There are three lies in the world, lies, damn lies, and statistics. The financial world is all about statistics and numbers that makes it more complicated for the common man to understand. On a lighter sense they say that the highest number of lies is generally found in the financial world financial world shares this goodwill, as the products are made by one profile of people and the rest is left to the sales force without giving much clarity to the design objectives of the product. Monthly targets add triggers to the sales concept, rather than an advisory sales concept. The need of the hour is more advisors than sales force, as it involves the management and investment of hard earned money. Dr.Philip Kottler the marketing guru, coined the term ‘CAVEAT EMPTOR' (Buyer Beware). It makes sense to have a brief idea at least about the available financial products for investment. If it is not possible to do the necessary home work in this regard, here lies the role of a professional advisor and definitely not any sales force to rely on.

DOS AND DONTS IN THE FINANCIAL WORLD

* ULIP (Unit Linked Insurance Plans) are making a big noise, of late. While logging in for a ULIP product look for the following- Charges to be paid for the first three years, lock in period, early exit penalty charges, track record of the issuer. It makes sense to go for more life coverage here as it is much cheaper than the traditional endowment plan. ULIP does give the desired life cover and better returns also.

* When you are going for a online D-Mat account look for the account opening charges, Annual Maintenance Charges (AMC), Dmat charges for each transaction, trading charges. One should bear in mind that a rupee saved is a rupee earned.

* Always insist on explanations while filing the proposal forms of asset and goods insurance as the implications of choosing wrong can be hitting the purse. Choose reinstatement values instead of market value in the choices. Re-instatement value gives you the claim amount to reinstall a particular machinery or asset unlike market value, which considers depreciation and other factors to arrive at the market value of the asset during the time of calamity.

* Insist on EMI chart while applying for car loan / personal loan. Many times salesmen quote flat rates instead of floating rate which can be misleading.

* Do not subscribe to extra signatures on the loan application forms. Sign only where there are cross marks for signature, as many times changes can be made without your knowledge. It will be accepted by the banks as you have been liberal with your signatures, which is a proof of acceptance of changes made.

* Also insist on filling the form in front of you. All the more better if you can personally fill it.

* While going for used car/ second hand car loan insist on seeing the original RC copy of the car. If possible get Form B particulars from the RTO to know if the car belongs to the same person who claims to own it. Form B gives you the name of the current owner of the car. This will prevent you from buying a car which will never belong to you.

Financial products do not have inherent problems. They are designed with particular objectives. You see, a knife can be used to save life or take life. It depends on us how we use it. It is the awareness level which plays the mischief. No one can blame the sales force either as they do their part of the job. It's our liberal, casual and ignorance towards the financial world which puts us in awkward situations. Financial products are designed to create wealth and if chosen with full knowledge can lead to wealth creation. Happy investing and happy awakening.

The author Abdul Gaffar Sait is a risk taker , Voracious reader and Foresighted. He runs his own venture Basket Option Pvt.Ltd; a company that offers investment advisory services and wealth management services.

Issue BG86 May 08

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