I recently met a bunch of IFA who do business in a medium size town. NONE (repeat NONE) OF them believed that a rich person needed any personal finance advice. I am sure that this arose from not even knowing what all work that an IFA has to do.

Let us look at some of the problems that only the rich (real rich, with net-worth in excess of Rs. 100 crores?) have. Of course the poor also have the problems but the IFA may not consider this their domain. So here are some of the problems….

1. Gambling debts – a ‘chirag’ of the family with so much net worth is also likely to lose Rs. 3 crores, right? not Rs. 3000!
2. Alcoholism / Drugs – not exactly a personal finance problem BUT he /she may not be able to participate in the business.
3. Extra marital affairs, illegitimate children.
4. Asking for the business being split – they want out. Personal finance implications can be huge.
5. Net worth does not mean cash flow. OMG basic? well you need to meet some of them.
6. Major health issues for the persons controlling the business
7. Alcoholism / womanising – by the CEO

None of this is obviously in the area of a financial planner. However, when he is doing a fact finding for s hni or super hni there are a lot of things to consider.

Fairly obviously no client is going to talk about such things in the first meeting, but will open up in the second, third or 20th meeting. Depends on a lot of other things also.

Maybe none of these questions can be in the personal finance questionnaire…or maybe it can be as a separate annexure, depending on your comfort level. The question that I am trying to ask is “How many IFA go beyond the simple questions”.

asking questions like – how much is your income, how much life insurance you have, do you know how much of bank guarantee that you have given seem simple.

However asking the entrepreneur about keeping at least ONE HOUSE free of encumbrances, making sure that guarantees are well managed….all this somehow not part of the routine for many IFA. Lack of preparedness was stunning when I did portfolio review for a few businessmen. Did this for an IFA who wanted a portfolio and personal finance review for 13 of his business clients. 

Some observations –

8 of them did not have a will

Most of them had a good lifestyle but poor balance sheets. They did not know that it would be a big impediment if they wanted their child to go abroad for studying.

One was in the 3rd generation of business, but had not thought of how to split the business between 5 cousins. They had no clue whether the girls could play a part in the business – they had no written down rules.

UNIFORMLY ALL OF THEM WERE TERRIBLY under-insured. One of them calculated his own life insurance requirement as Rs. 8 crores – to compensate for the personal guarantees given in the business. He said he would take a ‘Keyman’ insurance and a personal life insurance – for 6 and 2 crores respectively.

Well these were the broad observations….