do the client harm. Otherwise he cannot trust her at all. And primum non nocere, ‘not knowingly to do harm’ is the basic rule of professional ethics, the basic rule of an ethics of public responsibility.” – Peter Drucker

  8. I am simple guy and not a professional planner. Yes i understand basics of finance. I dont think i would be going for financial planner. Most of them are worried about thier own targets.

    I discuss my thoughts with my friends. when ever i get time i pen them down.
    Note: I am techie guy and not finance guy.

  9. I would like to ask one thing here. A notion is being developed / has developed that equities are no more buy and hold thing. Is it a good idea to keep churning some of stocks on half yearly/ yearly basis?

  10. Even I am a simple person and do not have a financial planner. I prefer doing the planning by myself and take some help from a CA friend. I do not think there is any bias here as the CA person is a friend and does not manage my money. That I have left to myself. The help is generally to understand the proportion of investment is various instruments. The ultimate decision of which stocks or which FD, which insurance policy is taken by me. And obviously I take the help of internet in this. So, keep the bias away, do it yourself and learn from mistakes is all I can say.

    The Do It Yourself (DIY) type of people can use these investment tools I found on the internet. I found them quite good. They are primarily for equity portfolio management and freely available. You can check them out here – http://bit.ly/portfolio-managers

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