Every article which starts by asking ‘do you need a financial consultant, or planner….’ is written by a person who is pitching for a financial advisory business. – this is not my statement, but a statement made by the editor of a finance website/magazine. The problem is, it is the truth.

Let us see the biggest problem with the Financial Consulting / selling business. I am combining the two because in India the lines are at best blurred. It is almost impossible to find a genuine pure fee based guy, and the operational hassles are too much for a person to want to do the execution and monitoring himself.

Almost every client / potential customer is trying to BUY ‘Financial Certainty’ and lovely graphs and charts, he is not buying the truth.

So every customer wants to hear “In the long run equities will SURELY earn more money than a debt portfolio or a Real Estate portfolio, so you can expect to earn about 19% (that is the last 35 year average), and the minimum time that you should be in the equities is about 5 years (the more aggressive guys could say 3 years and the more conservative guys could say 10 years). The problem is NOT in what the adviser says. It is in what the client hears. The clients see this as FINANCIAL CERTAINTY over a 5 (or 3 or 10) year period. Sadly it is not certainty which should be sold. The adviser has to have the guts to say

  • In the past equities have out performed debt portfolios (fact)
  • In the future equities will out perform debt (assumption based on Economic Theory)
  • I have no clue of the pattern of returns over the next 10 years, but the CAGR is likely to be REAL
  • I do not know whether we are in the middle of a bear market or a bull market. This will be answered in about 3 years time.
  • Fund managers will NEVER be able to tell you when to exit. You need to exit when YOU need money
  • I am as clueless as your 15 year old son about the next 6 months or even next 6 years about the market

Let us be fair, even if I do find a ‘client’ who is willing to say all these things, do we have ENOUGH clients who want to hear the following:

  • Invest in equities, because a lot of the world’s wealth has been created by equities
  • To invest in equities (direct or mutual funds) you need to read and understand
  • You need the maturity and fortitude to ride through a difficult market
  • We need to do a year to year review, but that does not actually tell us whether to shift from fund A to fund B or the reverse
  • A good well communicating agent may not have the guts to tell you the truth, but may have good presentation skills
  • A good agent who is doing well is not really seeking business
  • You do not need me on an hour to hour basis but only for 2-3 hours a YEAR
  • Why would a planner talk about uncertainty when you are so happy with the nice excel sheets and pie diagrams?
  • The Asset allocation and the split between Large cap, mid cap, value, growth, etc. is just for fun
  • There is corruption in the fund management industry just as is there in the Revenue departments of the government.

So let us be fair..one man goes to buy a story which says “…..and therefore we lived happily ever after”. The other guy is the story teller who has been told by Subra (or equivalent) on a Thursday Friday training to say the right things. Sat/Sun was the office bonding party. On Monday morning the boss says “guys revenue target, not the f…. top line”. Remember the nice printout and ‘certain’ looking ppt is an easier sale. And ensures a trip to ……………………..(fill in the blank).

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