People invest in such schemes…and what they look at

a) size of the shop

b) so many people are also investing

c)

Is this not stupid? do you know whether it is their own shop or rented?

Do you know whether the many people coming there are literate or illiterate?

I am becoming a big believer in Behavioral Finance. The old Economics told us that man is a rational animal. We always thought that man will try to maximize his wealth. True?? Even while doing audit of companies we always felt that ‘salaries’ need not be audited because people will shout if they got paid less. Sadly this is not true. Many people do not even see if their salary is credited. Many would not know if Rs. 10 or Rs. 1000 is regularly taken off from their salary – believe me this is true. I know of such people.

However man is more carried away by Social Acceptance. When he deposits money in Goodwin Jewellers he looks for people who make such deposits. When he deposits money in Punjab Maharashtra Cooperative Bank he looks to such friends. Then they talk about how PMC is a ‘Grade A’ bank, and how such a bank can’t default. Honestly none of them know the difference between a Scheduled bank, a Cooperative bank, a Grade A cooperative bank,  a big successful private sector bank, a weak private bank….they do not know and do not want to know. Sad is it not?

At home there is no communication about money. So when a father (or grandson) invests in PMC or Goodwin, the others in the family do not know, or rather do not care…and this is the end result.

Here is the opportunity for IFA, as well as other members of the family. Make a list of  all the assets that a client, his parents and his kids have. That itself is a great exercise which many families have not done in decades. So do that.

Once that is done, you will be able to make your will.

Then make a will for all your clients. Use this PMC and Goodwin scams to improve your business.