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Self Management is Best Management

Getting lured by fancy wealth management words is easy; managing your investments yourself is easier

I recently got a letter and some documents from someone who has been the victim of some decidedly bad 'wealth management' from a big name bank that advertises such services heavily. This victim of 'wealth management' was unhappy about the bank's refusal to invest in any mutual funds outside its own secret list and its inability to provide proper account statements. And finally when the investor started asking some sharp questions about its practices, the lack of straight answers would have been amusing were the underlying matter not so serious. However, what struck me most about the entire exercise was the victim's eventual realisation that the bank had asked for so little information to conduct its so called wealth management that it could never have been serious about the exercise. This is actually not a side issue but is key to judging whether someone who is claiming to do wealth management is actually even making an attempt to do anything of the sort.

The simple truth of the matter is that it isn't possible to do any kind wealth management without asking for and obtaining a great deal of information. The level at which wealth managers generally operate involves asking for how much money the investor wants to invest and then recommending some investments. However, the most important information that is needed to actually conduct such an exercise is not information about how much or what kind of fresh investment is needed. Instead, what is needed is information about what other assets and investments the investor has, and even more importantly, what the eventual goal of the investments is and what kind of a time frame these investments are being held for. You could be investing Rs 10 lakh through such a service but what should be done with that money depends more on what percentage of your total net worth is that 10 lakh than on what mutual funds the service provider is interested in pushing at the moment.

If you get attracted by a fancy advertisement or brochure for 'wealth management' or 'high-end private banking' or something like that, then the first thing to do is to close your eyes and count to ten. No, seriously. The most important thing is to tell yourself that these people are using words like 'wealth' and 'private' as a way of manipulating your feelings, of making you feel that they are going to do something special for you. These services are not selling good money management but a feeling of exclusivity, the same as any expensive product. The idea is to tell you that since you are wealthy, you must have something exclusive, something specially designed for you. How can you feel rich while investing in the same old things that ordinary people do? It's an easy trap to fall into since many consumer products and services are also sold with this kind of appeal. However, to fall for this 'exclusivity' a pitch for a watch or a pair of shoes is a lot less harmful than it is for investment advice.

Think of it this way. If you are a good potential customer for such schemes, it definitely means that you have more money than the average Indian. And almost certainly, you didn't earn that money by being unsmart about money. Believe me, you have a better chance of being able to figure out investments yourself than the random marketing guy some bank sends to wheedle your money out of you.