Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Targets, targets and you are the target

Posted by Muthu on February 26, 2011

Yesterday I went to a near by ‘corporate’ saloon. The hair stylist who was assigned to me informed me that he has monthly targets. I was surprised. He is not in sales and how he can have target? He told me that he needs to bring in monthly revenue 5 times his salary to become eligible for incentives. A minimum of 3 times the salary as revenue is essential for his continuity in employment.

May be I should cut my hair twice a month to help him. Probably I would look smarter with short hair.

Like every other business (profession?), the financial services industry has also targets and none other than you are the target.

I’m a small part of this industry and hence I know little more about its practices.

Every channel works on target and sales.

Perse there is nothing wrong about selling. All of us including gurus, filmstars, politicians, media, professionals and businessmen – Sell.

The whole world revolves around buying and selling.

What I notice in our industry, more prominently in banking channel is selling to the point of removing your shirt.

Like my hair stylist, the relationship managers at the bank need many a times to bring 5 times their salary as revenue.

So they would not recommend a term policy for life but preferably a one combined with investment, which would fetch higher returns, not for you but for the bank.

We’ve written in the past about NAV guaranteed products. They offer very low return and very high commission. And since most of us are fond or rather obsessed with the word ‘guarantee’, it work miracles for relationship managers.

Since banks cannot directly offer stock trading, they have associate companies who take care of this. The RM has target for selling stock trading services too.

I’ve a stock broking account with one such entity. I don’t trade but make some investments into direct equity infrequently.

A female voice called me from that company two days ago. Her voice was sweet but not the message. She wants me to trade. She suggested how I can make good regular income month on month by deploying a small capital. Good income month on month – is true- for the broking house and not for me. I would end up loosing my entire capital deployed with them over a period of time.

Broking houses are struggling for business. Too many brokers, intense competition and very thin margins. I would be surprised if you’ve not received call from any one of them.

The current trend is commodities trading and to a significant extent derivatives trading too.

You’ll not make any money in either of this trading. In all likelihood your capital would not last for more than a year. The broking house would make good income by allowing you to do more volume than the capital employed – leveraging for a small margin.

You cannot blame the broking houses. Like every other species, they also want to survive and would do whatever is required for the same, not necessarily what is good for you. This is an inherent flaw in the system itself. If a broker keeps your interest in mind, he has to shut the shop.

There is nothing illegal about what they do. It is just that only a handful succeeds in trading and all the others simply perish. I remember Rakesh Jhunjhunwala mentioning last year that the success rate in trading is 2%. The remaining 98%? That’s where we all belong to.

If you are interested in trying your luck to be part of 2%, may be I’ll float another firm ‘Lose Wealth Advisors’ for facilitating trading. I cannot think of any other apt name.

But I’m confident ‘Loose Wealth’ would fetch me lot more income than ‘Wise Wealth’.

All of us need you for our own survival. Just ensure that your own survival is not at put at stake.

Remember- you are the target!

Having a good advisor of integrity would help you survive and grow in the financial jungle.

Who is good and who has integrity? It is like choosing your doctor. You’ve to experiment, experience and decide. None can help you in this.

The only hope I can give you is that there are good advisors in the market. I’ve seen them even I was sitting on the other side of the table- as investor, when I was employed in BPO. I see them even more now, having moved to this side of the table.

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