Sunday, July 26, 2015

Ready for Sell...FINANCIAL PLANNERS....RESPONSIBILITY TOWARDS ECONOMY Series 2

Much of the suicide cases in the Indian society are due to financial issues. A sudden disease cost or an accident can eradicate life style of a middle class society. If you read carefully the news papers every day you find dozens of advertisement for where kidney donation and also kidney sellers advertise about their kidney. The one who donates and the one who gives advertisement willing to donate his kidney are none other the people whom we see in the middle class segment of society. They need money for various reasons, for their children education, for prolonged unemployment crisis of liquidity, or for treatment of any of the family members. This is the true story behind every donator. Lacks of proper financial knowledge and investment advice have eradicated these peoples life that have no other way but to opt for these avenues.  Either you die or either you sell your body part to save your family.You can’t blame poverty neither for taking birth in the middle class. Lack of education is the prime reason for the widening income inequalities among the society.

 In today’s world the cost of medical expenses become a nightmare for a family. Often facebook we find pictures with tag line asking for funds to save children. Salaman Khan the most famous reputed star and may other film star often come forward to save the poor Child for raising funds for their treatments. But this is also limited to number of cases of financial problems arising due to medical cause.  The lucky is the ones who get the help of an NGO but that’s too limited. My brother in law preferred to die since the cost of treatment of cancer was too high which was diagnosed at later stage just 5 months before he passed away. He was sole bread earner for his family with a child who has just qualified the 10th standard exam with flying colors. In India we find that income inequality is a generation based legacy passed over by the grand fathers to their grand Child. Very few cases we find where a middle class have raised up into the bracket to rich society segment. Financial planning and efficient asset allocation are the key tools to solve the problem of income inequality and developing the society to a better living space.

Financial advisors thinks that what a fee a middle class will pay since the fee is linked either on a certain fixed percentage over the asset of the investor being managed or a fixed fee. Now a middle class people earning meager salary of 20 k each money and who might be having a barely an asset of   more than 5 lacs. Hence hardly any financial advisor would come forward to help these middle class but just calculate that how much one can get an opportunity to help these middle class to train them about financial planning. You might say that financial planners are the ones who have to tools and knowledge about bridging the gap of income inequalities over the generations. All we need is to step ahead.

Did we ever think that today countries like Europe, US are struggling with income inequality and legacy of debt and poor living mentality is being passed to the young generation?  But they had one of the best financial advisors in their country with expertise knowledge far better compared to India. Then why they are having high income inequality.  Well financial ADVISORS only advised them to live for themselves and less for their grand children’s. They pushed products which were of high margin followed with high return but at the end the return only depleted the assets of the family and dragged them below the middle class segment into the poor segment. So what we should expect form an advisor who is advising. We need advise which will bridge the gap of the income inequality and brings up a family from the poor segment to the middle class and form middle class to an segment where any risk is covered to protect from falling below the middle class. Rising income inequality and wealth is due to poor lack of risk management in financial planning. Risk management can only be done when the financial advisors educate the people about risk management and the damages to their life. Most of the suicides happens due to poor risk management due to lack of financial knowledge.

When a middle class gets a job and start earning they don’t have the knowledge that they need to start SIP or invest in mutual funds. They don’t have the knowledge that after their marriage AND AFTER THEIR CHILD THEY NEED A family floater policy. They don’t know that how asset allocation can be designed and risk can be reduced. They know only that an LIC policy would be enough to take care of their family. In fact 90% of the Indians don’t know what insurance policy they have taken from LIC. They only find the answere from the LIC agent who has sold them the policy.

When an accident or a disease happens they sell their property their assets even they sale kidney to get money for their family crisis. Income inequalities could only be reduced through proper financial knowledge and we financial advisors holds a tremendous responsibility towards the society.  We need to understand that we don’t belong to the community of capitalist and hence our profession should not be a mere revenue earning based on only focusing towards the rich. We need to bridge the income inequalities and also upgrading the level of the society.


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