Resource id #4Resource id #4 Advisor Interview
13 June, 2024 15:20 IST

`Our profession is up to its eye-balls in conflict of interest`

Source: IRIS Exclusive (13 March 2012)

`Our profession is up to its eye-balls in conflict of interest`
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In an interview with Pooja Chopra Goel of, Rajesh D Chheda CEO at Finance Factory says, ``That although many financial advisors are quacks, there are a select few whose values one must appreciate.``

Can you tell us about `Finance Factory` and its mission & services? What services do you offer?

Finance Factory has evolved over the past 22 years from equity to risk management to catering to a niche set of health care specialists and cross border financial planning. Mission is to light a lamp of financial freedom in our clients` homes and services offered are total consultancy to my clients. They are a handful only and my experience in the financial services field right from the Sensex breaching the 1,000 mark to the 21,000 plus adds a great deal of value. We act more as a catalyst in helping our clients discern what they want and push them further towards their goals. In fact, at times, they are not even clear with their goals, which we help them identify by removing the deadwood around them via risk & investment audits, etc.

Your company website says, ``We have three competitors death, disability and old age, we hope to reach you before our competitors do.`` Could you elaborate on this?

It describes a simple way of putting the risk management in place. First, you need to do a proper risk planning for yourself and then to others and subsequently move on to investment planning. We learn alphabets from A to Z, don`t we? Well, A is risk management and Z is stocks. How many of us plunge into the Z first?

How many fund houses do you deal with? In which fund house do you have the maximum AUM ((in terms of percentage)? Tell us your favorite all-time MF schemes and fund managers.

A select few only. How many cell phone providers do you have? BSNL or Idea or Tata or Reliance or Vodafone? Apparantly beyond a couple, its more or less the same. I prefer a no surprise kind of a fund house, based upon the high level of ethics (not offering a junket trip to Dubai or Bangkok if I qualify for their schemes). And all time favourites do change as I prefer tailor-made schemes as per clients` needs. For example, a few years ago when a client had 100% exposure to Indian funds, I had suggested a Latin American fund promoted by ING. My weightage is more with the HDFC over the past decade, although initially, it was the least brokerage on offer (1.75% initially when I tied up versus 2.25 and above offered by a few others).

What is one misconception about financial advisors you would want to refute?

That although many are quacks, there are a select few whose values one must appreciate. And a financial advisor is not an equity analyst as many a times, including the interviewers might have a misconception that we need to dole out advice on multiplying our clients moneys.

How does a financial advisor make his living and is there any conflict of interest between him and his customers?

Theoretically, a pure-advice based or fee-based makes an ideal advisor. Unfortunately in the present moment of transition, conflicts of interests do exists due to the investor psychology of letting an agent earn even 35% plus on an endowment scheme of a life insurance policy versus Rs 25,000 charged for advice. In this practical example, a prospective client referred to me had paid Rs 300,000 annual premium for her child`s education fund earning a paltry 4% IRR and the agent pocketed a Rs 100,000 plus a recurring annual renewal commission of Rs 15,000! The realities of life I would say so! Our profession is up to its eye-balls in conflict of interest.

How would you suggest a common investor ensure that their accounts are protected and not invested in dubious instruments?

Find a right qualified certified professional. In today`s big bad world, you need a good doctor, a good lawyer, a good CA, etc. else there are black sheep in all professions. Since my niche is super specialist doctors, I have heard of cases wherein they are asked by hospitals to `cut` at least 5 out of 10 patients referred to them! And, in a case of my client being asked to undergo a prostrate operation by the hospital, I requested him to take a second opinion with a UK returned Urologist who was my client and I knew him to be ethical, the operation was avoided!! Voila!

Do you think enough is being done to address the broader issue of financial literacy?

No, not at all. It`s a big bravado and show out there. However, some of the greedy investors deserve it at times when they get taken in for a ride and sweet talks.

Is there anything else you would like to share with our readers?

Blame yourself for any debacles, no point in crying over spilt milk. Get up and get on with your life. There is more to it and I always say, get up with the feeling of : ``Today is the first day of the rest of my life!``

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