In case of doubt-seek professional advice!

Vincent has a secretary in his office named Ms Lilly, who undertakes the usual day-to-day official work relating to the CEO’s office. Vincent is a qualified engineer and has acquired his MBA from a premier institute of the world.Vincent is a competent professional, as last year only the country’s Chambers of Commerce awarded him with ‘CEO of the year’.

He is young, enthusiastic and can be termed as the best leader and a good team player. As a result of this success, he draws one of the highest salaries among the peer group of CEOs in the country.Vincent is a firm believer in creating regular savings and he practices this habit regularly.

The moment Vincent gets his monthly salary, he always makes it a point to invest a part of it into different financial instruments such as – Equity Shares, Bonds, Mutual Funds, FD’s with banks, Precious Metals, Insurance, Real Estate etc. Therefore, over a time, Vincent has constructed a widely distributed portfolio of his investments.

While in office, one of the duties which he normally assigns to the secretary Ms Lilly is the usual paper work relating to his various personal investment matters.Lilly is very impressed with the regular savings habit of Vincent, but bit saddened as she can not pursue the same due to her meagre salary.

However during her free time Lilly often reads various investment related literatures, which she calls for Vincent in order to execute his investments into different instruments.Slowly, Lilly started understating the silent features of different investment options and their operations on the market domain. It was the morning of Monday, the 13th December, 2006 and Vincent had just arrived in the office.

At around 10.30 a.m, a smartly dressed gentleman named David approached Ms Lilly. He introduced himself as a qualified ‘Investment Advisor’, working with a leading Brokerage Firm. David wanted to see Mr Vincent in order to offer portfolio management services, as offered by his company to many high net worth clients.

Lilly knows that Monday morning is usually not a good time to meet Vincent (this may be due to the effect of Monday blues) and therefore she advised David to come some other day. David was a bit persistent on his request, as he just needed a few minutes to meet Vincent. Lilly though liked the aggressive attitude of David but reluctantly went inside the Vincent’s cabin. She informed him about David and the purpose of his visit.

On spur of the moment, Vincent lost his temper and advised Lilly not to entertain such people in the office. He went on to add that the modern day’s ‘Investment Advisors’ behave more like  ordinary salesmen and lack professionalism.Vincent thinks that, as he is managing such a big company and that too quite effectively, in the similar way he can equally manage his personal investment matters easily.

Moreover, Vincent does not like to be guided by an ordinary investment advisor and thus rejected Lilly’s proposition to meet David in totality. Lilly came out a bit red-faced and David could easily make out the outcome of his request to meet Vincent. Lilly controlled her emotions and politely informed David that Vincent is busy and thus not available for the meeting. Without any great fuss, David left his visiting card with Lilly and decided to revert some other day with a prior appointment.

Since then David was calling Lilly for an appointment with Vincent every after two day and Lilly sensing Vincent’s attitude on the matter made one or other excuses to David for not fixing the appointment. Finally one day when Vincent was on leave, Lilly decided to call David in the office.

On arrival the first thing she informed David was, that Vincent is not available and she called David to explore the possibility of seeking his services for handling her own investment matters and not of Vincent’s. Lilly though confessed that she has a meagre disposable income unlike Vincent; however she wants to create a widely distributed portfolio of investments. David happily accepted Lilly’s proposition, but cautioned her that there is some nominal fees which she will be required to pay for availing investment advisory services from his company.

Lilly happily conveyed her acceptance and David started asking standard questions in order to understand her profile. From hereon, the relationship commenced and Lilly started acting on David’s advice with regard to all her investment matters. Though Lilly was a no match to Vincent, however she slowly started acquiring similar shares which Vincent had in his investment portfolio (obviously not in same proportions). Moreover she started timing her decisions to buy, sell and hold, based on David’s expert advice.

Slowly and steadily, David assisted Lilly in creating a widely distributed portfolio consisting of various financial instruments like – Equity Shares, Bonds, Mutual Funds, FD’s etc. Now Lilly was enjoying her wealth creation exercise and did not feel the pinch of nominal fees which she was required to pay to David for managing her portfolio, including the continuous churning of the portfolio.

Suddenly in year 2008, the whole world was reeling under the influence of the infamous phenomena of ‘Global Financial Crisis’ and stock prices across the world were on a continuous downward spiral. Financial markets all around were gripped with a panic and even future prospects were looking quite gloomy.

With continuous churning of Lilly’s investment portfolio, the overall impact of the impending financial crisis was not as harsh on her, as was suffered by many passive investors like Vincent. Off-late Lilly observed that in office Vincent’s mood was bad and this was clearly getting reflected in his dealings with other employees of the company. Lilly was equally unhappy as, for not so valid reasons, she usually get lots of firing from her boss Vincent.

Being sick of this situation, finally one day she gained courage to query Vincent on his recently practiced erratic behaviour. Vincent told her that due to impending global financial crisis, he has lost a big amount on many of his investments. He admitted that due to his busy schedule in office, he could not time the market well and thus lost many potential buy, sell and hold opportunities.

At this point, Lilly reminded Vincent about David’s visit and she narrated how she is now sitting pretty on her investment portfolio, despite a crisis situation all around. She declared that this was possible due to continuous receipt of professional advice from her Investment Advisor, David.

Vincent understood the difference and was very apologetic on the whole episode. After listening to Lilly, Vincent got convinced that though he is the CEO of a leading pharmaceutical company but that does not mean he is equally proficient in handling investment matters.

The above demonstrates the importance of hiring the services of a competent ‘Investment Advisor’. But remember, choosing the right investment advisor is a critical decision that has significant long-term implications both personally and financially. Candidly, many investors fail to ask important questions about the advisors’ means of compensation, expertise and capabilities, roles and responsibilities and on other related factors.

Whatever be the case, one should not be ashamed of hiring the services of an expect 'Investment Adviser' which may come at a nominal fee. This is better than getting trapped into the unknown and complex world of financial jargons resulting incurrence of unwarranted losses, which otherwise could easily be avoided with an expert professional advise.

So lift your phone and go ahead by calling an Investment Adviser (in case you do not already have one) and make him/her a partner in your pursuits of wealth creation.

THE Covid-19 pandemic is creating significant eco- ...

Author: Jagjit Singh

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