Do you need an investment advisor, at all?


Or Why you do not need an investment consultant !

If you need bypass surgery, you should find the most qualified surgeon available. If you’re getting sued, you should hire the best defense lawyer in town.These 2 are fairly obvious and I do not think you can do your own root canal surgery, brain surgery or heart surgery. Come to think of it, it is so inconvenient, is it not!Likewise, some people argue that if you’re planning to live well in retirement, you should hire the most expensive financial advisor you can find.

To me this causes a twitch!

I do sessions on financial planning and these sessions are reasonably well attended. Mostly at the end of the session the participants are unable to decide whether they can do their own financial planning or they need an outsider.And while people ask me questions on everything from momentum investing, auditor integrity, mutual fund loads, broker integrity, insider buying, etc. one question uppermost on people’s mind is

Can I do my own financial planning?

And

Can I do my own investing?

If you’re an investor who is seeking long-term capital gains, it’s crazy to pay a lot of money for a high-priced financial advisor who gives you an economic outlook and short-term market forecast with all sorts of commission-based solutions attached. To the best of my knowledge there are only a few (so few you cannot spot them) pure financial planners.Nor do investors generally need a “personal investment plan” based on their individual circumstances…

There’s Only One Objective for Long-Term Investors

A growth portfolio is designed to keep you from outliving your money. It should give satisfactory returns for a 25-year-old just beginning an investment plan, as well as a 55-year-old who may live three decades or more.

To quote Sir John Templeton, “For all long-term investors, there is only one objective – maximum total return after taxes.”

Of course, some advisors take generic advice and selling it as customized plans. For that reason, whenever I hear an investment advisor tell a client that he is drawing up a long-term growth portfolio based on that client’s “unique profile,” I’m invariably reminded of the Head of HR who tells his audience, “Never forget that you’re special… just like everyone else.

But, as is fondly said, “It’s 97% of investment advisors that give the other 3% of us a bad name.”

In the Indian context the commission structure is too badly designed – it is a design fault rather than a sales fault. But there is no body who really wishes to complain. After all in a bull run the manufacturer (called Mutual funds, Life insurance companies, PMS providers) need sales guys who go and get them money from the “client” for these guys to manage.So if it is a 70% upfront commission in a unit linked plan or the 6% asset management charges or the 2.4% amc in a debt fund, well there is no one to protest!

So you may need a financial planner (whose functions are so comprehensive) that I shudder to think why would somebody want to be a financial planner on a just fee basis.

Frankly if you wish to create wealth in the long term put your money in the cheapest index fund, buy the cheapest term life insurance, and go fishing.

Leave your mobile, TV, broker…in the city and play with nature. You will return fresher and richer.

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2 Comments on “Do you need an investment advisor, at all?”

  1. HM Says:

    Hello Subra Sir,

    Hiren here, remember me? Just happened to catch this blog while surfing. You are doing a great job.

    Best Regards,
    HM

  2. Lee,gilwon Says:

    Dear Sir/Madam
    We’re doing project financing in Asia market mainly for Korea market.
    Hereby we’d like to be your coworker if you’re interested in.
    Plz give us your idea about our proposal.

    Thank you,
    best kindest regards,
    Sincerely,
    Lee,gilwon
    C-Tree Holdings Ltd.
    Hong Kong Head Office
    Tel:+85231706345 Fax:+85231706346
    skyfe:ctreeholdings
    Project Financial Solutions & Asset Investment Advisory


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