• Greater dependence on investment income.
• Limited retirement corpus.
• Low risk taking capability
• Mind set to keep corpus intact and leave a legacy for the heirs
• Increased life span post retirement
• Falling Interest Rates on Bank deposits
• Rising Inflation
• Rising health care expenses
• Emergency funds and medical emergencies
• Inadequate health insurance
• Need for regular and guaranteed inflows for meeting day to day expenses Lock in Investments
• Investments are locked in and premature withdrawal can lead to loss Low risk taking capability and psyche
• Minimize income tax liability
• Have immovable property but low financial liquidity
• Lack of awareness of reverse mortgage
• Maintenance of immovable property
• Next generation is not interested in the property if settled abroad
• Whether to make investments in joint names
• Whom to make nominees
• Managing investments on a day to day basis as it is too complex.
• How to manage investments if incapacitated
• Not conversant using technology for managing investments
• Have a lot of time but at times lack expertise to manage investments
• Ever changing investment scenario
• Emotions normally attached to investments
• Prefer ease of management of investments
• Record keeping/ documentation of investments
• Biased towards guaranteed return products
• Whether they should make a will and how to go about it
• Whom to appoint as executors to the Will. Appointing someone to take care of finances due to ill health
• Managing cash flows on a day to day basis. Need to give a Power of Attorney
• Increasing dependence on other people for financial matters

After working hard for all these years post retirement shouldn’t be spent worrying about finances.All these concerns can be addressed with proper planning. Consult your financial advisor.

Gautam Bhalla

Director
BM Fiscal Point Advisors Pvt Ltd

There are several instances where we use consultants .we consult doctors, lawyers, architects, chartered accountants, and many others, as may be necessary. For instance, we go to a doctor when there is some bodily ailment and confide in her the problems we are experiencing. She would question, examine, analyse and arrive at a conclusion about the possible cause of the sickness. Then she would prescribe medicines. A fee is paid for her advice and the patient goes to a chemist and buys the medicines.

Let’s look at the alternate scenario. Everything is the same, but the doctor does not charge her fee. Instead, she asks the patient to buy certain medicines from a particular chemist. The doctor would get a cut on the price of medicines prescribed. Which doctor would you want to use, even if what you may pay overall is the same? The answer is self-evident. This example has been used to illustrate true, unconflicted advice versus advice where conflict is inherent and fully present.

Distributors have a role to play in the financial services ecosystem. There would be many customers who are looking at a basic level of engagement, which can be met by a distributor. However, a distributor is not the same as an adviser, and this is the distinction that consumers at large need to understand.

Differences

Distributors of financial instruments generally give advice and sell products that their clients need and are remunerated indirectly in the form of commission, which is embedded in the product they sell. On the other hand, fee-only advisers (RIAs) offer advice and charge a fee directly to the client. The argument is that the “only difference” between the two is the way they are remunerated for their advice. But are these two the same? They are not. Here’s how they are different.

Representation

Distributors represents Mutual Fund Houses. They sell products of their principal to clients based on their own “advice”. Their remuneration is going to come from Mutual Fund Houses, based on the products sold. A fee-only adviser represents only the client and is independent in this regard. A fee only adviser gets no commission from third party to sell any products.

Conflict of interest 

In such a scenario, there is certainly a possibility that distributors may sell the product that is most remunerative to them. Since they offer advice as well as products, there is a possibility that the product is not the best from the client’s viewpoint. So the issue is not how distributors get their remuneration, but the conflict of interest.

A fee-only adviser, on the other hand, offers advice for a fee. Hence, the judgement would only be based on what is in the client’s best interest as the client is the paymaster in this case.

Different standards

 As distributors they need to follow the suitability standard, where they can sell the principal’s product if it is broadly suitable to the client's requirements. By this standard, they have done their job even if the product suggested is not the one with the least cost in the category or offers lower benefits in comparison to others in the category. Also, they need not worry about other categories of products which may be more suitable to the clients.

Fee-only advisers, who are registered investment advisers (RIAs) with the Securities and Exchange Board of India (Sebi), follow the fiduciary standard. The adviser is expected to put the client’s interest first, even above their self-interest. Thus, such advisers are bound to suggest products that best suit their client’s interests. They also follow higher standards of certification, documentation and compliance requirements, which again is in client’s interest. RIAs need to follow the guidelines which are laid down by SEBI and they are accountable for any wrong advise. You also need certain certification’s to become RIAs like CA, CFA, CFP, CWM etc.

It is, hence, clear that the difference between a distributor and a fee-only adviser is not just a matter of how they are remunerated. Regulators (SEBI) need to protect investors from being taken for a ride. They may rub the entrenched participants the wrong way as tightening rules may affect incumbents adversely. But regulators have to play their role keeping in mind the larger interests.

In a nutshell, distributors (or agents) represent the principal and not the client. This leads to an inherent conflict of interest. Also, they follow the lower suitability standard, which as we have seen, is not in investor's best interests. Fee-only advisers (RIAs) represent their clients, have no or lower conflict of interest, and follow a fiduciary standard. Those are the differences and they are significant from the investors’ view point.

Karim Meghani

Director
BM Fiscal Point Advisors Pvt Ltd