Friday, 28 March 2014

Advisor, Cat and I

By Uppai Mappla

Cartoon source: Economic Times

FINANCIAL ADVISOR enters. He is in his mid-twenties, smartly dressed in black pants a pinstriped shirt. He arrives in a motorcycle with a junior advisor, similarly turned out. They have between them a black leatherette briefcase stuffed with papers.
We chat and make each other comfortable. I learn that both are MBA (Finance).  Six months ago the senior advisor left a multinational company since “India is growing Sir.” The senior advisor appraises me, my living space and my family. Finally he admires my cat, and I realize he is ready to talk business.
Advisor: Sir, I have a great investment product for you Sir, a ULIP, guaranteed to double in two years and with insurance protection. (He gives me a printed brochure.)
I am instantly hooked. The brochure that glides of its cover is a beauty. And the typography! Indian publishing industry has indeed arrived.
UppaiMappla: (my fingers running all over the pages) Amazing!
Observing my capitulation the Advisor moves in for instant kill. He yanks the brochure open at the last page to reveal an application form. 
Advisor: Sign here Sir with a cheque for Rs. Xxxxxx/- and let me take care of it for you.
Uppai: Don’t you want to know my age, medical status . . . ?
Advisor: No sir, nothing at this stage. Just sign and let me take care of the matter sir. And Sir, please make the cheque payable to XYZ insurance company Sir.
Uppai: I need to think a bit. You see I have already term insurances on life and health.
The Advisor deprecates my financial folly of insuring my life as if it were an automobile. He explains how the entire insurance money will go waste if “nothing happens to you Sir.”
Advisor: (finally backing off) While you rethink the ULIP Sir, here is a wonderful NFO that closed yesterday.  
Uppai: NFO?
Advisor: (recites) NFO means “New Fund Offer.” Each unit is available to you at Rs.10 whereas existing mutual funds are ten times costly. All these mutual funds invest in the same market. All investors are moving from old mutual funds to NFOs to maximize their returns. Imagine the return you will make with this NFO Sir!
Uppai: Amazing. Um, do you by any chance recommend an index fund?
Advisor: What?
Uppai: You know the Nifty, Sensex fund.
Advisor: (after the briefest hesitation) Sensex 22,000 Sir. NFO is only Rs.10 Sir, No comparison! And we don’t know where Sensex will go next year, do we Sir?
 Uppai: So I can look forward to this Rs. 10/- NFO to become 22,000 soon? How brilliant. Anything else?
Advisor: Here's an exquisite close-ended Real Estate Scheme fund Sir. After three years your money triples. See the way the real estate is going up, up Sir!
(I glance out of my window at the tall flat complex right in front of my house where some 25 flats from a total of 116 are occupied. The developer’s desperate banner flaps in the wind “Grab the Last Chance! Only TWO flats to go!”)
Uppai: (pointing) See those flats seem empty.
Advisor: (realizing I am chicken) Sir, you are wise and risk averse. I have the right product for thoughtful people like you Sir.
Uppai: Do you now?
Advisor:  (fishes out another brochure, much used and faded. Possibly that is his only copy. Must be very exclusive.) Our portfolio management scheme. Very must an in-house thing, only for HNIs. Minimum investment is Rupees One Crore but if you opt for our ULIP I can get it for you for Rs. 5 lakhs. PMS is an amazing product, Sir. It can go 100% into equity when the market is down and 100% debt when the market is up – just like that. (punches an imaginary keyboard miming how the fund manager goes in a trice from 100% stocks to 100% debt.)
Junior Advisor (interrupting shrilly): And our Peeyemmes fund manager is an Ayyeyyem product, Sir!
Uppai: Ayyeyyem product?
Senior Advisor:  Sir, IIM, Indian Institute of Management.
Uppai (disappointed): Oh, that means you two are not from IIM?
Advisor:  No Sir. Annamalai. Same syllabus.
Uppai: But of course! Ayyeyyem, Annamalai, the same thing! May I ask, if your PMS is going to zoom up like you said, won’t I have to pay capital gains tax?  And what about tax in real estate fund?
Advisor:  (shocked at my ignorance) Both the funds three years lock-in Sir!
Uppai:  No LTCGT even for your PMS and real estate funds?

Junior Advisor pipes up again: No Sir! India has no long term capital gains taxPalaniyappan Sirfrom my village. (modestly studies his fingernails).
Uppai: (slapping my head): Palaniyappan of course! Fancy your hailing from Finance Minister’s village. Your funds must have personal protection from him. That settles things. By the way, could I get back to you? I need to discuss this with my partner.
My partner Mr Divakaran is is at my heels mewing for fish.
Advisor:  (fatally ignoring my partner) Shall I come today evening Sir?
Uppai: I have your card. I will call you when I am ready. OK?
Advisor:  I wait for your call Sir. Thank you Sir. You are making the right decision, I know. (gets up to leave.)
Uppai: Oh, you said you worked for a multinational company six months ago before joining Indian financial sector? Which one?
Advisor:  Canon Sir. I was in charge of entire Tamil Nadu and Kerala.
Uppai: (indicating the Junior Advisor) What about him?
Advisor: Sir, he was in a multinational.
Uppai: Oh. Which one?
Junior Advisor: Nestle Sir. Maggi Noodles. (Senior Advisor flinches.)  
Uppai: Canon and Nestle! Great companies.
Both Advisors: Thank you Sir. See you tomorrow! (Waves patronizingly to Divakaran.)



Partner Divakaran bidding goodbye to financial advisors.
Moral: Never underestimate the cat.

Out of the more than hundred financial advisors I have met in the last ten years, I have found only  TWO -- yes, just two -- who really understood finance, and most importantly, were willing to teach me the basics of economics and finance without caring for their commissions : (1) Vinu Mammen, ten years ago with ICICI Bank, and (2)  Vinson Victor, five years ago with JRG Securities. This note is not a personal recommendation for them, but a spontaneous expression of hope for a minuscule minority  of young, honest high-flyers in financial advising profession in India.  
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This work (text only) by Sajjeev Antony is licensed under a Creative Commons Attribution 4.0 International License.