In an interview with Pooja Chopra Goel of Myiris.com, Abhinav Gulechha, a financial blogger and industry professional, says, ``Financial advisor is one of the most misused term in our industry.``
What got you started as a financial blogger? How long have you been blogging for?
I have been working in financial services space for close to 9 years now and it was an interesting trend I observed every year. As the tax season (October- March) approached, agents went all out selling mostly ULIPs and traditional insurance products to lay investors; and the investors, in the mad last minute rush of meeting the Rs 1 lac investment limit for tax deduction, blindly bought such products, without doing any due diligence at their end as to what they need, and more importantly, falsely assuming that such a buying spree takes care of their long term financial planning needs. So, one fine day, somewhere in December 2010 I thought why not write my views on this issue and make my friends aware of why tax savings should just be the icing on the cake, and not the cake itself. That`s how I wrote my first post, and LetsSimplifyMoney was born.
Can you tell us about `LetsSimplifyMoney` and its mission?
LetsSimplifyMoney is a small platform where I try to put a bit of my little knowledge, gained during my study for CFP and my work experience in financial services industry, to better use by writing some helpful articles on personal finance matters. My ideal reader is a person who is busy, not well versed with nitty gritties of personal finance, and is looking for some unbiased financial advice/ learning to manage his/her finances better. On the blog, I try to provide tips and tools (many-a-times from my personal experience and learning from the mistakes I have made as an investor) to help the reader better organize his/her financial life. My personal mission is that every Indian must have access to unbiased personal financial advice, and my blog is a small means to achieve that. I believe that even if a single reader`s financial life becomes a bit better through the posts on my blog, I have done my bit.
Do you think enough is being done to address the broader issue of financial literacy?
Enough? Frankly, I feel that we have not yet started in this direction. We have a lot of work to do on the financial literacy front. Till now, there has not been any focussed attempt in this direction, which precisely is the cause of so much misselling and has also resulted in investor distrust and apathy towards the financial services industry. The recently announced National Strategy for Financial Education, seen as the first unified and focussed attempt by bringing all regulators to work together in this direction, is much appreciated as has been long due. I think the biggest gap today where all stakeholders have to put their self-serving interests aside and put their efforts is financial literacy, and this alone can win investor`s trust and money back.
With an aim to crack its whip on investment advisors possibly indulging in unfair trade practices, watchdog SEBI is putting in place strict norms for them, including putting a ceiling on fees charged by them. What is your take on this?
The proposed SEBI norms to regulate investment advisors is a long due and much required regulation to ensure that investors` rights are protected and their interests are put first. Ceiling on fees is definitely one of the proposals, but in my view, the ones that can create the most impact and can be potential game changers for the industry if rightly implemented, are namely - requirement of meeting certain minimum education and experience criteria to enter this profession, separate category of investment advisors who can only earn fee for professional advice and mandatory disclosure of commission earnings/ conflict of interest. These will ensure that only those who are fit to serve the consumers in a proper way and desire to keep clients` interest first, enter and thrive in this profession.
What is one misconception about financial advisors you would want to refute?
I think that financial advisor is one of the most misused term in the financial services industry. So, today you can have a 12th standard pass out working as an agent of an insurance company, and getting the designation of financial advisor. The interest of such a person is not aligned with the consumer, but with the company he/she is tied up with. I will say that not all financial advisors live on selling products and earning commissions. While investor apathy is understandable, as till date most of the time they have been subjected to product selling in name of financial planning, if they do have a genuine desire to plan their financial future and seek unbiased advice for it, there is no dearth of some really brilliant minds out there who do that for a living and actually live by the value of client first. The investor has to really shake off his/her doubts/ apprehensions (which are very understandable), look around, and spend some time to do due diligence for the right financial planner.
How does a financial advisor make his living and is there any conflict of interest between him and his customers?
A financial planner can make his living through 3 methods - only a fixed fee for the professional advice rendered, or only commissions earned from product manufacturer on products sold to investor, or a mix of both - fee for advice given and commission for products sold. While there definitely can be a conflict of interest in case of latter 2 cases, but it will only be where the advisor places his financial interest ahead of that of the client. This depends on the advisor`s personal value system, which can vary from individual to individual and no regulation can completely control that. As long as the advisor puts client`s interests first always, and clearly discloses his earnings model to the client upfront, I believe there won`t be no conflict of interest. It may be noted that as per FPSB Code of Ethics, Certified Financial Planners (CFPs) are duty bound to make these disclosures upfront to the client. As an investor, while selecting a financial planner, it makes sense to have a frank discussion and enquiry about this with the planner/advisor.
What one book related to personal finance would you recommend every person read and why?
I have recently finished reading JagoInvestor by Manish Chauhan. I have found this book a truly authentic, real and inspiring effort to change people`s perception about money and will definitely recommend it to the readers. Other than this, I recommend that everybody should subscribe and read at least one dedicated personal finance magazine, blog or newspaper.
How would you suggest a common investor ensure that their accounts are protected and not invested in dubious instruments?
It is a bit disappointing that people do so much due diligence while buying something like a cellphone, but fall just like that when it comes for financial products. Gone are the days when people could plan their entire lives through fixed deposits, PPF and NSC. In the dynamic world today, one has to take responsibility for ensuring right channelization of hard earned savings and he/she should not blame anybody else in case of a sour experience. One has to empower himself by knowing what is happening in the industry, which is the right way to plan etc. and there is no dearth of online and offline information media to help in that. I believe it is wiser to spend time more on researching the product, its features etc. before buying it, than having to do it after making the mistake.
What would be your biggest piece of advice to anybody who wants to save money?
Saving money is not the end. What is the use of saving which is not channelized in the right direction? My advice is - everybody should set up some quality time per week to read and increase his/her personal finance quotient. If one does that, not only will he/she save money better, he/she will be able to spend it in a right manner on securing his/her family`s future, investing in right products to make whatever dreams they have thought of, a reality. So, I believe that self-motivated learning holds the key to a successful financial future.
Is there anything else you would like to share with our readers?
I will take this opportunity through your wonderful medium, to say that financial planning is not rocket science. Inflation or recession, bull market or bear market, an investor can, by taking some small right steps, make his/ her family`s financial future more secure, peaceful and worry-free. I wish all the readers greetings on the upcoming festive season and a secure and a happy financial life ahead.
**Note: Abhinav Gulechha is in full time employment with Tata AIG General Insurance Co. and the views expressed are his own and does not necessarily reflect Tata Group`s opinions, positions and strategies.