Trust your Financial Planner

In the world of investing, trust is the basis of all relationships.

Consider the following situation which though real but many may still ask—aisa bhi hota hai? Imagine yourself going to your family physician for a checkup, who thereafter writes a prescription stating the ailment and the medicines to be taken. Would you turnaround and tell the doctor that you want a different set of medicines as you think the ailment is something different?

The situation seems bizarre outright as no one in his senses would do so. However, this is precisely what people do when it comes to their investments and their life goals!

Investors in all likelihood assume that they know more than (sufficiently) enough to know what investments they want to do. As financial planners we do come across investors to whom we suggest to subscribe to SIP in equity funds to be able to meet their goals-- but instead they ask us to recommend FD and NSC or disclose their wish to invest their retirement funds in property!

Recommend term insurance and they will suggest Endowment or ULIP instead!

People approach us for advice, agree upon a fee and ask for a comprehensive plan to be made for them based on the inputs provided. All said and done, they want to dictate the final course of action.          

Invariably, the reason for this illogical behavior/suggestion is that a close friend of his has chided him for being amateurish by investing in mutual funds suggested by some unknown entity/professional. Confused, they now seek advice of another colleague who being a stock market buff instead suggests “hot picks”. The logic (and belief) being that mutual funds are for not so informed while FDs are for elderly.

By now the client being totally brain washed, works out a compromise that will suit his ego! A portion of money goes towards equity (tips) as suggested by office colleague and the rest into FDs or Post office MIS. Our analysis, strategy and experience be damned!

In any endeavor, things will work out only if the advice is followed completely. You will not strike water by digging two feet at 20 places. You’ve got to follow the advice and dig 40ft at a single place.

We believe that the root cause of such a mindset is that investors think that since they are familiar with the product they can do it themselves. This DIY (Do –it-yourself) attitude more often than not does more harm than good. Once the investor has the recommendation in front of them, they would tend to argue with the planner about the logic in their own line of thinking as regards investments and insurance. (Why DSP Blackrock MF and not ICICI Prudential MF? Why term insurance and not with profit endowment plans?) At the end, the investor goes ahead and implements only a part of the recommendations while the rest is done as per their own thinking and belief! So much for our plan and effort and experience!!

All this does not make sense! The relationship between a financial planner and his client will work only when there is complete trust amongst them. Just like a trapeze trusts his partner and let go of the bar himself!

Having satisfied yourself after the due diligence about the planner, simply let go. 

After all it pays to invest trust along with your money!!