If there is one phrase or term that riles up most of the financial services industry (perhaps any industry) it is, conflict of interest. The reason for this is quite simple. It is difficult for a person with a conflict of interest to understand what it means!
What is conflict of interest?
It is a situation where a person has vested interests. Such a situation is avoidable since the vested interest may influence the professionals decision-making.
Why would I want to hire such a professional and find out if the ‘may’ becomes a certainty?
There is no such thing as potential conflict of interest.
Potential conflict of interest = conflict of interest.
If my aim is to seek professional advice, I would like to hire someone who works only for me. This means eliminating people who get commissions from product manufacturers.
When they have another source of income, there is every chance that their decision-making is conflicted. I have no interest to find out if it is indeed conflicted when my money is involved. Chances are, I might never find out.
I am sure not everyone in such communities is ‘evil’ (that is statistically impossible), but what do I care? I have no intention to play with my money and find out.
I choose to avoid entire sections of the financial services. These include
1) Financial planners who distribute products either by themselves or via relatives. Many here are ignored SEBI regulations and have not got themselves registered as investmenr advisers.
2) Product distributors who offer financial planning services. Some of whom hide behind SEBIs ‘incidental advice’ clause and do not get registered as investmenr advisers.
3) Online financial plan creation portals which suggest commission-based products.
I don’t want to go and find out how many in these communities are ethical and how many are not. What do I care? I am not an analyst. I am an investor, and the only thing I care about is my fiscal well being. Even if I wanted to find out, there is no way that I could.
Naturally members from the above communities are unhappy with me and have used fiesty adjectives to describe my stand and me. I remain unruffled and see this as good advertisement for freefincal!
Like I said, it is my money and I no intention to play with it. I would prefer to either
- trust myself to learn and invest in a disciplined manner. I dont need to know everything about financial planning to get started. Just the basics will suffice
- or seek advice from a fee-only planner (if I am capable of trusting someone with my money that is). It is hard to find out if a person is a fee-only planner or not. So the simple mantra: Pay for financial advice but insist on direct mutual fund plans.
You will never find mention of these issues in the print and visual media because it is indifferent. Most of the ‘financial experts’ who write or speak in the media are product distributors.
I am fairly confident that as investors, most of you feel the same way as I do.
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