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Since when have you been practising investment advisory?
My financial career started in 2005. Like many people back then, I started off as a mutual fund advisor or distributor, and once you find your feet in the business, you really understand what people want, and what you are good at, etc. I became a financial planner in 2010 and then registered in 2014. So, since 2005, I have basically been into financial advisory.
Can you describe the financial advisory landscape before the RIA regulations came into force?
As I said earlier, I've been into financial advisory since 2010. The RIA norms had not yet been issued, but I was always a CFP (Certified Financial Planner), which was fee-based advisory. The difference I feel was that earlier, it was more product-oriented rather than being client-centric. Good advice was being given by certain distributors and advisers at that time also, but the defining difference is that such advice was earlier restricted to products. Hardcore financial planners were far and few because the concept of financial planning was very nascent.
How has the scenario changed since then?
The entire ethical financial advisory fraternity, right from distribution to advisory to planning, has taken the onus of educating the clients and make the client or investor more mature and evolved. Earlier, you would not find questions being asked of us on complex issues, but now the difference is that because the client or the investor is more mature, he is in a position to ask you relevant questions. That does not mean we are not asked those cliché, naive questions like how markets will perform or how insurance can double our money. However, you also have investors talking about important things like financial goals, and how they can meet them.
Investors are more mature when it comes to understanding the markets before getting into it and asking the right questions when appointing a financial planner.
What were the issues that affected consumers before the RIA regulations came in and what is the extent to which they have been resolved?
The way I would want to address this is: what were consumers’ problems 10 years ago and what are their problems now? Regulations probably have been just one of the factors because the problems that existed earlier are still there, which is that wrong investment instruments are still being sold. New ones, such as cryptocurrencies, are in but those were not prevalent 10 years back, and the lure of fast money still continues. This is where, I think, advisers have to play a very big role.
Did your clients push you to invest their money in cryptocurrencies during the last wave?
They tried their best, but they could not get through with that.
How did you dissuade them?
It's simple. I would tell them that they are asking the wrong person. I'm responsible for their investment to be safe and under the ambit of a regulator which is going to govern it. The investment product that they are asking me to invest in is not even regulated by the government itself, so I'm not even going to talk about it. If, however, they still want to do it, it is their money and they can take a call on it. But, I also tell them not to come back to me with their stories of profits or losses. Whatever they make, I just don't want to listen about it.
Let's talk about your own journey. How was your first year of practice?
In the first year, a middle-aged woman had come to me and her finances were in a complete disarray. She was single and earning well but was facing a huge cash crunch. She was not able to fathom the reason for it despite having a good source of income and hardly any financial liabilities. I looked into her finances,put on a straight face despite being very nervous, and told her that she had been mis-sold several insurance policies. It took another six months for me to convince her that she had to get rid of all the garbage accumulated over the last five to six years and make her aware of what had gone wrong over the years and then rectify it.
For the first seven to nine months, we were in rectification mode and did not make even a single investment. After we modified her mis-sold insurance policies and got her cash flow back on track, which, I think is the nerve centre of financial planning, she could breathe easy and was able to start investing as her income also rose.
In fact, she gave me a testimonial in which she said that, after interacting with me on her personal finances, she was not scared of seeing her bank statement anymore and could enjoy a good night's sleep. The joy of seeing a person come out of their shell when you put them on the right path cannot be measured in numbers. I still cherish that experience and it is one of the proudest memories I have about my profession. In fact, she ended up getting me almost seven to eight clients.
Do you have any regrets about something that you recommended in good faith?
I would look at it the other way: that I did the right thing but the client did not appreciate it. There are certain clients, who despite being given all the right advice, still chase numbers. Most people would appreciate that associating with a financial planner has put them on the right path, but there are still a few of them who only want returns that beat the market. My regret, so to say, is only with this section who only want to be in that rat race.
What, according to you, is the hardest part of being an adviser?
Simplicity and ethics are often misunderstood by clients. For instance, I may recommend an FD (fixed deposit) if it fits a client’s profile, but it puzzles them that they are paying me a fee for merely suggesting an FD. Following this line—of always trying to be ethical and trying to resolve difficult things in a simple way—can be tough, and doing it continuously iseven moredifficult.
What according to you are the changes needed in current RIA rules?
There are a couple of things. First is that the existing rules are very strict and comprehensive, which makes it difficult for anyone to follow and comply with it. Of course, we are doing it but they are a deterrent for new entrants and hence hinder the growth of this community, whereas there is a lot of scope for growth.
Second, with the type of transparency and fairness that the investment advisers bring to the table with no conflict of interest, the choice of the execution of investment products should be left to the clients.
Third, and more importantly, RIAs should not have to prove their expertise and education levels on a continuous basis. Once they are on this path, they should be allowed to continue as they are already following a set of rules.
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