Asan Ideas for Advisor Bashing!

Published: May 29, 2015 at 11:48 am

Last Updated on

No. This post does not provide you asan ideas for ‘advisor bashing’. We both have better things to do. The title reflects the way many advisors feel about Facebook group Asan Ideas for Wealth (AIFW).

The group has 8500+ members out which about 100 are regulars and about 200+  are ‘active’. That is, they participate from time to time.

There are many direct mutual fund investors in this group. In fact each week there would be 1/2 people who wish to invest directly. Even if they don’t know about it, members would urge them to invest directly.

The group has quite a few people from financial services.  Many of them do not participate. Those who do, have made their displeasure about “advisor bashing” quite clear.

aifw
Can’t resist adding this photo. Credit: Thomas and Dianne Jones (flickr)

“Advisor bashing” refers to the constant refrain that one does not need the help of a distributor for investing in mutual funds or a financial planner for money management. Needless to say, I am part of the chorus.Can’t resist adding this photo. Credit: Thomas and Dianne Jones (flickr)

I write this on behalf of all AIFW singers to clarify that there is no ill will or hatred towards distributors or financial planners. No one is being targeted or bashed upon.

The urge to reduce investing costs is natural and cannot be curbed. However, there is no free lunch. If one wishes to invest in direct mutual funds, one needs the confidence to develop a simple investment methodology, commitment to follow common sense, do nothing during turbulent times and discipline to invest systematically.

Anybody can do this.  What is being presented is a simpler and achievable option. Each individual has to choose what is best for them.

Most people in financial services will not publically acknowledge that DIY is eminently possible (why would they?!). Hence DIYers feel compelled to make this known to new investors.

Btw many advisors rely on CRISIL or VR ratings to a great extent for fund suggestions. Ignoring for the moment peer comparison is not a smart idea, how hard is the same for an investor to do?

This is the age of information. Those who know how to harness it can manage quite well.

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There is no free lunch associated with financial advisory either. Conflict of interest, competence of advisors are way more complex stumbling blocks than DIY investing.

The truly DIY investors recognise this and therefore, urge others to follow suit.

This is not bashing. It is avoidance.

DIY investing is simpler than trying to find an advisor. So why bother?

The regulator (whom most advisors pay no heed to) is batting for the investor: Direct plans, registered investment advisors who should not distribute, distributors cannot provide investment advice etc.

The financial services industry does not have the maturity to publically recognise that, just like the competence of investors vary, so will that of the advisors.  There are too loyal to their clan to admit that meeting a dud advisor is extremely easy.

If stating these simple truths is referred to as ‘advisor bashing’, so be it.  One mans meat is the other mans poison. That is the way the cookie crumbles.

 

 

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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15 Comments

  1. Well said. I feel that the performance of whichever funds you choose to invest, diversifying across fund houses and market caps, depends more on luck than on your choice. So, why pay 1% or so for selecting funds. Many advisors are also known for advising funds based on which fundhouse is offering what.On the other hand, many investors may not actually be well versed with the intricacies of selecting funds.

  2. I agree. As you said many advisors choose the funds based on mutual fund rankins which are publicly available. The advantages that an advisor provides is convenience ( bit overrated with advent of online options ) , incidental advice and some degree of control over unnecessary withdrawal. An ‘informed’ investor doesnt need these but there are definitely people who are better off with advisors. These are the people who would otherwise ‘invest’ in LIC.

    1. The main problem in India is the issue of volatility and trust associated with mf selling thanks to ULIP mania and LIc agents. Also people should stop buying mfs from banks!

  3. DIY is the future of personal finance. Planners and advisors have to think out of the box and add real value in their services offered, to stay relevant.

  4. The best thing that I find in this blog is the photo. 😀 Depicts the exact ‘blah blah’ from the distributors.

  5. hmmm, don't you think there is more to Financial Planning than just selecting mutual funds ??

    And aren't you doing a disservice to advisors by referring to them as distributors in this paragraph
    “Advisor bashing” refers to the constant refrain that one does not need the help of a distributor for investing in mutual funds or a financial planner for money management. Needless to say, I am part of the chorus.

    While I appreciate your stand on learning to do it on your own, is it a good idea to do everything on your own…will you also learn medicine, law, repairing your car and a million other things which professionals do.

  6. hmmm, don’t you think there is more to Financial Planning than just selecting mutual funds ??

    And aren’t you doing a disservice to advisors by referring to them as distributors in this paragraph
    “Advisor bashing” refers to the constant refrain that one does not need the help of a distributor for investing in mutual funds or a financial planner for money management. Needless to say, I am part of the chorus.

    While I appreciate your stand on learning to do it on your own, is it a good idea to do everything on your own…will you also learn medicine, law, repairing your car and a million other things which professionals do.

    1. I have written enough about the trouble with choosing financial planning elsewhere. Here I am referring to distributors who would like to call themselves as advisors and who also engage in financial planning. I have no intentions to debate on comparisons made with other professionals. Makes no sense to me.

  7. have written enough about the trouble with choosing financial planning elsewhere. Here I am referring to distributors who would like to call themselves as advisors and who also engage in financial planning. I have no intentions to debate on comparisons made with other professionals. Makes no sense to me.

  8. People who dont know something must either learn or pay for services. It is only when they have to choose they will realize the difficulties with choosing a service provider

  9. Hi Pattu – Thanks for the well articulated post. I just wanted to add my two cents from personal experience…
    In some cases, professional services CAN be replaced with DIY after gaining that skill. With internet, knowledge is ubiquitous and skill can be honed through practice. From my personal experience – I used to PAY for oil change service. I also used to pay for car wash. I used to visit a local garage/shop for both services (imagine!!). Now I have acquired both skills and am in DIY mode.
    My point is there are levels in each profession – law, medicine, engineering, accounting, taxation, plumbing – skills for which can be learnt and replicated. If one has the time and discipline, level of those skills can be enhanced to levels beyond most professionals. Same with financial services.
    Ultimately, I think IFAs will continue to exist – only because of lack of discipline or ignorance on part of common populace,

    Thanks

  10. I know a lot of ultra high net people and none of them have a personal financial advisor. Point is, if you have the brains to make money then learning to manage is not hard.
    In buffet’s simple words rule 1. Do not lose money 2. Never forget rule 1.
    FDs and ULIPs lose money (inflation adjusted), so don’t invest there. Long term investment in a fund/etf never loses money. How hard is this to understand and follow?

    Unfortunately it’s the middle class which lives in fear and most advisors target this fear in this group. That’s the reason why most people dislike them.

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