Why did various Fixed-Fee RIAs choose to give up a more lucrative career path to pick a less lucrative career path? SEBI RIA Avinash Luthria asks this question to three Fixed Fee RIAs.
About the author: Avinash is a part of freefincal’s curated list of fee-only financial advisors and a Fee-only India member. He was a Private Equity investor for 12 years and he has a two-year full-time MBA in Finance from IIM Bangalore. He can be contacted via his website, Fiduciaries.in . He has an occasional column in Business Standard. He has written in freefincal several times and this was his first article in freefincal: Fee-only advisor Avinash Luthria warns real investment returns will be zero!
I previously wrote in FreeFinCal, How the financial services industry aims to take 1% of your wealth each year. That article covered just one out of several ways in which the Financial Services industry harms clients, and there are many other ways. Two examples are (a) zero fees and (b) low fees combined with very poor products / services in an opaque way so that the client cannot make an informed choice.
It is not that surprising that most people will do what is in their self-interest, even if that requires harming other people. And the Financial Services industry is no different from other industries such as Healthcare / Medicine, Education, Law, Technology, News / Media, Activism / Social Services Organizations etc. It is only the nuances and patterns that change from one industry to another. For example, in some industries / businesses the victim may not be the client but may be someone else e.g. employees or vendors or taxpayers or the public. The more surprising and interesting question is why a miniscule proportion of people (in every industry) do the exact opposite, which is: harming their own family to ensure that they can avoid harming their clients. This puzzle is the focus of this article.
There could be multiple reasons why people go out of their way to avoid causing harm to people who are not their relatives / friends. So instead of doing a very detailed analysis of one reason, I have instead asked three people to explain why they are doing something so puzzling (even if their explanations are only moderately detailed). I have spent two decades in the Financial Services industry and hence (a) I understand the Financial Services industry far better than I understand other industries and (b) I know more people in the Financial Services industry than I know in other industries. So, I selected three people in the Financial Services industry to ask this question to: Hourly-Fee SEBI Registered Investment Adviser (RIA) Basavaraj Tonagatti , Hourly-Fee RIA Swapnil Kendhe, and Fixed-Fee RIA Salma Sony.
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These are seven reasons why I selected these three people to answer this question:
- Oversimplifying a lot, in the case of RIAs, Hourly-Fee is just Fixed-Fee combined with a disclosure of the number of hours of effort by the RIA (in calls with the client and back-end work). Hourly-Fee RIA is a fee model in which it is extraordinarily difficult to be viable in India, the US and everywhere in the world. And Fixed-Fee RIA is a fee model in which it is moderately difficult to be viable in India. So, I have selected two Hourly-Fee RIAs and one Fixed-Fee RIA. This is my terminology to describe their fee model, and they may use different terminology to describe themselves. Since all Hourly-Fee RIAs are also Fixed-Fee RIAs (but the reverse is not true), for brevity and simplicity in this article, from here onwards, I will use the term Fixed-Fee RIAs.
- A significant proportion of Fixed-Fee RIAs had enough money to retire or at least to slow-down before they became Fixed-Fee RIAs (for example this article by Fixed-Fee RIA S R Srinivasan). An answer by a financially-free RIA would be less relevant. Swapnil Kendhe (in part 1 and part 2 of this article) and to a much lesser extent, Basavaraj Tonagatti (in this article) have implied that they were not financially free when they became Fixed-Fee RIAs. That made them perfect for this article. Salma Sony has not made any public statement on this aspect. So that was not ideal for this article, but I wanted there to be at least three people to attempt to answer this extremely difficult question.
- The three of them shut down their own Mutual Fund distribution business to become Fixed-Fee RIAs. I am aware of only three such people in India (here I am using the definition of Fixed-Fee RIA that is the same as is used by FreeFinCal). So, the three of them are exceptionally unique.
- The three of them were already entrepreneurs before they became Fixed-Fee RIAs i.e. they gave up their earlier form of entrepreneurship to become Fixed-Fee RIAs. For many other Fixed-Fee RIAs, the desire to become an entrepreneur was a small part of their reason to become Fixed-Fee RIAs. And an answer by such an RIA (who was in a salaried job) would be less relevant.
- Most people are not aware (or try to be unaware) of the harm that their role creates or can potentially create. Only a small proportion of people are aware of this. If a person is in a salaried job, then it is very easy to justify any harm caused as being because their boss made them do it. An entrepreneur does not have this excuse. So, for this article, the three people had to be entrepreneurs.
- I think the question is correct. But it is an extremely difficult question to answer. And the three of them write frequently. So, I hoped that they might be willing to grapple with this extremely difficult question without deflecting it or rejecting it.
- I have interacted significantly with Swapnil Kendhe over the last 7+ years. I have interacted a little bit with Basavaraj Tonagatti over the last 6+ years. And I have interacted only very minimally with Salma Sony over the last 2+ years. I did not want the list of three people to be biased only towards people I have interacted with significantly (even though that would havehad its benefit for the purpose of this article).
This was my Initial Question to them: Why did you deliberately give up a more lucrative career path and pick a less lucrative career path?
My request to each of them was: Please assume that in response to each of your replies, I have again asked why? Please keep going deeper till either the question / answer becomes too personal, or it is not possible to answer (e.g. it is almost impossible to answer why you have ego or why you are doing something that is in your own self-interest). Please try not to deflect the question but instead to answer at least the part of the question that is correct. But if you think that the question is 100% wrong, then please feel free to say so.
This was my subsequent Follow-up Question, which was just making the Initial Question a little sharper: Why are you willing to apparently harm your family so that you can avoid doing any harm to your clients?
I have started with Basavaraj Tonagatti’s answer because, I think, he was willing to wrestle with the question most directly. But various readers could find that they relate more to one of the other answers. I have underlined one phrase or segment that I found most interesting in each person’s answer.
Basavaraj Tonagatti’s answer to the combined question:
“I chose a less lucrative career path because it aligns with my values, purpose, and the impact I want to make. Helping others and staying true to my principles outweigh the financial trade-offs. Life is measured by the difference you make in others’ lives, not material wealth. Beyond a certain point, money loses its value, while integrity and staying true to my beliefs provide lasting satisfaction.
Material wealth offers comfort, but true meaning comes from relationships, trust, and the positive impact you have on others. Trust and relationships are the foundation of a meaningful life. Financial success feels hollow if it harms others’ well-being, and maintaining trust strengthens my identity.
I prioritize others’ welfare because of my deeply ingrained sense of responsibility and empathy. I strive to act in ways that minimize harm and benefit both my clients and myself.
The balance isn’t about harming my family but modeling a life of ethical integrity, which I believe will ultimately benefit them, even if short-term sacrifices are required. Strong values provide resilience in challenging times. While financial security may fluctuate, integrity and principles offer a stable guide.
I view acting in line with my values as an investment in long-term harmony and trust. The harm I avoid to clients is tangible, while the ‘harm’ to my family is an opportunity to strengthen resilience and shared values.”
Swapnil Kendhe’s answer to the Initial Question:
“I was deeply into Swami Vivekananda literature during my engineering and even after, which made me an idealist. I could not accept the ways of the finance industry where selling an inferior product to the client that gets you a higher commission is the norm.
Not informing the client about a better option like direct plans of mutual funds would make me feel guilty. Finance industry was trying to motivate me by the lure of money when doing what is right and doing it well excites me more. I was a misfit there.
Fixed-fee suits my temperament better. It can never make me rich as my income is linked with my time. I only have so much time, I can only earn so much income. But my life at the emotional, intellectual and spiritual level is better. I take pride in my work as a fixed-fee financial planner, which I could never do as a financial products salesman.”
Swapnil Kendhe’s answer to the Follow-up Question:
“I don’t think I am harming my family. I earn more than enough for my family’s needs and wants.”
Salma Sony’s answer to the Initial Question:
“I believe RIA is an esteemed and lucrative profession; we just need to do our best to solve people’s financial problems to make it more lucrative. The three reasons why I chose to become RIA:
- Freedom to work from anywhere and anytime.
- To serve more people who genuinely need pure advice. I love to work with responsible people who want to enjoy life today and plan responsibly for tomorrow.
- For Job satisfaction. When clients thank me for helping them to become debt-free faster, buy cars without loans, buy homes with minimal home loans, etc., I live every moment as if I’m achieving my financial goal. Job satisfaction is immense in this profession.”
Salma Sony’s answer to the Follow-up Question:
“I will serve more people and ensure my clients’ and families’ financial security. It’s a win-win profession.”
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