I met a very very evolved personal financial planner – and a wealth manager too. He was going through his past actions and telling me how he would have done some things differently.

When I heard that I realized how difficult it is to be a personal financial planner with a conscience, with ability to reflect on past actions – and make money. It also brings the ‘direct’ in mutual funds into play. How many serious investors will be able to do all these functions themselves. I must hasten to add that a majority of distributors and financial planners themselves are not capable of doing it, so it is a funny situation. Here it goes….in my words. His words are a mix of Hindi, Gujarati, and English. Please note that he is not a great communicator and some of the points are contradictory too, and he himself does not see them as contra!

All translated and summarized:

1. I thought when a client says he will invest for 30 years, I believed the client: Actually when a client says he will invest for a long time he means 4-5 years, or till he can use the money for making a down payment to buy an asset! Out of 59 clients that he has only 6 have SIPs running for more than 10 years…even though all of them had said ‘we are in it for the long term’.

He says he would have preferred a 30 year product with a 10 year lock-in!!!

2. I got carried away by educated salesmen representing banks, mutual funds and life insurance companies: Since I was myself only a graduate, I used to attend all the meetings by these educated people. I even got carried away by what they said. Now I realize that they were meeting THEIR targets, not mine nor my clients. For them it was a job, for me it was a relationship. Only after talking to some people who are outside the system did I realize the mistakes. Nowadays I do not attend meetings or parties. If they come to my office I meet only if it is a national sales head or above.

3. I sold single premium pension plans: these were the best for the client, so I sold many. In these the commission was a negligible percentage, and almost the whole amount was invested. In one company the new fund manager is so terrible that my clients are stuck. Legally if they withdraw they pay tax, so it has been a terrible deal. These products have been good ONLY for the manufacturer – not for the distributor and terrible for the customer INSPITE OF HAVING lower costs.

4. In the period 2003-8 I had also got carried away by low cost products! Only in 2008 – about 13 years of starting the business did I realize that good fund management is far, far more important than lower costs. Frankly Templeton India Growth fund at a HIGH cost is superior to many lower cost equity funds. After all the client is interested in total ABSOLUTE return, not comparative return or a Q on Q ranking as the media thinks.

5. The best returns that my clients have got is in direct equity – Thanks to the main broker who is a good wealth creator and a combination of investing and speculative transactions, I have been able to give my clients a superlative return.

6. In 2008 I stopped looking for business: This was perhaps the best thing I did. I did regret sometime in 2010 when business was dull, but was very happy when my son migrated. My son is not coming into this business, and my employees are not too keen to run it beyond my life. I am happy to be running a business where I can be useful for another 20 years, but do not need more clients to keep me busy.

7. If I were to start all over again, I would first sell ALL my clients a nice easy to use software to track their goals and link it to their investing.

8. I do think the fund management industry is over paid and under performing. My best advice would be to use term insurance and direct equity investing. Assuming you LEARN to do direct equity investing. Sadly there are no schools willing to teach long term wealth creation – I would happily pay for ALL my clients to attend that school.