Conflict of interest
If you do not know who is paying your financial planner, take heart, you are paying a much higher price than you want to.
Frankly it does not matter what a person calls himself / herself. If a person says ‘I will spend time with you and make a financial plan, and I will charge you X amount of money, AND i do not care where you execute the transaction, he is a planner’.
However, if he says ‘I will help you plan and will also do the paper work for the investing, he is a distributor’. The agency could be in the name of the spouse, child, parent, friend with whom the commission is being shared.
Is there a conflict of interest? Yes. Why?
– for a bank employee, his bank may be working with a particular Mutual Fund, so the RM may push that product
– the RM may be chasing a reward and may be short of achieving that number, so he may be pushing a wrong product
– banks like upfront commission more than trail, so they push life insurance products
– the person selling may not even know he is pushing a wrong product. Managers normally want sales guys to know the minimum so that he can sell without too much intellectual inputs
-sales commissions are much higher than ‘fees’
-most people cannot do a reverse engineering of the product, nor realise the impact of a small aum based charge vs a high upfront charge. Financial illiteracy is fashionable.
-most financial planners sell directly or indirectly – again proving that till there is customer awareness, stricter regulation, etc financial services will be a mess.
– if a customer wants real sensible advice, he has to learn it himself. If websites are masquerading as planners, I am not sure why doctors, dentists, etc. cannot do web based consultancy. Any answers?
siddhant
Wow, Succor punch,
Is there no hope for people needing genuine advise?
Ramesh
Genuine advise is plain and bland. Get one bank account, one credit card, one equity fund, PPF/PF, and maybe one debt fund, one term insurance and one health insurance plan. Done. Subra has said that many times.
Do people do it? No. Will they? No. At least 99% will not do it. Since, there are no bragging rights there.
If you cannot understand an instrument, you should not invest in it. People want readymade solutions, with big numbers shown on excel sheets. And people want tax-saving and not financial planning.
Basic Financial Planning is simple and is a DIY.
“Don’t buy what someone wants to sell you. Buy what you have researched.”
PrAvEen
Once local agency which procures money in Andhra shutdown it’s board recently. As per papers it collected 150 crores promising to pay either 10% intrest per month or thrice the money in 3 years (each paper says a diff story). As per one paper max people invested more then 10 lakh each and one paper says even the employees of the agency invested in it too.
So what we call these people who invested into this too gud to look at ponzi schemes. INNOCENT? GULLIBLE? or?
& as per one papaer the major agents who joined memebers into these agency schemes are TEACHERS!!!!
subra
thanks Ramesh, absolutely true…nothing sexy about simple things in life, so no bragging rights. Hey it makes money for you!!
NPR
Even PPF/PF is not good enough. It may be a good debt instrument for an overall portfolio, but not a good tax saving / retirement / wealth accumulating instrument. Why?
* PPF A/c maintenance is not easy. You can maintain with only one Bank Branch or with post Post Office A/c.
* One has to keep the A/c going every year atleast with Rs.100 a
* Interest rate is highly regulated by Govt. Although E-E-E, even 8% is good.
UTI Retirement Benefit or Templeton Pension Fund (both Mutual Funds are better). Easy to maintain, No need to invest every year, LT returns are around 10 to 11%.
Atiker
Now in this e-world maintaining ppf too is easy.
I have a ppf account with sbi and a savings account too with them.
One can transfer money from savings to ppf conveniently from the comfort of home.