Are you still thinking?

Last week I met my friend Saurabh who is now a Regional head with one FMCG company and stationed at Bangalore. We were sitting in a coffee shop when suddenly he told me that he’s thinking to engage a financial planner to manage his personal finance matters. This was not a new thing to me as he shared the same thoughts around 3 years back but till date he’s still thinking. That time I also gave him few references of my fellow financial planners but he did not contact anyone. I didn’t want to mix my profession in friendship so it was better if he deals with some other good planner, to which he agreed.

Now when we were sitting in an easy mood, I got quite curious to know what stopped him to go ahead or what made him think so much? After all, he’s been thinking about this for the last 3 years.

He told me that he had few apprehensions in going ahead, like:

1. Fee Structure of the Planner
2. Why to pay fee when everything is available for free
3. He was afraid of the complete structure of the financial plan
4. He thought this will dilute his control from his own finances
5. Selecting a financial planner, itself is a tough job

Elaborating this further he said, that he went to my references’ website and also called a few, but was not sure if the fee they were asking for was justified to the work or not. Just to avoid the charges he went to Google and tried to learn about financial planning and planners, got huge information which further confused him. During the search he happened to visit few good blogs which he immediately subscribed to.

He also found a site which offers financial planning online at very nominal cost. So he went ahead with that and got his document made. He implemented few of the advices but many are still pending as some of the bloggers views were different on those recommendations. Actually he tried to confirm the recommendations from them.

After sometime he started feeling that investments is an easy job and he don’t need any financial planner.

He also shared that he’s afraid of the discipline that financial planning asks for. Getting into a structure might restrict him in his financial independence and also might dilute his control over his own finances. He said how anyone else can take decisions on his behalf related to his personal finances. How would the planner know, what are his aspirations and desires? He said sarcastically.

Ok. So now what? I mean what made you search for financial planner again? I asked saurabh.

He replied that he was feeling direction less. In the last 3 years, he did have accumulated some investments but was still not sure if those were right choice or not. Different advisers have different views, some say this investment is better, some say that. Online space is full of information which further confused him. Even after having 15 page plan by spending R 2500, he had implemented only 10% of it. One friend’s wife sold him 2 Insurance policies; his banker sold him few mutual funds and keeps coming back with new offers every now and then. His kid is about to start schooling next month and he was worried on his future. Work stress is rising day by day, he felt that the working life span may get reduced with the kind of lifestyle he’s living, this worried him on the retirement and estate planning front too.

Hmmm…after listening to him patiently…I asked, so what do you want from me now?

He answered with smile – Duvidha door kare prabhu!!

Avashya bacha!!…so it was my turn now.

I gave you reference from some of the good planners of Industry, but you disregarded them due to the fee they charge. Actually the problem was not fees, it was your understanding of the value behind the fees. You thought fee for some pages of plan and that too investment plan which is freely available online, then what’s the point in paying 15/20/25 thousand. Right?

So the first problem is “lack of understanding”. And the next is that you are human. Humans are emotional beings, full of biases. You can ignore the long term loss to get short term gain. This is what we call as Instant Gratification. Just to avoid few thousands of fee, you wasted your time and money on so many other things. Though I am sure you must have learned many things, but my dear…Information is not knowledge.

You are paying heavy indirect charges to your friend’s wife through those insurance policies, you have helped your banker achieving his Job target…but what about your own life’s goals. Who’s taking care of that? They are getting delayed as you are still thinking.

Financial planning is a simple thing and human mind doesn’t value simple things. It is a common sense approach. Which all of us feel that we have but actually we don’t. We are happy paying on complex structures like Endowment insurance plans, Close ended mutual funds…also wants to play in derivatives, but when someone say that he can help in making our life simple, we ignore it .

We can’t make ourselves accountable to our own deeds. It is difficult to accept our own mistakes and rather than correcting that mistake we tend to ignore it.

Saurabh, keeping things simple is the most difficult task and this is where financial planners come to our rescue. What price can you put on your peace of mind? I am sure planner must not be asking more than that.

I can understand that in a country where every second person is advisor and every third person is financial adviser and can call himself as financial planner, it is difficult to chose a paid professional

To make the selection of financial planners easy for you, Regulator has started regulating this profession and now if someone is truly doing financial planning then he should first get registered with SEBI and starts calling self “SEBI Registered investment adviser”, by giving clients complete disclosures of the conflicts of interests.

But he will also tell the same things which we can get online and that too for free. Saurabh, asked.

Depends on what you get. The “R” which is the difference in FEE and FREE is very important to understand. R is the risk of not acting fully on advice, R is the emotional risk of getting into and sticking with wrong non suitable products, R is risk of getting limited advice which you can take as complete. There’s nothing free in this world. You are paying for everything, directly or Indirectly.

See the important thing to remember is that if you want help, it’s not because someone is smarter than you, but that person is not you. To make good financial decisions you have to take “I” out of your investments. I don’t know what you have, but what I know now is that you are getting emotional towards your investments as you have selected that yourself or from a close friend.

But, are those suitable to your goals or risk profile, would be known when you fix upon some goals, and things looked upon holistically. Frankly speaking if you don’t have goals you are in wrong investments. No matter how smart you are …you still are human. Emotions overtake you in making important decisions and this is where you need help of outside expert.

If a structured approach in personal finance scares you, than just look at what you are doing in your Job. You have your own goal sheet, your juniors have goal sheet, you have your targets to achieve and work full year towards those to have a good appraisal and salary hike next year. Why can’t you follow that disciplined structure in your personal financial life.

Company structure doesn’t let you work on your own, it has set processes, protocols to follow and this is how they control the human mind and get the desired results. Same way a written financial plan will bind you with a structure and financial planner will handhold you through out the journey. You will gain success only when you come out of your comfort zone.

You have to understand that you don’t hire anyone to make decisions for you but to help you in decision making and keeps check and balance on your decisions.

If you can value the worth behind the advice and relationship of planners, they actually charge peanuts. They stand between you and your big mistakes. Financially speaking I have seen people losing big when they are not focused, when they buy products without understanding their overall needs, but structured financial planning saves you from that. Moreover if you think Planners’ charge heavily then do check out the total expenses you pay in your invested portfolio, and add up the cost of the mistakes you’ve made and opportunity cost of the time that you’ve spent.

How easy and cost effective it is to fall for the pitches made by stock brokers, Insurance agents and others who have vested interest in selling their product, but when someone asks you about your goals, you look at him with suspicion.

And My dear friend, if Fee is the only reason and all other reasons came out to justify it, then you would be shocked to know that when you were thinking, others were working and in these 3 years good planners have raised their fee structure. But no worries your income has also increased during this time …no?

Financial planners help in choosing the best suitable products as per your requirements. Now since financial planning is being regulated by SEBI, so you need not to worry from the mis selling front too. At least for now as the number of registered advisers are very few and Regulator is very strict in its guidelines.

Electronic media is there to create sensation which is not good for decision making. Bloggers’ replies on blogs should not be taken as advice as every person’s situation is unique and so is yours. Contact the speaker on TV or the blogger directly, and ask if they provide personalized services too and if you like them go ahead and stick with them.

Financial planning is not only about making investments, its about being comfortable with money matters. Looking things holistically you will know what is good and what is bad for you and how to manage money matters during unexpected life transitions.

So don’t waste time on thinking…and start acting. It’s high time. I am sure the hitch is only in the start and you will enjoy the process and the results.

Finally he looked satisfied with my answers…

What about you all? Are you guys also thinking still… C’mon take action now. Click here

This article was originally written for The Financial Planners’ Guild, India. The only association in India of SEBI Registered Investment advisors.