India is a land of savers. We have all been inculcated the virtues of thrift and not living beyond our means. We put aside money to take care of our every requirement in future, however modest our incomes may be. We save. However, most of us don’t want to spend time knowing about the products in which we invest in; or in the alternatives available.
Why not then ask someone who knows? That has been the classic problem. There is no one to turn to. Most people offering advice are product sellers, which makes them an involved party. Hence, we can never be sure that the advice tendered is right or not.
Sellers as advisors? Since the product sellers have been the ones offering advice, they don’t charge for it. Their advice is tailored to making the client buy their product. So, the understanding among the public is that, financial advice comes free. No one wants to pay. But, they are actually paying through their noses – in terms of wrong, high-cost, illiquid products. Also, they won’t know if they would meet their goals. Sometimes, the product could be right but there could be even better, more suitable products. But the seller won’t suggest it as he does not deal in that.
Don’t fall for free advice – Firstly, people need to realize that they have a problem, if they have to start addressing it. These days there are so many articles being written on personal finance and so many query columns and TV shows, that the awareness is building up. But asking a query in a magazine or on TV and getting an answer, is a sub-optimal way of solving a problem. A problem can be addressed well only after understanding the complete situation of a person, which only a qualified advisor can do.
Where are the advisors? The problem today is that, there are far too few advisors to go around. If we look at advisors for investment purposes, the number may be somewhat decent. But even among them, those who only offer advice, is far and few between. Most of them are offering advice and side by side, selling products too; nothing wrong with that. To remove any bias, it would be far better for the client to get advice alone from the advisor and invest through a different distributor. Now, finding this kind of advisor is going to be a challenge, as most offer advice and sell too.
Then, there are Financial Planners. They go through the goals and finances of a person and come out with a blueprint of what needs to be done to secure their future. Financial Planners who are into full-time practice, are even more difficult to find. All across the country, there are an estimated 200 of them who are practicing. Even within this group, many are mainly distributors and also do financial planning.
Plus, there is another problem. Anyone today can call themselves a Financial Planner and several insurance agents are calling themselves precisely that. Some are calling themselves “Professional Financial Planners”, without any specific qualification in this area ! The general public is none the wiser about this.
We desperately need more advisors, for a country as massive and diverse as ours. Our people should also change their mindsets and be ready to pay for unbiased advice, from the right kind of advisors. This is a bit of a chicken and egg situation, right now. Educating the general public is important, at the moment. Advisories are the future. Those who realize that are entering the profession now. We need more of them, many more. Let a million advisors bloom!
An excellent article!