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Financial Planning is akin to playing a sport with defined rules. Indians by nature are more prone to playing games for recreation rather than for achieving.

Financial Advisors Interview

On: Dec 2, 2013 | Duration: 1.00 hrs | From: Aniruddha Sengupta
Financial Advisors Interview in Advisorkhoj - Financial Planning is akin to playing a sport with defined rules. Indians by nature are more prone to playing games for recreation rather than for achieving.

Aniruddha Sengupta, has been the part of the financial industry for last 20 years. He is a B.Sc (Physics) graduate and a MBA (Finance). After completing his studies, he got the opportunity to work as an investment banker. He founded Arthashastra in 1998 as he sensed the growth of personal finance industry. Aniruddha, believes that 'competence', 'reliability' and 'trust' are the cornerstones of our professional practice, which also permeates into our personal space.

What are your views on the current state of awareness on financial planning in India?

Financial Planning is akin to playing a sport with defined rules. Indians by nature are more prone to playing games for recreation rather than for achieving some pre-defined goals and objectives. It is not that people are not aware of the benefits of planning and following a systematic approach. It is simply not in our DNA. Look at any field/discipline – education, healthcare, nutrition, it is the same. And of course, this is one area where you cannot blame anybody else!

So what is the way forward? It requires great discipline on the part of the advisor to keep repeating the golden rules and nauseam like a parent does to a child, in the hope that the ward will at least pass the test. This is very important and the measure of it lies in what may happen without financial planning inputs and perseverance of the advisor.

Do you think that the need for financial planning in India is different compared with other countries, especially the developed world?

Yes, absolutely. These thoughts have to be viewed in the Indian context of lack of social security, low insurance penetration, vast majority of the population not being covered under any retirement benefits etc. Also, India being a developing economy with a growing population, one cannot lose sight of the facts – high inflation will continue, purchasing power will keep increasing leading to galloping costs for every conceivable product/service, low employability or lack of right skill sets.

Here, I will give you an example - The incidence of job losses is commonplace with a downturn in the economy, however, when it happens to people above a certain age, the ability to seek re-employment diminishes substantially based on last drawn salary levels and cheaper alternate options available to employers. A person in such a situation may have to forcibly strike out as an entrepreneur (higher risk than a salaried occupation) whereas all his life he may have always preferred “low” risk options for his savings and investments. This can be very disturbing for anybody.

How long have you been in the financial advisory industry? During this time in the industry, what are the five common investment mistakes that you have observed?

I have completed 20 years in the financial services industry – the first 4 years were as an employed professional in corporate finance and the last 16 years as an independent advisor spanning multiple financial services including investments, mortgages, corporate finance, insurance and financial planning.

The 5 common mistakes - I will highlight them in terms of not how often people make them, but, in terms of the damage they cause to their future goals and needs.

  • Lack of self-awareness of what our goals and objectives should be – unlike westerners we don’t have the habit of putting down things on paper. This lack of self-awareness is substituted by "over the top" eagerness to discuss about markets/products/strategies. It is something similar to going to a doctor and discussing medicines/diagnostic & surgical procedures but not talking about complaints and symptoms.

  • Savers and investors don’t pay much attention to the need and the process of identifying a good advisor. They choose an advisor the way they choose their provisions store – approach the nearest outlet. A better way to choosing an advisor would be much the same way we choose a doctor – check his background, specialization, referral check with a few existing clients etc.

  • Do your due diligence before and not after you have put your money in a product.

  • Chasing returns - Most people buy “products” based on “returns” (expectations) without any reference to their needs. That is why you have retired people being sold ULIPs with 5 year lock-ins. Liquidity, Risk and Real Returns – the holy trinity of any investment. These are a must evaluate list of parameters and strictly in this order of priority. Any other way of investment analysis is a sure shot recipe for disaster.

  • Most of us do not document our investments/savings properly, as a result, in case of an unforeseen calamity; the consequences can leave the survivors in complete disarray. The need for documentation, filing, preparing a Will, familiarizing the family with the advisor etc. are must dos for everybody.

What basic investments that a client should do during his/her first four years of employment?

  • Create a corpus of Liquid funds for any emergency (the minimum corpus should be a few multiples of your monthly expenses)

  • Buy a term insurance policy (ONLY if you have dependents) and

  • Start saving for retirement through SIPs in diversified equity funds
    – Strictly in this order of priority.

Do you think there is a greater need for financial planning for women, who are increasingly entering the workforce?

I’ll dwell on 3 aspects.

First - Don’t get caught in fads. Children’s plans, retirement plans, weekend homes are some common ones. Another one which is vying for attention is “Financial Planning for women”. Why? Is it different for men? Ask yourself.

Second – Having said that, women entering the work force are more likely to have an independent mindset and lifestyle and may not follow the usual stereotype life-cycle of a traditional Indian woman – get married, have kids, take care of family and settle down in happy matrimony – you get the drift, I am being polite. What if, the new age woman does not find a suitable match? What if she gets married early, has a kid before, realizing that matrimony is not working for her and chooses to become a single parent? Retirement planning is not an option anymore and in the latter instance she also needs to take care of the child’s higher education etc.

Third – what happens if an educated woman who is married and chosen to become a home-maker suddenly finds that she has to now provide for the family? So irrespective of whether you are a working woman or a home-maker, women’s involvement in financial planning can certainly bring about a world of improvement in how Indian families go about managing their finances.

What products are you suggesting your clients in the current market scenario?

It is difficult to generalize. If you understand your client’s needs then the prescription also has to be necessarily need-based. The basic framework will however remain the same – The holy trinity.

What is the procedure you follow when you meet a new client?

We spend a lot of time trying to get to know each other. You may laugh at it – but the level of interaction can be really detailed. Knowing about his past, his present, his profession, his aspirations, his likes and dislikes – in short, if we feel our “wavelengths” don’t match or we are not competent to handle their requirements, we may politely excuse ourselves from taking the relationship further forward.

What services do you/your firm provides? How do you charge for your services, and how much?

As mentioned earlier we help our clients in every conceivable area of personal finance – managing the balance sheet, risks, business succession planning etc. We respect our client relationships and the confidentiality that is in-built in every relationship, all of which is customized.

What value addition does the client get after paying a fee?

I will answer this by saying – customer retention is the true test of client satisfaction and we are blessed to have some really long standing relationships.

Do you promote investment awareness programs (IAP)? Share your experience with us?

While we do address small groups of people occasionally, our experience suggests the best results are always derived from one-on-one meetings.

How do you plan to expand your clientele?

We focus on ensuring our existing clients are happy. Almost all our new clients are through referrals of existing customers.

What are the few golden rules of investment that you would like to share with our investors?

  • Never invest in a product if you are not sure about its promise.

  • Ignore the noise -usually products that make the loudest noise are the most damaging.

Where do you see your firm in next five years?

We aspire for 100% client retention and organic growth through referrals.

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