In an interview with Yogita Khatri of Myiris.com, Yogin Sabnis, MD, VSK Financial Consultancy Services says, ``Always check whether the financial advice you receive is to meet your financial goals or to buy a particular financial product.``
Yogin Sabnis, a certified financial planner by profession is currently working as a managing director (MD) at VSK Financial Consultancy Services. He has over 25 years of experience in the investment advisory business. Sabnis is a co-promoter of VSK with V. S. Kulkarni. He is amongst an elite breed of certified financial planners in the country.
> It`s been over two decades since you established VSK Financial. How has advisory industry transformed over the years? Tell us something about your experience.
In the 80s when I started, products were simple and people understood them. There were the post office schemes, UTI with its guaranteed returns product range and the company fixed deposits were some of the favorites. Investors knew what to expect from their investments and they were just looking for agents to do the paperwork and give efficient service. We also had the stock market which was largely shunned by the middle class believing it to be the fiefdom of select few. It was around this time that the adventurous souls amongst the middle class forayed into stocks through IPOs.
> VSK Financial`s philosophy emphasizes on retail clients than corporate. Could you tell us more about it? How do you reach out to your clients? How do you win the confidence of your clients?
In those days there were very few investment advisors who had a proper office with back office staff. Most agents were part timers and had no offices. Communication with them was difficult. I guess just the fact that we had a professional setup gave the investors, confidence to deal with us. After that it was just a matter of doing our work efficiently and with the utmost integrity.
I am very proud to say that we have helped each and every investor with myriad investment related problems irrespective of the business potential of the client or even whether we would ultimately benefit from resolving the issue. Most of the time, we have not even charged for the services. I think this sort of attitude does generate a lot of goodwill and looking back I realize that most of our clients have come through referrals.
On the advisory front, I had a major rethink on the way we advised clients post 2000 market debacle. We had been newly exposed to mutual funds in the late 90s and I had the mistaken belief that the fund managers were the stock market experts and they would insulate the investors from the market falls by withdrawing from it at the right time. How wrong I was!!
It was around this time I realized that I have to take the responsibility to see that my clients make money irrespective of market crashes and fund manager follies. Out of it was born the understanding of asset allocations and the efficacy of SIP like strategies. A decade later a lot of clients have seen the efficacies of these strategies.
> What do you feel is the biggest mistake people make regarding money management, and how can they be corrected?
People fail to consider the effect of inflation on the returns generated by their investments. Inflation adjusted returns on long term fixed return investments like post office MIP; bank FDs can be even negative and in turn can erode the wealth. At the other end of the spectrum there are those who are playing the market for that one big windfall, that one elusive tip which will make them rich very fast. Investors should realize that like any other specialty, investment advice is best left to experts and should seek help. As a broad strategy they should understand that equity investing is for the long term and for short term requirements they should have a mix of liquid funds and short term deposits. The proportion of equity to debt can be determined by an expert based on individual situations.
> Tax-planning season has began, how would you recommend investors to go for it? What kind of investment avenues one should look at for this fiscal?
Firstly, tax planning should not be thought of in isolation. It should be a part of overall financial planning, then this mad scramble for products in the last quarter of the fiscal year would stop. There cannot be any favorite product for saving tax. Each case has to be considered in isolation.
> On a broader perspective, what financial resolutions should people take in the New Year 2011, according to you?
# I will pay credit card dues in full on due date. If I have outstanding dues, I will get rid of them followed by personal loans as the interest rates on these liabilities are very high.
# I will not buy insurance as investment or tax saving avenue.
# I will not be underinsured.
# I will not confuse investment with speculation.
# I will differentiate between Needs and Wants and budget my Expenses accordingly.
# I will invest my savings regularly in a disciplined manner.
> What is your take on current market situation? What are the key factors that will drive the stock markets in 2011? What is your advice to retail investors now?
Do not read too much in the market situation. If you follow your asset allocation, and rebalance periodically you will ride any market volatilities comfortably.
> Any regulatory changes you would want to suggest?
I find that new investors are finding it more and more difficult to comply with the paperwork required for staring the investment process. They are being asked for address proofs and bank details photocopies of which are required to be bank or notary attested. For non residents it gets worse because of this attestation requirement. Can we not simplify this?
> Going ahead, what are your plans? How do you plan to expand your business?
A good question as we have never done any marketing activity. Most of the time, we have acquired new clients through referrals. The one activity however we want to do now is to use the social networking websites to create financial awareness among the investors and impress the need for independent financial advice.
> What three books related to personal finance would you recommend every person read?
Recently The Economic Times have started a weekly supplement called `Wealth` which looks good. It explains various concepts in a simple easy to understand language. In a similar vein even their personal finance section which comes daily is good.
I would also recommend every investor to go through the website of Travis Morien. He is an Australian financial planner and apart from his commercial website he also has an informative website on www.travismorien.com/invest_faq. The site has an amazing no. of well researched articles. It is meant to be read by lay persons and is written in `easy to understand` language.
> Is there anything else you would like to share with our readers?
# Always check whether the financial advice you receive is to meet your financial goals or to buy a particular financial product.
# It is the asset allocation between equity and debt which in the long run generates real return on your investment than selection of a particular financial instrument.
# Do not underestimate the power of compounding and start investing as soon as yesterday!