SEBI registered Investment advisor (RIA) with Registration number – INA 000000342.
Wealth Manager or Wealth Destroyer?

Rajiv was very happy to get a call from his bank last week. The lady who called him introduced herself as Anita, the newly appointed relationship manager to handle his accounts exclusively. She invited him to the bank to discuss on some good investment options.

Rajiv was keeping 2 lakhs in bank deposit, which he received from the maturity proceeds of an LIC policy. He wants to spend this amount next year for his daughter’s higher education.

Next week Rajiv met Anita in the bank. She recommended a Single premium ULIP policy to Rajiv after realizing his bank balance of 2 Lakhs. She told him that the equity market is down now, and you can make good returns in the next 1 year! Somehow, he managed to escape from her temptation!

Relationship Manager?

Rajiv is not alone. Many customers are getting such exclusive relationship managers! Banks are recruiting fresh MBAs and training them to increase their fee income. They found such product selling as the best way to reach their revenue targets.

Once, banks were the safest place to keep your money! Now relationship managers are peeking into your bank account and then talking to you to get that money invested in revenue earning instruments. Since, these employees are getting incentives based on the commission generated through such sales, they will be selling such toxic products to the customers. It is good for the bank, not to the customer.

Your Risk Profile?

Such advice will do harm to your financial goals. Rajiv wants his amount next year and how Anita can recommend a ULIP to him? Any advice, without understanding the time horizon and the risk profile is not in the interest of the customer.

Asset Allocation?

Banks are offering traditional insurance policies as debt investments, Highest NAV guarantee ULIP as Equity! Relationship managers are having ‘Product of the month’ – a contest to push a product when there is an offer of extra commission from the manufacturer. If you happen to invest in such products, you will be a loser in most cases. Please note that in such sales, asset allocation is not happening, it is only asset destruction!

Wealth Manager?

If you have a big amount in the bank, you will get a Wealth Manager. They are nothing but glorified agents of all wrong products. They will recommend you the Debt Funds of a ULIP for debt allocation, Portfolio Management Service (PMS) for equity investments. They will not recommend the time tested PPF for debt and a long term SIP for equity. They will not recommend you a term policy even if you are the sole breadwinner of the family and have an outstanding home loan. Instead they will recommend you to go for an endowment policy of 5 Lakhs! What will happen to your family, in case of an untimely death? Will this 5 lakhs is sufficient to run the family?

Financial Advice

The advisor should understand the customer’s needs and then see the suitability of the products to match those needs. A bank, which is having a tie up with one insurance company cannot offer the right advice, but will push only their products. As long as these managers are getting incentives and foreign trips based on the commission income, they will sell such products.

How to manage such managers?

As far as possible, avoid banks for investments. Use it for only banking services. If at all you have to buy from them, ask the relationship manager to give the details in writing. Nobody is supposed to give any assured returns in mutual funds. Insurance companies can give projections at an assumed rate of 6% and 10%. If your relationship manager is giving projections with 25% returns from mutual funds or 15% from insurance, better avoid him. He is trying to fool you. Seek a second opinion from somebody you trust before finalizing.

Don’t hurry things. If he is telling this product is getting closed by month end, better wait. In most cases, the same company will be launching a better product next month.


  • Mayur Posted August 6, 2012 10:35 pm

    Hello Melvin,

    I have been reading your posts for the past few weeks. Quite astounded with your depth of knowledge across products from equity to insurance. Want to know your views on Rajiv Gandhi Equity Scheme announded by Pranab Mukherjee in FY13 budget.

    Today P. Chidambaram has announced steps for attracting retail investors towards MF. [buzz is Rajiv Gandhi Equity Scheme lock-in period might be reduced from current 3 years to 1 year]. People with annual income less than 10 lakh would benefit by 50% tax deduction upto 50,000 in this scheme. How about the people above 10 lakh income?

    Also, curious to know the taxation for MFs in the proposed new DTC Code to be implemented next fiscal.


    • admin Posted August 7, 2012 6:54 pm

      I am happy to know that the articles are useful to you. Rajiv Gandhi Scheme will be good for retail investors, if implemented through mutual funds and that too with a lock in period of atleast 3 years.Direct exposure to equity will not be good for such first time investors.
      Regarding taxation in MF under DTC, lots of discussions are going on. Let us wait for the fine print. Anyway, mutual funds will be one of the best investment opportunities for long term wealth creation.

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