Your Chartered Accountant is not a Financial Planner / Advisor

As I interact with lot of investors, I find that some investors, particularly the HNI segment, have this habit of referring their Chartered Accountants (CA) for every financial decision including investments. I am not saying that this is completely a wrong practice, but one must also check that, is your Chartered Accountant so efficient that he can advice you on your investments or financial planning matters? By efficiency I am in no way referring to his qualification, but yes I am referring to his area of expertise.

Chartered Financial Planner

I have seen that Chartered Accountant being given god-status in some households. Once I was with an aged investor and he was looking for tax efficient returns without any exposure to equity as this was an investment for around 6 months. The investor was into highest slab bracket hence I recommended him Fixed Maturity Plan from a reputed mutual fund house. But investor insisted that I should explain the product to his Chartered Accountant. Reluctantly (because of my past experiences) I agreed. The first question that was asked by the CA was pretty basic- “is this an open-ended product or a close-ended product”. If an expert ask question like this we all know the fate. He insisted investor to go for a Bank FD saying that the mutual funds are not safe and banks are. So invest in a PSU bank. And then he went for the final kill and suggested that since equity market is in bull phase, you should take 2-3 large cap stocks and sit tight. You will make the same money in one month that this FMP would give.

Although this Chartered Accountant had no vested interest and was working in favor of his client but his knowledge limitations ruined investors portfolio.

Chartered Accountant (CA) is not a Financial Advisor

Consider these following points before you refer to your Chartered Accountant (CA) for any of your investments decision or Financial Planning:

  • CA is an expert in accounting and tax practices. He is not an expert on assets like Equity and Debt. Also he is not an expert on tracking or researching factors which are must for any investment decisions you take. These factors can be macro like European Crisis or micro like inflation. He may have view on these as a spectator but he is in no way qualified to analyze these facts to form an investment advice.
  • In case of individual investor, a CAs job ceases after he calculates the amount of tax that investor needs to pay. Investments to save this tax fall under the purview of your Investment Advisor or your Financial Planner. He will help you invest a suitable tax saving instrument taking care of your overall portfolio, asset allocation and other needs.
  • CA has no role in Financial Planning. He is not equipped to assist you in your goal planning or risk assessment. Also since he is not an asset expert he cannot help you in assessing your future finances and portfolio. CAs engaged into advising on investment just does it for the sake of not losing their clients or for some monetary gains. Beware as his advice will never be comprehensive.
  • Your Financial Planner is expected to have detail knowledge about economy and individual assets. He can also deal with tax related matters if you don’t have too complicated financial life. Also as he is associated with you since the early stages of investments, he has a broad picture of your individual requirements. He is aware of your family needs and you get personalization.
  • In some cases CAs act like product sellers for your insurance needs or tax savings bonds. This is not a correct practice in fact the Chartered Accountants are prohibited by their practice guidelines to act commission agents. It is prudent that you take service of professional who is suited. For all financial planning related aspects, your Financial Planner is most suited.

Roles of different Financial Professionals 

If we look at the roles or the expertise Chartered Accountants are not Financial Planners or even Financial Advisors.

  • Chartered Accountants (CA) work in fields of business and finance, including audit, taxation, financial and general management.
  • Financial Advisor is a professional who renders financial services including investment advice, which may include pension planning, advice on life insurance and other insurances such as income protection insurance, critical illness insurance etc., and advice on mortgages.
  • Certified Financial Planner (CFP)  is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners).

So next time if you suffer prolonged common cold it is better to show this to a Doctor who is expert in Internal Medicine and not to a Cardiologist, even though the cardiologist is your friend and provides free advice over telephone. For god sake stop worshiping the wrong deity. (Read: How fake financial planner puts his clients into trouble)

Must share your experience with Chartered Accountants for financial advice.

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90 COMMENTS

  1. Hi Hemant
    I am in complete agreement with what you have said. My experience is also somewhat similar. I have a CA friend. I know that he makes more money in property dealing than in his professional practice. Many times he has suggested to me to buy a piece of land. He once told me that he will send an insurance agent to me. He has also been telling me to buy some tax free bands. So far I have not listened to his advice. I only consult him to know how much of advance tax I have to deposit.

    • Hi Anil,
      You are lucky that you understand personal finance & also role of CA but what about other people. People think that as CA knows more than them – he can guide them but what about things that CA has no clue about…

      • Hi Hemant
        We have to understand that we live in an era of specialists. General practitioners have a very limited role these days. My sister who is a doctor in the US is a specialist in geriatrics and deals with the diseases of the old people. Whenever she visits us she always tells me to visit a specialist for any medical problem. Unfortunately in India we have very few specialists in all fields and most people seek advice from people who are not specialists.

        • Hi Anil,
          In US they have specialist or niches even in case of financial planners – segments like retired, women, divorced, early retires who sold their tech businesses, windfall gains or inheritance & even living relationship or gays. 🙂

    • yes,agreed.
      It happens in the same in many places.
      in our place all the C A s knows only lic agents and never shown any interest in understanding other financial products.
      d about in some cases they are suprised when said, about tata or reliance also entered into life/non life business !

  2. I totally agree with you. But what i have found from my personal experience is that for people tax filing is a legal requirement and Financial planning is not. and when they found that their CA or Tax lawer can advise them with the investment matters also , they feel more secure in discussing financial matters with a single person.
    and there the main problem starts from. That’s why i love this article, as whosoever read this will come to know why they should prefer Financial planners to CAs as far as personal finance is concerned.
    CAs have their own expertise and if required any good financial planner will himself divert you towards a CA/tax lawyer. But i have never seen any good CA diverting his clients’ to a financial Planner.

    • Hi Manikaran,
      I have seen all type of CAs:
      CAs who concentrate fully on their practice & are very successful.
      CAs who are ready to do anything to earn additional income – insurance agency in name of his wife, selling plots etc
      CAs who have left their profession & 100% transformed themselves as financial advisor.
      But its clients duty to understand that what his CA’s expertise.
      You added a very valid point “they feel more secure in discussing financial matters with a single person” – in one sense it is good for client if CA is competent to meet all his requirement. But in most of the case client is not able to get best of both worlds.

  3. Nice article, Hemant! Anil, the best trick you can use as an investor is your ability to say ‘No!’…especially if the advisor is your friend. And you seem to be doing it well.

    I wish your friendship survives! 🙂

  4. Hi Hemant,

    An awesome article on difference between role of a C.A. and a CFP….
    I will definitely use this as reference into my coming seminars……..

    I think this article will be an eye opener for those who rely on their CA very much.

    • Hi Shinoj,
      There can be few fund managers or stock analyst who are CAs – because their educational qualification helps them in reading company statements. But even fund managers are not financial planners/advisors 😉 – their role is just limited to manage pooled portfolios, they are not even interested about investors risk profile & overall asset allocation.
      Bw normally fund managers do CFA from US.

      • Hi Hemant
        I feel our passions are more important than our basic qualifications. Anyone who is passionate about something can always acquire additional qualifications and experience in a completely unrelated field.Our present RBI governor has a basic engineering qualification.Anil Kumble has engineering qualification. I know many engineers and doctors who are IAS, IPS and IRS officers. One engineer friend of mine has taken training in photography and runs his own photo studio. Lastly, many people without any formal training can write very good articles.

  5. Hi Hemant,

    Your article is eye opner for those people who do rely blindly on CA that he is the only competent professional for everything know about financial matters. I retrirated always to my clients that CAs are expertise in only professional qualified in corprate financial planning and CFP are expertise in professional qualified in individual financial planning. Most of my clients either are CAs or doing CA and surprisingly, they do not even know about “what is mutual fund”. I know some CAs, they do not even know about under section 80CCF investments. Hence, how can they help about tax planning and investments. In my personal experience, CAs are only typical accountants and expertise in book-keeping, profit and loss account and balance sheets of the firm or company, nothing else.

    • Hi Suresh,
      I have damn bad experiences in interaction with CAs – most of them don’t know about even basic taxation involved in mutual funds. I met one client in 2006, he was paying long term capital gain tax on selling his equity MFs.(as guided by CA) 🙁
      Recently met one businessman, his CA said don’t invest in liquid funds – your software company will become NBFC as per RBI guidelines LOL. When I told client, that in this case TCS & Infosys should be NBFCs as their annual result shows they have invested heavily in mutual funds. Client told same thing to CA – he shared a RBI circular
      “The company will be treated as a non-banking financial company (NBFC) if its financial assets are more than 50 per cent of its total assets (netted off by intangible assets) and income from financial assets is more than 50 per cent of the gross income. Both these tests are required to be satisfied as the determinant factor for principal business of a company.”
      I replied “This circular clearly says – AND. So this means both the conditions should be satisfied but in your case we will not be earning 50% of the income from financial assets. This means we can invest in mutual funds.”
      But as CAs are semi-gods – client is still loosing Rs 5-6 laks every year due to zero interest in current accounts.
      I would like to reiterate “Although this Chartered Accountant had no vested interest and was working in favor of his client but his knowledge limitations ruined investors portfolio.”

      • Hi Hemant
        I have worked in many private sector undertakings and got the opportunity in interacting with CAs.What I have understood is that in most small privately owned companies the owners have very limited knowledge of financial matters. So apart from their company matters, the CAs handle the financial matters of the owners also. Their main concern is to reduce the income tax burden of the owners and handle their cash transactions. So automatically they take the role of their financial planners also without knowing anything about financial planning.

      • Hi Hemant,

        As you define the role of CA… we would like to know what is the role of CFP in Financial Planning … How their hand is upper than CA.

        When we talk about finance… first name come in our mind is CA…. What I understand from CFP is that they analys the data … Find Out Goal… Prepare path for Goal…. Mostly they suggest two products… Firstly Term Plan… for Financial Support & Secondly SIP (Mutual Funds) for future dreams with DISCLAIMER (depending upon risk taking capacity of client) – correct me if I am wrong.

        • Hi Atish
          Finance is a very wide field just like medical science.As we have experts in medical profession similarly we have experts in financial matters. Accounting is a very small portion of finance. I know many CAs who seek the advice of advocates who are experts in Tax laws. CAs generally handle the accounts of companies and individuals and file their tax returns.
          Personal Finance is a completely different matter which concerns all investors big and small. Unfortunately,the level of financial literacy in our country is very low and even highly educated people do not know how to handle their personal finances. So this is where CFPs come in. Financial planning is not as easy as you make it to be. No one size fits all solution is available.Hence it has to be tailor made for all individuals. Moreover, this is an ongoing dynamic process.

          • Dear Anil

            Very much true, Like medical science, Even every MBBS doctor is not competent to get treatment every ailment such as ENT, Dentist, heart specialist,surgeon etc. We are here like that specialist. Like that, CFPs are specialist in individual financial planning etc.

          • Hi Anil,

            This make some sense to me.

            How many people would like to plan for more than 10 years when they cannot see beyond 5 years.

            Take my personal example… I don’t know how much my Son will be needed when he complet his 10th/12th Standard… I don’t know which subject he will be interested… I don’t know at what age I will take retirement and how much I will be needed at that time…upto what age I will survive… If I don’t know all this myself how can i tell this to Financial Advisor.

            On the top there is always disclaimer attach with Financial Plan “the return are subject to market risk”

            • Dear Atish,

              Those who can not see or think beyond 5 years, will not do any financial planning.
              For your personal example….you decide how much you want to have for your son as per today’s value, CFP will calculate and tell you how much it will be in future after inflation and how to achieve that based on your income/expenditure. Whatever subject your son studies…you should be financially prepared. Your CFP can also calculate how much you need to maintain your lifestyle whenever you retire…45,50,55,60…CFP can plan for that. About survival…a CFP can plan for your survival as well as plan for you families financial security in case of death.

              If you do not like the line “the returns are subject to market risk”…please note that “the returns are also subjected to inflation risk”….. 🙂

  6. Haha, I had the most pleasure of reading this. I am going to slap this to an uncle of mine who thinks that the CA he knows is all he needs, even though some of the investment advice he suggested was utter wrong and a non-financial person like me could see this with little knowledge but he went with his suggestion anyway. CA’s are good for taxation, audits, etc but when it comes to financial planning, one needs to dig deeper to find a financial planner inside a CA, if at all it’s there.

  7. Very nice article and eye opener specially for HNIs or Business Class segment whose have a blind faith on CA.
    Have seen many CAs those are making lots of money by selling stupid investments to their clients. Their focus is only to maximize their income from a particular client.
    Regulator must clear if a CA want to act as an Auditor then he can’t do Financial Planning and he want to act as a FP then he can’t do his primary work.

    • Thanks Gaurav,
      Few insurance companies have focused CA’s spouse as their agents – even my neighbor who is a big CA is having is Max Newyork life insurance agency in name of wife. And to my surprise one day she came to my place with sales manager. LOL

  8. Hi All,
    Whether you are a CA or whether you are a educated Finance professional like a CFP, its important to ask yourself a few important questions to ourselves – can you inspire trust in front of a potential client? Do you have the systems to delever on a consistent basis the service levels to the customers? Do you command respect to charge a flat fee to the client?

    Very rarely would the client pay you a fee because you have convinced him that a particular professional/ Advisor/ agent is not good. He would pay you a fee for what good we are as Personal Finance professional. Have you in the process of educatuing the client able to convince him that you will make a genuine difference in their lives.
    Instead of speaking about what a CA does and does not do, we should focus on how Financial Planning will add value to him.

    • Hi Kamal,
      I agree with couple of points that you have raised – but trust will always be result of your advice & outcome, it can’t be other way round. This article is not CA vs CFP – leaving that small infographic but its about misconception that people have about the role of CAs. In starting I clearly mentioned “By efficiency I am in no way referring to his qualification, but yes I am referring to his area of expertise.”
      PS: Hope you are not a CA.

  9. In september I along with a sales person of DSP Blackrock visited a doctor in mumbai for his investment in mutual funds. I n guy from DSP got 2 application(SIP) each from him .
    he gave a blank cheque and asked to put in any fund which is performing good.
    so i submited the application in multi cap & gold fund and asked him to put in large cap of DSP fund.
    Next day i rcvd phone from clint stating that he doesnt want to do investment now because his CA has said that it was not a good time to invest in market.
    The forms were already franked (time stamped) , so i had no other choice to manipulate and reject the application.

  10. Very good article highlighting the difference between CA, CFP etc. In my organization I have seen CA only in month of July when they come to file tax. They ask for information in prescribed format and advice on how much tax to give. They don’t even ask for interest on Saving Bank Account!
    So expecting advice for financial planning or investment from them doesn’t seem to be right.
    But one needs to find a good financial planner, for as you rightly suggested in your article there are many sales agent in the guise of financial planner!

    • Hi Kirti,
      Normally for salaried individuals CAs have a limited & very simple role but in case of professionals or businessman they do hell lot of work. I think that interaction over the years & dependence for every financial decision creates some misconception while considering CA for investments.

    • Hi Kirti
      I have experience of working in small as well as large organizations.I have found that small organizations normally avail the services of part time CA but large organizations employ a number of CAs and they don’t look only after tax matters or accounts but do many more jobs for their employers.

  11. Well distinguished.

    No doubt CAs expertise is limited to his domain but due to lack of Certified finanical planners in the city/country people tend to consult their financial matters/investment planning with CAs.

    Today’s generation due to the exposure on the internet know the differentiation well between the two. But still there are many people who are in their 40’s/50’s are aloof with this differentiation.

    So what’s the Govt or the concerned authorities doing in this regard?

  12. Once again, an article explained in a simple but effective way. Keep it up.
    I would like to add an incident pertaining to this.
    I had approached a financial adviser thru my brother and he started to plan for me by asking me to start with the invest in tax free investments and then the balance to be invested in mutual funds and term plan as per goals. Now i was not so convinced with that, after investing 1 lacs for tax saving , i was left with almost no money for my goals. So i started for searching a CFP.
    I found one and one thing which he advised me was that if i invest 30000 to save 3000 as tax in low returns investments, i shall save only 3000. But if i invest the same 30000 in high returns investments regularly for long term, i shall reach my goal and also shall be able to recover the tax paid of 3000 from high returns.
    I concluded that sometimes it may be better to start investing in investments related to my goals rather than save tax, as i may lose out the precious time for investment to grow for tax saving.

    Regards,

    Hitesh

  13. Very well described and informative articles are here for finance illiterates. Thanks for your efforts sir.I want to ask your frank opinion about my financial planning and your guidance in this regard..I am a central govt PSU executive ,age 28 yrs ,married ,having one child of age 1 year.from this year only i started to think and act for my financial planning ,after reading your articles and posts.
    To save tax ,i purchased 1 NSC of 10,000 ,and IDFC infrastructure Bond of 20,000.EPF contribution is 50,000 ,1 PLI Endowment Plan for 7 years (maturity at age of 35 years),sum insured 200000….Due to financial constrains and some mismanagement of fund ,i cannot purchase TERM Policy this Financial year ( i am sure going to purchase in next 2-3 months).I go for short period of PLI period ,because the difference of amount at maturity of 35,40 or 45 is only of 7000 per lakh per year….which means for example
    i will get Bonus at 35 (7000*2*7) and at 40 (7000*12*2) , difference is of 70000 only…I will purchase 1 NSC or deposit in PPF account ,(this will give more benefit as compare to 40 years age of maturity amount.For Insurance i will have TERM policies….
    one more think i want to tell you that,the amount which i am going to invest in any plan ,whether in NSC,PPF,PLI or any Mutual Fund (this is also in mind through SIP),is not going to be used by me until age of 50,i will try to circulate them for next investment,i.e from NSC matured value i will purchase another NSC of same amount and forget it for another 5 years…and like this …
    This is my first year of investment,so i need your views about this planning…From April-2012 ,i will plan for Child Future .I am also an Illiterate person in financial planning…
    what more i can plan?

    • Hi Ankur
      It appears that you are investing only to save tax and not for your goals.Your exposure to equity is nil and you seem to be investing only in debt instruments.

      • hi Anil
        Can you please elaborate your comment… By considering my first year of investment planning,what is your suggestions?

        • Hi Ankur,

          To start with, reduce investment in NSC,PPF, start some long-term SIP in diversified equity funds with minimum 3-5 years of good track record, keep provision for some liquid cash or may be FDs, immediately buy a Term plan, and don’t do anymore endowment plan,. This is not financial planning though…but good to start with.

          • Thanks Debasish
            i will try to follow your suggestions in next financial year..this is already done..But you had not touch my income tax aspects …for them i have to do some thing na?

        • Hi Ankur
          Only investments in diversified equity mutual funds can give you inflation beating returns in the long run.To get the benefit of compounding one should start investing in equity funds at the earliest.

  14. Dear Sir
    Completely agree with your above statement. CA’s will look only for his/her interest. I had many examples in day to day life but still people believe in them. They had a tie-up with the companies and earned commission on them. They just suggest the client to invest in such and such insurance without looking to customer’s requirements and earn a heavy commissions.

    Regards
    Hussain Namakwala

  15. You are right in saying that CA can not help in financial planning.It is in general trend that we meet a CA at the end of financial year or some where close to that ask about his advice in saving money from tax jaws.He helps in that way and you need to plan your self about future financial goals so that you can chalk out a way of achieving them.Nice article.

  16. Hiii Hemant,

    The article is very good and the comments & your reply to them is most convincing.The few things which made me laugh a lot in this article that a CA asked “A FMP IS CLOSE ENDED – OPEN ENDED” “PAID LTCGT ON EQUITY” and so on…
    The conclusion is that CFP can tell you investments as per taxation & need but CA cant tell u investment products as per your need.The best part is for financial planner who can offer or realise client that he/she will manage his/her not only investments and also taxation by hire a CA or do a expertise in tax then client will be happy as he/she get everything at one place and I have seen that many CFP do same thing.
    Waiting for your new articles sharing your experience
    Superlyk…

  17. Dear Hemant,

    Could you please write an article on the post-budget impact on financial planning and investment after changes in tax and exemptions. That will be very helpful.

  18. Hello, Nice article however, can you advise how do you understand a good Certified Financial Planner, I have seen that the passing of Exam does not require too much of brains (passing not excelling). But the performance will be known only after let us say 5 years how do you evaluate a good CFP, for example how do I know that X is good CFP what are the deliverable & checks for being best in profession.For the simple reason whatever CFP says is SUBJECT TO MARKET CONDITIONS, so I fail to distinguish between CFPs, which basically is a job which can be done by any website free of cost without too many efforts, i think the job involves more software than knowledge.

  19. Hi All,

    I hold a different opinion, I really doubt that any of them making comment here has a clue about CA curriculum. A CA curriculum has all financial aspect ranging from accounting to tax and financial management and it also includes 3 years of effective training mechanism. In every professional field there are people who excel and justify the knowledge level while other falls the line. Take layers, all layers in India are not like Ram Jethmalani or Kapil Sibbal. Many does not secure a decent livelyhood even after holding a law decree. So we can not form opinion based on few underperforming person in a professional field.

    All other courses in the finance are a copycat of the CA program. CAs are one of the oldest financial planner of world economy and probably that’s why few think they are the Gods. They not suggest in one field they guide their clients in all fields like Investment, Returns, Tax, Regulatory changes. A CA is master of these field. For all tax reforms CBDT refers to ICAI for validation. If anybody think that a investment decision can be taken without considering these facts (as advised by a CFA or MBA) then he is completely a ignorant.

    There are many CAs who are running top companies like Aditya Puri Director of HDFC Bank. Many of the top investment bank’s officers, CFOs, CEO are chartered accountant. List is endless.

    I believe you all need to analyze the things first and then make opinions. CAs are highly efficient and educated professionals and hold very high prestige in the financial domains.

    God bless you… Pranay

      • Hi Hemant,
        I believe you have an immature understanding. Expertise doesn’t mean theoretical knowledge of one subject, practice in same subject and consider expert. For example, a big tower need a big base you can’t pile up bricks one on another and have a high tower.

        CA study all the subject related to financial management so they have vast knowledge and expertise. A CFA just cram share price of few company and believe have very sound financial knowledge…

        Financial management is much more than that. Due to sentimental market like India sometimes you may succeed convincing someone with this sallow knowledge but when you discuss at broader level it need more knowledge in the area of accounting, tax, regulation, controls which hardly a CFA come across with..

        Pranay

    • Hi Pranay

      Completely agree with you….

      It seems very strange to even read these comments, some of them really out of place and immature . Forget about what a CA does and what he dosent do? why not concenterate on building yur own capabilities….as a professional…

      I think you have a very valid point on the curriculum, its just got a huge rigour. It not only gives expertise, but gives an ability- and confidence to make a difference in peoples lives, something I believe a large population of the CFP community lacks. There are a few notable ones who do only c0re financial planning and deserve credit. Also some of them increase the awareness on what financial planning means in a very productive way…….

      The bottom line is that a profession builds respect for itself not by belittling others but by raising its own standards of service. The CA profession has done that…..for decades….

      I mean, How many CFP’s have shown the courage to buid a clientile of atleast 100 fee based financial plans, do you really bother to lay down systems that delever services topeople. The clients judgement is the best judgement…..he will decide what expertise you have…what kind of trust do you really command……we all love testimonials from clients dont we?

      Hemant, if expertise is the argument, the CA’s cirriculum and standards on examinations are tough. The principles on Financial Planning(Inv/tax/ins and comprehensive) are not very difficult to understand and master, the practise is……

      Whats difficult is for people to do business ethically, it takes guts to keep doing the right thing without loosing focus on client centricity. I see a lot of Financial Planners today not focus on Financial Planning but on other things to occupy themselves(Selling products etc) . It would be interesting to see whether any of the comments are coming from a person who has atleast a 100 Financial plans (Fee based).

      The CFP has the expertise ….but it has a long way to go to first build reputation for itself…..and then to protect it from being criticised…..

      God Bless you…

      Kamal

      • Hi Kamal,
        I clearly told you its not CA vs CFP but it looks that you are a CA & taking things personally. 80% of the comments on this post are from layman (they are not CA or Financial Planner) – read what they have to say rather than concentrating on what I have written.
        Regarding setting practice – going to CA is like buying Motor Insurance (which is almost mandatory) & going to financial planners is like buying term plan(which is not mandatory but more important than motor insurance). If we talk about age of profession – ICAI is 60 years old organization & FPSB India just 10 years old.
        Financial Planning is well established profession in couple of countries & also rank in top 5 jobs.

  20. dear all !
    when i was working for a life insurance co. i was forced to meet my clients CA for collecting itax returns. the ca got angry when he came to know about a TERM plan from our co., he told me the client needs NO life insurance extra as he is already paying 5 lac rs per year as premiums !!!
    i went back to clients office/ residence only to know in SHOCK that his total sumassured in case of death is only 40 lacs and no raiders or any health policy.
    for the readers benefit i want to say the client annuval income is one crore.
    i remember the story.

  21. Should the investor rely on a financial consultant who claims to be one just by passing an AMFI exam comprising of 100 basic questions ?

  22. sir

    I am deepak kanodia from india and married with age 32
    I found your name in one of the personal wealth mgmt website.
    I have done my mba in year 2003. and now currently working as fundamental research and technical analyst in equities in a firm in kanpur in which my profile is handling equities portfolio
    sir i was bit confused which career path should i choose CFA or CFP as i want to boost my career so want your guidance in this regard. ?
    how to decide as per my inter personal skills what direction should i take as i am not very extrovert/
    after reading your profile i thought you are the best fit to mentor me.
    I know CFA is recognised globally and CFP is country specific.
    I was thinking to do CFP of australia as salary is good there and paraplanners demand is good there and recession not as great as in US or EUROPE.
    but after great research i found that CFP is actually selling personal finance to clients and is more client based rather than CFA which is not more like client interaction
    so i want to take ur guidance looking at my skills that should i go fo CFP in australia by distance education or go for CFA in india?
    will CFP help me to take me to further level or i should do CFA or any other advice you give

  23. Hi Hemant,
    This is my first visit to your site and I found your articles very clear very convincing. I am an NRI for the last 12 years. I am holding 25 lac in my NRE savings account (tax free). I dont need this money immediately so I want to invest it in NRE FDs (tax free) for 8 years @ 9.25 interest (expecting 50 lacs in the year 20000). I will be returning permanently to India by the end of this year and after that I cannot invest in NRE FD. I think NRE FD is the only investment 100% tax-free. From your articles I am inclined to invest in MFs but I do not understand the tax implications of MFs originally opened with NRI status, but later the investor becomes a resident. Could you please educate me on that?

    From Jan 2013 I will be woking in India @ 2 lac/pm, so I will be under a high tax slab. Hence I need a careful planing for my present NRI saving keeping in view my upcoming tax liability in India. Kindly advise me at your best.

  24. My dear Watchdogs,…..expertise is gained from experience and not just boasting of how our exams are hard….there are many education courses which are much harder/tougher than the course pursued by aspirant watchdogs..so dont flaunt about exams only…CFP institute is newly born..and institute of watchdog is almost 60 year old…so comparision by old man with a child is not worthwhile….if you want to see the scenario where CFP will have wider recognition than that of watchdogs….it is fact that watchdogs do tickwork and copy-paste work…balance sheet& PnL is automatically prepared in dataprocessing system..watchdog do copy,paste and format in excel…this is exactly happening in many companies…financial management,planning is not an area of expertise of watchdogs…as far as taxation is concerned only income tax where they claim as expert..and that is just becuase of provisions of tax audit authority mentioned in income tax act…but real tax practice like chamber practice is out their ability..there are many expert tax consultants whose services are availed by companies when they found in trouble..in case of indirect taxes, watchdogs does not know beyond tax rates….so my dear reader of this post, use your brain while giving importance to watchdogs…see with open eyes&mind….best of luck

  25. Hi hemant, Good wishes For your Successful career as CFP!

    I am chartered accountant, we advice our Clients based on his Risk attire
    You told
    “I have seen that Chartered Accountant being given god-status in some households”

    I have seen many persons give this status because CA is Tough course. ICAI is being in india for 60+years The members of this premier institute is around 2 lakhs+ (oops remember 120 crore people in india ) again they are separated into two categories working in/for corporates and those who are in Public practice.
    They ratio being give today is 60:40 so approximately 40 percent of 2 lakhs that is 80000+ CAs are there in INDIA serving for various people. Being with the Client for Longer period He knows that what risk portfolio he could be accomodated. So generally CAs advice Advice based on Age and his Risk taking capability. Thats why they reserve special status. Apart from his Tax planing things.
    You said
    Once I was with an aged investor and he was looking for tax efficient returns without any exposure to equity as this was an investment for around 6 months. The investor was into highest slab bracket hence I recommended him Fixed Maturity Plan from a reputed mutual fund house

    You yourself said aged investor, i have seen many persons who are aged will not take things easily. So as a auditor he done his Good to his client. in market condition like CAD booming up and hearing new new corporate scams frequently and for the aged person the market is not suitable because he can loose money but he should not get heart attack!!! ok so for them the risk free invesments is enough at this juncture.

    CFP is new specialization. They need to be with client to understand his risk attire. he should not only concentrate on returns but he should give due response to the age and attire of his client.

    Regards
    Yogi

  26. In this computer era, all records of business enterprises are maintained in computers and voluntary compliance of return filing U/s 139 of Income-Tax Act are also sought in digital format. Return preparation utilities are provided by the Deptt. so that there may not be any instance of wrong claims or deduction, unless there is bug in the utility provided. Therefore, Tax Professional should be more specialized in Computer Operation rather than Income-Tax Law and Accounts at Original Side. As per Section 288(2) of Income-Tax Act, Eight class of persons are authorized to act as representative of assessee. Among them, only following Five class of persons are authorized to prepare return on behalf of assessee under Rule 12A of Income-Tax Rules :-

    (a) Legal Practitioners
    (b) Chartered Accountants
    (c) Cost Accountants, Company Secretaries & Income-Tax Practitioners.

    Audit means “verification”, depending on the purpose they are classified as Energy Audit, Environment Audit, Product Audit, Process Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Here, person conducting audit should be specialized in that subject. Hence the word “Audit” is not the domain of Chartered Accountants. Assessing Officers in Income-Tax Deptt. who conduct audit in assessment proceedings are not Chartered Accountants. In conclusion, person specialized in Income-Tax law should issue “Certificates/Reports” under Income-Tax Act. In 1984 certificate from only Chartered Accountant U/s 44AB called Tax Audit introduced in Income-Tax Act to ensure that physical books of accounts are properly maintained by business enterprise & claim for deductions are correctly made and also to save the time of assessing officers to verify correctness of totals at the time of scrutiny. Since then, CA Certificates started entering Income-Tax Act and on date there are 46 Plus CA Certificates in Income-Tax Act. Because of 46 Plus mandatory CA Certificates in Income-Tax Act, Legal Practitioners, Cost Accountants, Company Secretaries and Income-Tax Practitioners can not exercise the authority granted in the statute fully & independently. This is practically causing strict hurdle for voluntary compliance. This position is comparable to decree of the court which can not be executed. Here the question is, when such other classes of persons are authorized to PREPARE RETURN under Rule 12A, there is no JUSTIFICATION to prohibit them from issue of certificates in Income-Tax Act (Here presumption is, such other class of persons also possess the knowledge of Accounting Principles prescribed U/s 145 of Income-Tax Act) It is also clear that, on introduction of CA Certificates in Income-Tax Act, original intention of legislature in Rule 12A has been struck down. In fact, there is no such type of certification clause in any country throughout the world in revenue side.

    In latest e-filing website of Income-Tax Deptt. only CA’s are treated as Tax Professionals with special login to upload CA Certificates, without which Non-CA Tax Professional can not give compliance to the Deptt., if given his clients are under the risk of penal provision. These CA Certificates barricade support for voluntary compliance from Non-CA Tax Professionals & new Non-CA Tax Professionals are not entering tax profession on one hand and total number of practicing CA’s are not increasing on the other hand (Considering the output & death rate of practicing CA’s). In the enclosed Tax Audit Data provided by DIT(S), it is evident that only 65,570 CA’s are practicing throughout India. Further, there is ceiling of 45 Nos. of Tax Audit Certificate, fixed for each CA irrespective of corporate & non-corporate assesses, without considering the demographic spread of CA’s throughout India. Because of ceiling, existing Non-CA Tax Professionals handling tax audit cases have to roam around in search of empty slots of CA Signature to give compliance in the case of their clients during due dates. This has also resulted in high cost of compliance, due to high demand & extra payment made for reservation of empty slots of CA Signature. These CA Certificates in Income-Tax Act are causing strict hurdle for voluntary compliance not only in Income-Tax Act, but also in other Central and State Govt. tax laws (Ex: In Finance Act, 2012 negative list introduced in Service Tax requiring the assistance of more tax professionals, but number of tax professionals are stand still on date). In another 10 years, Non-CA’s who entered the Tax Profession in 1980’s will all eliminate & Govt. has to relay on only CA’s for seeking compliance under all Indian taxation laws.

  27. DEAR SIR, I AGREE WITH YOUR ARTICLE. I AM AN LIFE INSURANCE ADVISER SINCE 2004. SOME OF MY CLIENTS ARE SAY LIKE THIS. THEY ASK THEIR CAs THE SUGGESTION TO INSURE THEIR LIFE……WHICH CAs KNOW THE HUMAN LIFE VALUE? I STRONGLY SAID CHARTERED ACCOUNTANTS ARE STAND TO CLEAR THE ACCOUNTS OF A PERSON. HELP THEM TO SAY HOW SAVE TAX, ETC….BUT MY DUTY IS PROTECT HIS FAMILY FROM FINANCIAL LOSS!!!!….A CA’S WORK ONLY AT THE LIFE TIME OF HIS CLIENT. BUT MY DUTY IS TO GIVE FINANCIAL PROTECTION TO HIS FAMILY……

  28. I Concur with you Hemant.Of course i belongs to CA fraternity i saw most of my CA friends doesn’t even know about interest rate change by RBI and how it affects clients portfolio and US Fed Rate Interest rate change and its affects on domestic and International markets.Some of my CA friends suggets financial Instruments to clients without considering Interest rate,Inflation and some even doesn’t now about Global Economy is Slowing.

  29. I respect your point of view but this should also be kept in mind that a chartered accountant being continuously reporting and analyzing a organization’s financial status would be quit familiar with the issues giving rise to company’s finance and one which decline it. or it can be said that a chartered accountant working for a long time for an organization is efficient enough to take the financial decisions of the organization.

  30. Hi Hemant,
    While you say CAs don’t know about various financial instruments I would bring the other perspective. How many of the CFPs are able to give a really tax efficient investment advise is also questionable. The main point we all know is that while there is a dearth of CFPs we at least do have CAs and hence it is natural to follow their advise rather than do nothing. If financial planning is accessible to all the situation would surely change. In the good old days we all used to buy insurance from our friendly agent which is now no more true.

  31. Hi Himmat sir
    I read your article CA is not Financial Planer. It’s True.
    I am a afmi certified mutual fund advisor. But Some our clients told us that their CA asked him do not invest in Mutual fund and share market. They were not sutable investment for you. Invest in other products that is insurance and real estate so what can I do in this case ?

  32. I 100% agree with you Hemant on this.

    Many a times, I also meet clients who expect me to do Financial Planning for them and I have to explain to them that there is a lot of difference in the work of a CA and a Financial Planner.

    A CA (if he has the practical knowledge and experience) can work like a Financial Planner but as most CA’s practice in Tax and Audit, it is difficult for them to do Financial Planning as well.

    And if a CA claims that he is well versed with all of these, then maybe there is something fishy as it is practically very difficult to be an expert in all the 3 fields.

  33. Yeah! To Meet Your Finances Goles One Should Take Proper Advice From Right Person.
    Finicer Advisor is Best Person for Advice

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