Agent,Distributor, Bank, CFP’s and Sebi Ria- Who is good for you?
There are few people call themselves Investment Advisers or Financial Advisers. Insurance Agent, Mutual Fund Distributor, Bank, Postal Agent, CFP and Sebi Ria.
But common man not able to understand whom to chose out this list. Hence, I am writing this article about the skill. education, capability, mode of their income and reliability etc.
While selecting any one try to select one who has No or least conflict of interest and high skill and education.
Conflict of interest means putting their interest first instead of yours.
Most of the Insurance agents academic qualification is 10+2( Intermediate).
Few agents will do only Life Insurance business only, and some will do the combination of health, life, and General Insurance business.
Insurance Agents earning is in the way of commission only.
As their income comes from only from Insurance Policies, their tendency is always to sell an Insurance policy to the prospect.
Hence there is a high possibility of mis-selling by these agents.
Lic agents mis-sold Jeevan Saral and Bhima Gold and Money Plus heavily. Lack of skill and lack of intention doing good to the clients is the main reason behind this mis-selling.
In Life Insurance Term Insurance is the best policy. Term Insurance policy protects Policy Holder dependents in case of sudden death of the policyholder.
Life Insurance must be taken on the need base method. Some people do not need life insurance at all.
But the problem with these agents is they always sell life insurance who do not need. As Term Insurance brings lesser premium and lower premium means lower commission to these agents.
So, they will try to push other products like Endowment Life Insurance, Money back plans etc.
I have seen so many instances where these agents promised one type of policy(single premium), taking signatures on the empty Insurance proposal form and policy issued is Regular premium Policy( Where agent gets more commission).
Apart from this instead of trying to increase their skills to deliver good to the clients, they offer pay-out the commission the upfront commission that they receive from the Insurance Companies.
So, it is highly riskier to deal with these Insurance Agents as they have a high conflict of Interest.
They put their interest first not yours.
These agents thinking is always to get the new business with more regular premium so that their club memberships will remain the same.
Mutual Fund Distributor…
Some Insurance Agents also work as Mutual Fund Distributors.
Majority of Distributor’s academic qualification is 10+2 only( Intermediate). They would have got ARN Card from AMFI after completing NISM – VA exam.
Their income depends on the commission received from the clients only like Insurance Agents.
Mutual Funds contains the risk of losing your capital invested also sometimes.
Mutual Funds have different category of schemes. Few are Equity and Debt. As equity funds offer a high commission to distributors they always try to sell equity funds to the clients.
But it should not be done according to Sebi guidelines. Investing in equity mutual funds without proper risk profiling can erose your capital invested.
Mutual Fund investment contains risk. The distributor should know the ways to reduce the risk in mutual fund investment.
But almost, Majority of distributors do not have that skill, education, and intention to serve the client better.
They always to pinch the NEW FUND OFFERS from mutual fund companies which is also not a good practice from them.
In the past distributors done so many times switching of funds from one to another for getting an upfront commission on every switch.
This upfront commission is a loss to the mutual fund investor.
These distributors always say to invest long term. The intention behind this is to build their Assets under management as more aum means more income to them.
They will try to mis sell for the sake of foreign trips and club memberships etc.
When compared to Insurance Agents, Mutual Fund Distributor’s, Bank Employees definitely have a higher academic qualification.
They will be having at least Graduation qualification. But when it comes to skill, the capability to advise and reliability lets discuss.
I have seen people buying blindly depending on the advice of bank relationship managers.
Bank employee wearing a Bank Badge doesn’t mean he is capable of advising anything( insurance, mutual fund etc).
Bank employees will not get a commission like Insurance Agents or Mutual Fund Distributor. But they used to get incentives for selling financial products to the bank customers.
Thanks to the steps taken by RBI and Sebi, incentives to Bank Employees decreased.
But wrong selling from the Bank Employees not yet stopped.
I have a friend who is Ex- Bank employee, for his job safety, he mis sold insurance and mutual funds to the bank customers so many times.
Banks will give targets to the Bank employees to sell insurance and mutual funds etc. As Bank is giving is pressure employees are mis selling
financial product in the bank.
Even though they have a good academic qualification, their skill and capability and reliability is not enough for you.
Frankly speaking, they always work for their Bank benefit. Hence there huge scope of wrong selling and high conflict of interest which already proved so many times.
A cine Actor who deposited 3 cores in a Bank by giving power of attorney to the bank has lost more than 50% of the capital invested in three years. While the bank earned 50 lakh rupees in the way of commissions and fees from that investment.
Certified Financial Planner(CFP)…
When it comes to Personal Finance, CFP is the highest qualification around the globe.
Like C.A, CFP pass percentage is also low.
In India, Very few CFP’s are available.
You can find CFP available in your city. Click here to find a CFP.
If you compare Insurance Agents, Mutual Fund Distributors, Bank Employees, CFP holds the upper hand. As his skill and capability, professional qualification is higher.
A CFP has the capability to dig much deeper into your financials and give a solution to that.
When it comes to the above three category people do sell financial products only. They do not have the skill to help you to plan your investments in the best possible way.
But the only problem with CFP is, In India, it is not easy to charge fees from the clients.
Hence many CFP is giving solutions But their main source of income is from commissions.
As there is a commission income there for CFP conflict of interest may arise.
CFP has the capability of giving financial planning, But according to Sebi rules without becoming Sebi Ria, a person can not give Financial Planning.
To conflict of interest to Zero or low Sebi introduced the RIA model in India, in the year 2013.
In India, Sebi Ria should have to follow the following rules designed by Sebi…
- Should have Graduation.
- must have professional qualification CFP or Nism LEVEL AND LEVEL
- Should charge clients and should not earn any commission for recommending any financial products( it differs for companies and firms).
- must give investment advice based on the risk tolerance of the client only
- He should get a license from Sebi to act as Sebi Registered Investment Adviser.
Among insurance agents, mutual fund distributors, Bank Employees, CFP’s and Sebi Ria’s, Sebi Ria is the most reliable person.
Do not worry about the fees that Ria will charge. Because he will help you to create more wealth than you do alone.
Ria always thinks about your financial goals and he puts your interest first.
Sebi Registered Investment Adviser(Individual, it may differ in case of company Ria) will not get any commission from the products he recommended.
Sebi Ria is capable of creating wealth for your financial goals like retirement, house, child education etc with low risk in investments based on your risk tolerance and financial situation.
He will make sure that your most important goals are achieved with peace of mind.
People treat Sebi Ria’s also as agents etc, But they are not agents.
If you are earning monthly Rs.2,00,000 and you have Rs.1,00,000 investable surplus after taxes and household expenses, Sebi Ria has the qualification, skill to give investment planning for your entire surplus Rs.1,00,000 to achieve your future financial goals like retirement house etc.
At the same time agents, Bank employees etc do not have that skill. But, people sometimes investing blindly believing these agents, Bank employees etc and losing wealth in their investments.
God must save those people.
So, Sebi Ria by charing in thousands has the potential to create wealth for you in lakhs and crores.
Read following articles. https://paisahealth.in/xirr-in-mutual-funds-stocks-and-real-estate-etc/