Recently we heard of Suchitra Krishnamurthy taking her advisor Hsbc to court over her funds being poorly managed. She may or may not win the case, but what is the learning for celebrities (and us too!!) from SK’s case? What could she have done differently if there was a second time around?
Well here are some pointers:
1. You need a team of advisers: If you are talking of managing money in excess of even US $ 3 million – about Rs. 10 crores or thereabouts you need a team of people. To me even if you are just a beginner – Unmukt Chand – it is worth assembling a team.
The team should comprise of a CA to keep track of your income, expenses, and file your income tax return. He is the guy to whom you will turn to when you have taxation queries, and the guy who will whet all your agreements.
The second person is a financial planner who will make you articulate your goals, provide clarity, choose asset classes, etc.
The third person is the Investment or Fund manager who will actually invest. This person should be paid ONLY on effort basis and NOT ON THE SIZE of the AUM.
2. Show your credentials please: Asking the team members for their CV, interviewing them, asking them some basic questions is a MUST. Sadly many celebrities feel that once you see a big brand you need not worry about the individual with whom you are dealing. Nothing can be further from the truth. SK for example did not realize that Wealth Managers have SALES targets, not YOUR wealth!!
3. Trust, but Verify: these famous words of Ronald Reagan hold true. Your CA should give you a warning about what is happening on a Quarter on Quarter basis. The days for review should be fixed, and you should show interest in what is happening. Your financial planner should be able to see what the fund manager is doing and what explanations he has a) for increasing risk and b) for reduced returns.
4. Do not blindly trust your friends advisor: How do you think Virat Kohli must have chosen his advisor? He must have turned to Virendra Sehwag. How would Sehwag have chosen? He would have turned to say Harbhajan….the list goes on. So one half competent guy chosen by say Kapil Dev may have got a lot of business just from referrals! DO NOT DO THAT….look outside ALSO before you decide. Have a choice of 3 people for each post.
5. Once in 3-4 years have an independent audit done.
Will all this cost money? The answer is yes, of course yes.
Is it necessary? unfortunately yes. You could also learn a little bit of investing, take a term insurance do a SIP in 4-5 funds and be done with it. You still need a team to see that you are on track – yes when you are ONLY in index funds, MONITORING becomes easy.
So earning a good amount of money (ok in case of SK it was alimony!) is tough for sure, but managing it is far, far more difficult.
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