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A decade ago, for most middle-class individuals, personal finance
decisions were relatively simpler as their investment options were
limited to postal saving schemes and fixed deposits.

With incomes rising, investment choices have grown and with choice
comes complexity. In the world of structured products with core
complex strategies, financial intermediaries have come to play a big
role.

With the financial services industry moving to the ‘commission-based’
distribution model, most individuals are likely to come across an
‘agent’ who tries to sell a product.

Here are some tips on how to deal with them:
Ask stupid questions
There is nothing wrong or inappropriate in asking questions that sound
stupid. After all, it is your money. If you do not understand a
product, ask for details. Instead of presuming things, seek
clarifications.

Most products come with benefit illustrations. Sift through them for
better understanding, along with what is on offer from the
competition. The agent should be helping you out in understanding
these.

No obligation business

When you shop for clothes, a television set or even a car, you may
choose to window-shop or even visit some showrooms or malls.

You may try out clothes and walk out without buying any. There is no
obligation on you to buy one. Investments are no different. You are
not obliged to buy a loan, life insurance policy or a mutual fund even
if you make extensive inquiries.

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Performance
The performance of the financial intermediary should be analysed using
two parameters. First, what is the level of deliverables?

For instance, the services of two stock brokers will be different: One
may offer you ‘online trading’ involving e-funds transfer and digital
contract notes with no human interface and another may offer you human
interface and contract notes on ‘paper’. Of course, the costs
associated also differ.

Second factor will be your needs. A stock broker that offers an
excellent online trading platform for buying foreign securities will
be of no use to an individual who restricts his investments to
domestic equities. You will be better off if you keep these factors in
mind while signing an intermediary and dealing with it.
Ask about his income
Ask the intermediaries how they are compensated. There is nothing
wrong about it. Most professional bodies and regulators have made it
mandatory to disclose the compensation received by the
intermediaries.

Do not choose or avoid a product because the intermediary is making
more or less money out of it. Rather, knowing about the commissions
may help you understand the ‘sales pitch’.

Offer the advisors to give you an advice for a ‘fee’ than buying any
product from them. The advice may not remain the same, if you tell the
intermediary that you are not going to buy anything from him.

Grievances

Grievances need to be heard. Most good financial service providers
provide you with details of the authorities to contact if you have a
grievance. Instead of fighting with the ‘call centre’ executive or
‘helplines’, write to the ‘nodal authorities’ appointed by the service
providers before approaching regulators for redressal.

Do things yourselves
With the advent of technology, it is easy to buy financial products
directly from companies. This saves time and cost, after you break the
initial wall of ‘system issues’.

Forms are no more difficult as they used to be and an attempt to fill
it on your own will prove this. Still, if you want hand-holding, go
for an advice for fee from an expert and hand over the ‘execution’ to
a ‘distributor’.

Do not pay the expert advisors for execution as incremental costs here
are generally higher than what is charged by an average distributor in
the form of ‘commission’.

But you do have the choice of getting everything done by one person if
that gives you peace of mind.
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