Investors do not do proper asset allocation due to which they end up investing in one or two baskets only. Usually, middle class people invest up to 90 percent in real estate.

Financial Advisors Interview
On: Dec 2, 2013 | From: Devdatta Dhanokar
Financial Advisors Interview in Advisorkhoj - Investors do not do proper asset allocation due to which they end up investing in one or two baskets only. Usually, middle class people invest up to 90 percent in real estate.

Devdatta Dhanokar, an engineer and CFP has been the part of the financial industry for last 10 years. Though he started his carrier as an insurance agent, his curiosity to acquire in depth knowledge of financial planning led him to pursue CFP. He writes regularly in Maharashtra Times and financial magazine 'Arthvishva'. His passion has given him the opportunity to work as a guest editor for investment book 'Guntavnuk'. He also conducts IAPs in various institutes. Devdatta shares with Advisorkhoj the mistakes usually committed by the investors in a lure to get maximum profit...

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

Currently, I notice an increase in awareness about financial planning among professionals. They understand the importance of financial planning. The importance of financial planning in not only restricted to urban but also now people in rural areas are well aware about the subject. This is because of the media (print and electronics) who has done a good job by spreading awareness.

But unfortunately fee based financial planning is still not popular in India. It will take time to change the mindset of the investors.

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

Yes, to some extent… Financial literacy in developed countries is more compared to India. Also developed countries have better social security than India.

After spending 10 years in the industry, what are the five common investment mistakes that you have observed?

The five common investment mistakes that I came across are:

  • Investors do not understand the difference between saving and investment. They usually parks their investments in saving account or bank FD and is not aware of the fact that he gets a return less than inflation rate. They just try to double his investment in a year’s time by investing in some ponzi schemes (chit fund) too.

  • Investors do not do proper asset allocation due to which they end up investing in one or two baskets only. Usually, middle class people invest up to 90 % in real estate. I have come across live cases, where the family owns reality investment of Rs 80lac but doesn’t have emergency funds in the kitty.

  • Investors do not understand the importance of various investment avenues and how to use them in combination (i.e. with proper asset allocation) to fulfil their short term and long-term financial goals. As a result, they invest money in shares and equity, mutual fund to fulfil their short term goals (of 6 month or 1 year) and the remaining in NSC, bank FD or in bonds for 8 to 10 years to fulfil their long term financial goals.

  • Investors do not plan for retirement. Many investors buy life insurance for tax saving purpose without going through the features of the life insurance policy. So, they end up buying policies that are not suitable for their financial goals.

  • Investors do not want to go for proper financial planning. They takes various loans to fulfil their financial goals such as child education, child marriage, etc and if unfortunately they are unable to repay the loan, then investors goes in for another loan to repay the previous. As result they are trapped with debt and loses money and precious time to come out of the trap.

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

  • Create Emergency fund

  • Start SIP for long term goals such as retirement

  • He should invest time and money to understand various investment avenues.

  • He should take proper health and life insurance.

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

Yes 100%! Women are hard working and they have to take care of their office responsibilities as well as complete her household duties too. Usually, I have observed that women between 40-45 years want to spend more time on themselves and their family. So, they look for early retirement. Therefore, if they do proper financial planning it will definitely helpful them to retire early without compromising their other financial goals.

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

I always suggest products depending on financial goals of the client. In the current market scenario, I am suggesting lump sum investment in liquid fund and then systematic transfer to balanced or equity fund. I am also suggesting lump sum in ELSS.

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

I follow six step of financial planning whenever a new client approaches me. First, I try to know his short term and long term goals and understand his risk taking ability. Then I ask him to share his past investment experience. Then we have a more detailed chat to know him better. So, once I understand his requirement, I suggest him suitable products to fulfill his financial goal.

What services do you/your firm provides?

We offer various services to our client such as:
Mutual fund investment / Financial planning / Estate planning / Insurance planning / Early retirement planning/ Tax Planning / Child education planning / Bond and company Deposits

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

Personalized service from CFP and other professionals such as MBA Finance, advocate, CA we also give them our training programs.

How would you differentiate your service from the other advisors?

We understand client’s goals and plan and his asset allocation in such a way that with minimum risk he / she will fulfill his/ her financial goal at appropriate time.

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

Yes, I promote investment awareness programs. I would like to share an experience of one of my existing client. He had done a very small investment under my guidance me. But after attending my investment awareness program, he is investing almost every single rupee under my guidance.

How do you plan to expand your clientele?

I plan to grow my clientele through investor education programs. I am currently conducting free seminars at society, offices ,schools and colleges making people aware about the importance of financial planning. I am also conducting paid workshops where I make the investor aware about the basics of shares / investment / financial planning.

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

Few Golden rules of investment are: Start early - Do proper asset allocation - Invest in yourself (attend investor awareness program) - Get expert advice

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