Let’s say you have a stomach ache. You go to a doctor..and he says “loosen your belt..go for a walk around the block…and comeback”. You do that. He says “Good, my fees is Rs. X”.

You pay the fees and go away.

Let’s now say you have a stomach ache. You go to a chemist who has 20 years experience and he says “loosen your belt..go for a walk around the block…and comeback”. You do that. He says “Good, my fees is Rs. X”.

WILL YOU PAY FEES TO THE CHEMIST? No. THAT IS THE PROBLEM. So he says “buy this pudinhara…it has no side effects” or something like that…so you buy the product and go home.

See the difference?

See how WE REACT to a chemist and a doc? The sad part is that in financial services everybody wears a white coat and  stethoscope…HOW WILL YOU AS A COMMON MAN find out who is a doc and who is a chemist? and do you need to know the difference? does it really matter?

It is today easy for a person to get a visiting card with a qualification that sounds very good. Let us see if you can pick which one is a degree got with some effort and what is got gratis:

Certified Financial Analyst, Certified Public Accountant, Chartered financial analyst, Certified Financial analyst, Certified Financial Consultant, Certified Financial Adviser, ….surely you do not know to tell a good one from a ‘time-pass’ handed down free ‘qualification’.

All of them can mouth some ‘Hand me down’ mantras like ‘equity is good for long term’, Hdfc Top 200 is a good fund’, take a pension plan…and many of them charge a fee too for giving this generic advice. As long as clients are willing to pay I do not think there is anything wrong in this business model.

How do you differentiate between a planner and a salesman?

Well the planner charges you a fee and says ‘I do not implement’ please buy these products from some one else.

However, the salesman quickly starts selling the product. He makes much more money selling products than by consulting. Even if he/she charged you a bomb!

What are the products that a Salesman (masquerading as a planner) will NEVER recommend to you:

A term plan available on the net

National Pension Scheme (I have other issues with NPS)

Index mutual funds

ETF (if the ‘planner’ is a broker he will still sell other products not an etf),

Self insurance (an IT company with an average age of 27 may not need a group term insurance or a group medical insurance). Even if self insured,  partial (not covering child birth) coverage may make more sense than full coverage. As the commissions are a %age of the premium paid….you know what I mean do you not?

A financial services product salesman earns anywhere between Rs. 1 million to about Rs. 3.5 million as commissions in big metros. Very few ‘REAL‘ planners can hope to net this kind of amount especially at the start of their career. Commission income is far easier to earn than consulting income.

So they normally do a combination of pharma business (selling medicines)  and doctor’s profession (doing a ‘consulting’ business). When you are dealing with such people it is necessary for you to know whether you are talking to a doc  or talking to a chemist. That will bring clarity to the whole conversation.