A hotelier who puts a board saying “The owner eats here” is supposed to be a good hotelier. He eats his own cooking. However should an IFA (Independent Financial Adviser) or a bank RM, or a Life Insurance agent have his own Adviser? Or should he do his own financial planning?

I do not know of many financial planners who think that they need an independent consultant. Mind you, all these people I meet can give you a 1 minute, a 3 minute or even a 5 minute talk on why you should be doing financial planning. These are the guys who charge anything from Rs. 7500 to Rs. 75000 for a one year financial plan. So they all know the ‘advantages’ of financial planning. However, they themselves do not have a planner. At the philosophical level it is understandable – what will my clients think. Fair enough.

Does a financial planner need a financial planner for himself? My answer is yes. Yes you run the risk that they planner will talk about your portfolio of Rs. 20 crores (or  Rs. 200 crores), or your lack of medical insurance for your parents, or…but do other clients not run the risk of ‘loss of confidentiality’ – stop pretending that you are different from the others.

Oh your argument is “I know everything” – precisely. The worry is you know all about behavioral finance, but you may not be able to fight familiarity bias, cognitive bias, confirmatory bias, etc. For example my portfolio has been equity heavy right from the day I started with a huge MNC bias. It has worked for me till 2015. What if that strategy were to fail? Why should I now not move to a less equity, or at least more indexing than active equities? These are questions which an independent Investment manager / Adviser can / should ask.

I have a friend who is a few years younger to me and has a debt / RE bias. When I reviewed his portfolio I was almost alarmed at the slow growth. However he has a big enough corpus that he need not have had any equity exposure. However about 10 years ago I put about Rs. 2 million in equities, and he is happy about that. However, my portfolio is heavily into equity. We cannot see our own blind spots. For example my MNC heavy portfolio with a great track record may have outlived its life. So should I add Sun Pharma (not my definition of an MNC) at the expense of a Pfizer or a GSK? Well I know not.

Is it time for me to be more scientific and less dependent on portfolio performance? Will my annual reviews be far, far more scientific? Will my record keeping be more organised? I am sure.

So an IFA can get the same advantages which they claim a client can get :

a scientific / analytical / objective approach to personal financial planning

reviews happening exactly on set dates

involving other family members – and their views being heard!

your spouse knowing what you have done and why

updating your will (or even making it!!)

Just as a dentist goes to another dentist and a psychiatrist goes to another psychiatrist, …makes sense, see if it suits you. More importantly, it could be free!!