How many greedy stock broking and financial advisory firms murder their clients should not remain a mystery for long. To achieve high growth targets, these firms hire street smart people, who make new clients, fool them and earn their living. These firms don’t think about creating wealth for their clients, they only think about earning quick money by misguiding masses. They advise clients to indulge in day trading, derivatives etc. so that they could earn handsome brokerage.
They never advise them on investing for long-term to create wealth, because they know that this would reduce their earnings. I call them यमदूत. In fact they are. These firms actually murder their clients to achieve their targets. There is no creation of wealth, but transfer of wealth from their clients to their firms. Clients are greedy. They get trapped. Clients then blame the stock market for this murder, which is actually done by the greedy firms.
Likewise, insurance firms and agents try to sell endowment and ULIP products to earn high benefits and commission. They avoid suggesting term insurance. Mutual fund distributors advice for schemes on which they earn more commissions. Such advisors never think of wealth creation for their clients. They think for their own wealth creation. Sebi has taken a right step recently to stop upfront commission in case of mutual funds, after which mutual funds distributors are least interested to switch clients’ funds without any fundamental reason.
All the stakeholders including stock exchanges, insurance companies, AMCs etc. are happy with this white collar murder of clients on a continuous basis. The stakeholders make money on the cost of such murders. Nobody wants to come forward and educate people in the right direction. Everybody is busy transferring wealth from client’s accounts to their own account.
Clients on the other hand, need excitement more than creating wealth. They want to make money quickly instead of creating wealth in the long term. When the client is young, she trusts blindly on the so-called advisor. Infact, an advisor is supposed to advise for the benefit of clients, but she works for her company’s benefits to justify her job. Plans are made everyday to increase business, and not for increasing clients’ wealth.
In this scenario, we can discuss some solutions here.
Organizing educational workshops online and offline is important. Stakeholders generally organize workshops to pitch their products. They should also organize workshops where clients should be educated about the mis-sell.
On the part of clients, they should take a second opinion from a person who is not having vested interest while investing or taking insurance. The second opinion would always be critical and fair. The clients should hire professionals for this second opinion by paying reasonable fees to them. Generally, investors take advice from family and friends who are not capable of advising properly.
Insurance companies should popularise term insurance(pure risk) instead of endowment or ULIP. They should leave the investment part of so-called insurance products to the expertisation of various mutual funds. Pitching term insurance should be the part of helping the individual in doing financial planning. When a person does financial planning, he or she( an earning member of the family), gives least importance to term insurance. We have seen many cases where the life of families went upside down after the death of their only earning members. Who will save the families from this turmoil? These institutions naturally, which know more about the subject than an individual.
Lets make the investors more educated and help them in achieving their financial goals while having a system of proper risk management though various important insurance plans.
By- Vinod K. Bansal
