Sometime back when medicine were at its initial stage in India there were many quacks that used their half-baked knowledge to treat people & people were exposing themselves to huge risks. Even now you can find such quacks in smaller cities or towns. These quacks mushroomed as there were loose regulations and checks. In another Industry, financial planners in India are facing a similar situation… any one can make a claim about himself/herself being a financial planner. There are no regulations about who can actually be a financial planner.
There are lots of Madoffs & Puris in India who can easily destroy a financial life. These can be some of the troubles that a fake financial planner can bring to you:
- If he doesn’t suggest you to build a 3-6 months emergency fund – you will always dip in your long term investments & that can be disastrous in situation like bear market.
- If he doesn’t advice to repay your expensive debt before starting investment – you will always be in danger if tide goes out.
- If he misjudge your insurance requirement or suggest an expensive endowment or ULIP policy as a solution rather than term plan – you will probably not be able to achieve your financial goals.
- If he suggests you to trade in equity or take leveraged position in the markets – high probability is that your capital will be wiped out.
- If he is showing you the moon about how he can generate highest returns by churning your Mutual Fund portfolio – actually he is talking how he can generate highest income for himself & your fund will never grow.
There can be n number of examples that can be quoted here but before we publish this there will be a new list ready.
Can you identify a fake note??
So check these points before & after hiring financial planner:
- Trust but always verify.
- Always take advice in writing.
- Ask what he will be earning from implementing a plan – you can take this in writing.
- Do not sign any blank document or cheque & always ask for a copy of final documents submitted.
- While taking insurance always fill the form rightly – don’t allow agent to just play checkers in the form.
- Never give unlimited access to your money to advisor that includes full power of attorney.
- Be suspicious of pressure selling techniques like time deadlines & best investment.
- Always ask for negative side of every product – if there is nothing negative better don’t invest as you are going to get shock at some later stage.
- Always check that any product fits or helps you to achieve any of your goals – just don’t invest anything for the sake of investment.
- Consider timing of the proposed transaction. May be the product manufacturer is motivating the advisor be it month end, year end or some through a trip that he will get if he achieves his targets.
- If you don’t understand something ask again & again – put your hard earned money only when you have clearly understood that thing.
- Always take a second opinion – every 3 years get your advisor’s recommendation audited by someone.
It’s always Buyers Beware & Buyers Be-aware.
Would you like to share your experience??