Nice to see many many many articles, blogs, even legislation which are meant to ‘help’ the uninformed, poor investor. Let us look at the assumption of what these intellectuals and bureaucrats think about the behavior of the end investor. The dark portions are the MYTHS…the reality is different.

1. The investor is rational: Fair assumption based on the Economics that they have been taught in school. In real life, he/she buys because –

a) HR has threatened to cut tax

b) Sister in law has become an agent for a life insurance company,

c) Feels good to say ‘See now we have a pension plan so our old age is taken care of’

d) Neighbor / Friend was buying something and he said ‘why don’t you also buy’ …

2. The Investor is sick and tired of the poorly performing ULIPs that he/she has bought. Fact is:

a) he has no clue about the IRR of the product

b) he has no clue that it is an investment, insurance or a pension plan

c) he loves his bank because they call him ‘Emperor’, ‘Platinum’, ‘Elite’

d) he bought it because his bank treated him to a dinner at a 5* hotel. Period.

3. The client wishes that he got unbiased advice. Fact is:

a) everybody who sells anything HAS to be biased by definition.

b) no planner will ever say ‘sir your life is too damn simple, you do not need a plan’

c) regulators and intellectuals assume that a qualified person will not cheat. Chuckle. Chuckle.

d) the client has no idea which product of his is comparable to which product

e) bloggers want to increase their area of influence – no visible monetary reward perhaps but ego satisfaction can be an end

4. The client will benefit by dealing with qualified people who do not sell

a) Doctors do not sell. I rest my case.

b) Trust comes from the relationship, not from the degree

c) Financial planners will behave well and be self regulated is a great myth.

d) Clients will take 10 years to know the difference between an agent and an adviser.

e) There are some amazingly well qualified people writing impossible things on their blogs, caveat emptor.

5. Lots of qualified people will take to being an adviser instead of a distributor:

Facts:

a) youngsters in the business are more FORCED into distribution, not by choice

b) as new banks come into being more jobs will be created for selling – so desperation will be less

c) Much easier to sell a 61% commission product instead of trying to argue for a Rs. 20,000 fee

d) Agents vs Distributors difference is zilch in the current structure

6. In self interest people will look after their personal finance:

a) I know more portfolios looked after will by their advisers than DIY people

b) The journey from doing nothing to DIY is a pretty long, and arduous one

c) People wake up to retirement needs as late as the date of retiring

d) Finance is too complicated for 99% of the aam junta