When did you last do your financial planning ? The progress at which financial planning in India is growing is nothing to be proud about. It is no doubt slow and the reasons are many and varied. I have tried to jot down some reasons why people avoid financial planning.
Please add if you think I have missed out on any.
Top 10 Reasons Why People Avoid Financial Planning –
1.Low Awareness
The awareness around the need for financial planning is very low in India. Most of the investors do not realize the significance of what good financial planning can help them achieve in life. Low awareness leads to a throw away opportunity and many investors wake up too late in the day to make amends.
2.No clarity on what is financial planning
Many investors do not know what financial planning encompasses. As a result they are unable to understand how their holistic financial disposition can be improved. Buying some random stocks and life insurance policies are construed by many as financial planning however that is simply product picking.
While there is free stuff on the internet to read up on, many people do not understand what they read. It is critical to understand that the four pillars of financial planning, investments, insurance, retirement and income tax, are best done holistically.
3.Little regulatory push
The Financial Planning Standards Boards of India can do much more in advertising the need of a certified financial planner. It has recently taken a step with trying to demarcate an “agent” from a “financial planner” but it has not gone down too well with the financial planning community.
Awareness among the general public about financial planning is badly required in our country. Why people avoid financial planning, Maybe print media, TV advertisem*nts and other forms of advertising will help.
4.Financial Planner in many forms
With so many people masquerading as financial planners, it is difficult for the ordinary investor to decide who is the right person to go to. In India, life insurance agents aka life advisors, relationship managers, tax consultants and brokerage houses act as financial planners. It is obvious the investor will be confused who is the right person to go to.
5.Once bitten twice shy
Many investors have burnt their fingers by going to the wrong people. Once that happens they lose confidence in the system and people who can make their financial lives healthy. So they become wary and do not want to take another chance – they end up managing their own money.
Learn from your mistakes. If you chose the wrong person, share 50% of the blame !
6.It’s a paid service, I want it for free !
I have had many queries from clients who have asked whether financial planning services are free or not. Once I clarify they are not, many take a step back saying other places (banks/brokerage houses) offer this for free. Investors need to warm up to the idea of paying for a service which is gong to make their future financial life better.
Why people avoid financial planning, just for getting free services only !
But, all you get is crap advice and unsuitable products, because they all are generalized ones not the specifically designed according to your needs.
7.It is boring
Let us accept this. Why people avoid financial planning, because it is perceived as a very boring and monotonous exercise. Investors think they would rather go watch a flop movie at the theatre than sit down to collect their financial data in a very detailed manner. As a result, very less priority is given to managing one’s own finances.
There is a mindset change that needs to happen to investors.
8.“I can grow rich myself” syndrome
Many investors think that investing in stocks is going to make them rich and as a result they do not need the services of a financial planner. They watch the stock ticker every day, make money often, lose more often and still continue trading stocks they know nothing about with gentle pushes from their stock brokers. It’s a never ending black hole.
Others take the real estate route and say they don’t believe in mutual funds and gold. Diversification is given a backseat. The “I can do it myself” mania gets the better of the individual with devastating results.
9.No clarity on whatto expect from your planner
Often, the expectations investors have from financial planners is blurred. Many want a person just to do fee based financial planning and not talking about product selling; Some want a one stop shop person to do everything for them; Few want a person to do their tax filing as well !
Fee based financial planning is your best bet as it will ensure the planner recommends products best suited for you but if you yourself do not know what to expect from a planner, then it might be a failed collaboration. You might never sign up anyone !
Make sure you know what to expect and don’t aim for something which does not exist in the industry today.
10.Poor renewals
There are many clients I have had who have not renewed their subscriptions beyond 1 year. They think that once they did their planning, it was good for their lifetime. That is a big fallacy investors might want to correct.
The need for financial planning exists each year and investors need to be careful to discontinue. You keep visiting the doctor for regular check ups each year, don’t you? In a similar way, you need to keep visiting your planner. And for God’s sake, we need to earn as well !
Any more points that my readers want to add ?
Avail Advisory Services
