Recently i received a call from my Relation Manager and she told me, she has 1 awesome investment plan to offer & she would like to share the details with me …While talking to her, I was thinking about myself and some of my friends who were trapped by Personal bankers….In past, I took some wrong financial decisions based on RM’s advise and lost my hard earned money…This time though i was in no mood to invest but just to test myself that have i attained financial wisdom, i told her to mail me complete details…After going though details, I applied all my knowledge which i gained during last 4 years and sent her some queries. Its been over a month now but she is not able to answer the same becoz i knew in advance that she will not be able to answer….Answering those queries means suggesting the client not to invest, which they can’t do…After this test i realized that i have gained sufficient financial knowledge & on lighter note, now i can give better advice then so called financial gurus.…
Before proceeding, Let me clarify being financially wise and being financially ignorant are mutually inclusive not mutually exclusive…A person can be financially wise but at the same time he can be financially ignorant also..In layman terms financially wise means how he spends money and financially ignorant means he take wrong investment decisions & invests in wrong instruments…Let me give e.g. I earn 100 Rs and spend 40 Rs in household expense, I invest 30 Rs in equity and save 30 Rs for my retirement…In a nutshell i am financially wise but if I don’t select right instrument or avenue for investing 30 Rs in equity and same amount in retirement corpus then i am financially ignorant.
There is a famous saying “Managing money is more difficult than Earning Money”…Very True…Today we have lot of young achievers, who earn sky rocket salary at young age…Whenever your bank account cross threshold limit (Different criterion followed by different banks) immediately bank appoint a Personal Banker or Relationship Manager for your account…Bank will make u feel that u r a star achiever & you will be on cloud 9. U have earned money but u need Personal banker or Relationship Manger to manage ur money…
Have u ever wondered, Why bank will appoint well paid Relationship Manager to service your account….Here service of account means to suck money from your account….Normally these Relationship managers are given huge targets by Banks or other institutions to be achieved through their client base, in Raw language it means to generate business of X amount from clients assigned to Relationship Manager…Now u must be wondering, i know all this & why am i reading? I agree, till this point, u know whatever is being mentioned but it is very imp to know other side of the story….These Relationship Managers (RM’s) are being paid some Y% commission on business generated according to slabs…More the business generated, more will be commission…Secondly commission is highly skewed towards products which are very difficult to sell like Insurance, Pvt Equity funds etc or in words worst investment products (low return or high risk)
Beware of Relationship Manager as the objective of RM is to generate maximum commission for himself or herself rather being empathetic towards your hard earned money of Investor….The whole financial sector is gripped with this virus…In case of Insurance, the banks usually tie with particular insurance provider and hard sell the insurance product…It is not necessary, that particular insurance provider has best products in portfolio…Same goes for other financial products like Mutual Funds etc..My personal opinion is any kind of investment in insurance products besides term insurance is worst form of investment.
Secondly besides commission, the target assigned to RM is portfolio wise i.e. he needs to sell 30 Insurance policy, 40 MF’s, 200 Gold Coins etc so if i as a RM have achieved my target for Insurance this month then i will hard sell MF or Gold Coins…Though on paper, it is maintained by banks that RM’s give advise based on client portfolio but in reality, its all about money…For RM, client is just like a Scapegoat..
RM always insist client to keep buying and selling. If a customer keeps holding on to his mutual fund investments, the bank earns a trail commission of around 1% of the amount that has been invested.
Also clients who approach RM have a fixed amount of money. Within that amount, the relationship managers have to make more and more commission. So the easiest thing to do in such a case, is to get a customer to exit one mutual fund and get him to invest in another mutual fund.
In a nutshell, advice from RM is totally biased based on following considerations
(a) Commission/Earning potential
(b) Targets assigned to him
(c) Portfolio Rotation
At the end of the day, its ur hard earned money & u have all rights to question ur RM on logic behind suggesting particular investment instruments..Don’t trust ur RM blindly and use ur financial wisdom becoz its ur money…Its always better so little internet search and u can find lot of reliable & trustworthy blogs, which provide sufficient information to make well informed financial decision…Any kind of advise should come from person who is not biased and value ur hard earned money…You are saving for ur future and ur future is dependent on ur today’s investment decisions…Any wrong decision can spoil ur future as i have seen many people learnt this lesson after burning their fingers…
Frankly speaking people who have working knowledge of financial instruments are not in the radar of Personal Banker or RM…They look out for people who don’t think much while investing…They just sign the cheque and handover to RM or Personal banker for investment…
Next time, kindly spare some time to scrutinize financial advice from your RM and just evaluate its Pros and Cons before handing over cheque to ur RM becoz for ur RM that cheque is only an instrument to earn his commissions and achieve his targets but for u its ur or ur kids future…
Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.
A good knowledge based article for frequent investors.
Ravi Delhi
This is exactly my experience too. Article correctly sets the tone to context “Relationship Managers believe in one sided relation.. Me and only me”. As soon as you start expecting some help from your banker, they unveil their real and ugly face.
well said
I recently bashed my RM for suggesting me crap things. He was following me since many days. He wanted to give me ‘suggestions’ on my portfolio. One fine day I questioned him several things and he was not able to answer and I told him I do my financial planning myself and I dont trust ant RMs. I also told him I want to chnage my RM if he keeps calling me.
I agree that we are best the custodian of our hard earned wealth.
Sir ,
Sorry for the inconvenience caused to you , as you had faced such bad situation from your RM and your bank .
But all RM’s are not the same as you had quoted , now it also differ from bank to bank what quality and competency their RM bears . good banks recruit RM after many evaluation and these RM’s are well component to manage your hard earned wealth , there are targets and pressure in every organization but a true RM know what is suitable for its clients and to clarify you sir investment is a never ending process if you want to make money with money .
I just want to know what questions you have asked to them. Sir.
It depends on the financial product you would like to invest.