When we talk about financial freedom, we usually think about income, savings, investments, debt, and returns. But there is another factor that can quietly influence our financial decisions: Trust.
Yes, Trust. We trust our bank relationship manager. We trust the insurance agent who has been visiting our family for years. We trust the neighbour who sells insurance. We trust the financial influencer whose content we regularly watch on Instagram. And sometimes, that trust can prevent us from making decisions that are genuinely aligned with our financial goals.
The problem is not trust. It is blind trust.
About the author: Vishnu M is a SEBI-registered investment adviser and a member of Fee-only India, a group of fixed-fee-only SEBI-registered advisors. He can be contacted via his website vishnum.in
Banks may recommend insurance and investment products. Insurance agents may recommend policies. Influencers may promote mutual funds, NFOs, or other financial products. There is nothing inherently wrong with someone recommending a financial product. The problem begins when we assume that the recommendation is automatically in our best interest simply because we trust the person making it.
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When someone we know and trust says, “Sir, this product will protect your family, and after 10 years you will also receive ₹10 lakh,” it can sound like a great opportunity. We may think, “They genuinely care about my family. Otherwise, why would they recommend this?”
But the more important question is: Is this product actually the most suitable solution for my financial need? The person recommending it may have a completely different incentive. A product can be good and still be wrong for you
Consider life insurance. Suppose your primary requirement is to protect your family financially if something happens to you. In that situation, your first priority should be determining how much life cover you actually need and for how long. A pure term insurance policy may provide substantial life cover at a relatively lower premium. The remaining amount that you might otherwise spend on a bundled insurance-investment product could potentially be allocated separately toward investments, depending on your goals and risk profile.
This separation can make the purpose of each product clearer: insurance for protection and investments for wealth creation. The point is not that every insurance-linked product is bad. The point is that we should not choose a product merely because someone we trust recommended it.
The same problem exists with investments
Social media has made financial information more accessible than ever. But it has also made financial product promotion extremely easy. You may come across an influencer promoting a new mutual fund NFO with claims such as: “The NAV is only ₹10. This is the best time to invest.” Some may even suggest that an investment of ₹1 lakh could become ₹5 lakh in the future.
But how can anyone know that with certainty? A mutual fund’s NAV being ₹10 does not make it cheaper than another fund with a NAV of ₹100. The NAV simply represents the per-unit value of the fund. What matters is the underlying portfolio, investment strategy, costs, risk, and expected suitability, not whether the NAV looks low.
An NFO is simply a new fund launched by an asset management company. Because it is new, it may not have a long performance history of its own. There are already numerous mutual funds with 5, 10, or even 15 years of track record. That does not mean past performance guarantees future returns—it doesn’t. But when evaluating an investment, having a meaningful history can provide more information than having no track record at all.
So why do investors still get attracted to such products? Often, trust plays a major role. We trust the person explaining it. We assume they understand our situation. We assume they are recommending it because it is good for us. But their incentives may be different from ours.
The cost of misplaced trust
The consequences may not be visible immediately. You may end up with insufficient life insurance because a large portion of your premium went toward an unsuitable product. You may invest money in products that do not match your risk tolerance. You may choose investments without considering when you actually need the money. You may end up with a portfolio that looks diversified but does not actually serve your financial goals.
And eventually, when you need the money for your child’s education, retirement, a home, or another important goal, you may discover that the financial decisions you made years earlier were not aligned with what you actually needed. At that point, the problem is not necessarily that the product was bad.
The problem is that the product was never evaluated in the context of your financial goals.
Think like a doctor
Think about how you visit a doctor when you have a health problem. A doctor does not normally start by saying, “Here is a medicine. Take it.” First, they try to understand the problem. They consider the symptoms, assess the situation, identify the likely cause, and then recommend an appropriate treatment. Even a good medicine can be the wrong medicine for a particular condition.
Financial products work in a similar way. A mutual fund can be a good investment product. A fixed deposit can be useful. An insurance policy can provide valuable protection. Bonds, PPF, NPS, and other financial products can also have their place.
But a good product does not automatically mean it is the right product for you. The right solution depends on your goals, time horizon, risk profile, cash-flow requirements, existing investments, and overall financial situation.
Don’t stop trusting. Start questioning.
The answer isn’t to distrust everyone who recommends a financial product. Instead, trust should be accompanied by questions. The next time someone recommends a financial product to you, ask yourself:
- What financial goal will this product help me achieve?
- Does it match my risk profile and investment horizon?
- What is the actual logic behind recommending this product to me?
- Is there a better or simpler alternative?
And perhaps the most important question:
- How does the person recommending this product earn from it?
Understanding the incentives behind a recommendation does not automatically make the recommendation wrong. But it can help you understand whether the person recommending the product and the person buying it have the same interests.
Your financial goals deserve independent thinking
Financial freedom is not built by blindly following recommendations from banks, agents, friends, relatives, or influencers. It is built by making decisions based on your own goals and circumstances. Trust the people you value. Listen to their advice. Learn from their experience. But when it comes to your money, don’t outsource your thinking. Because ultimately, the person who has to live with the consequences of your financial decisions is you.