Approach

  • My approach is relatively risk averse and conservative, and focuses on simplicity, minimizing costs and minimizing mistakes (relevant video and article)  
  • Some examples of this approach are provided below:
    • Risk averse: All of us tend to overestimate our ability to stay calm during a significant stock market crash. Ironically, the primary way to mitigate this is to accept that it will be difficult to stay calm in such a scenario. As a result, one should limit one’s equity allocation to twice the amount that one is willing to permanently lose (relevant article in Mint)
    • Conservative: The average investment returns on one's overall net worth over one's lifetime, is much lower than most people estimate. Because of this, saving an appropriate amount each month (and year) becomes as important as investing
    • Simplicity: The entire core of the retirement planning calculation should be simple enough to do on the back of an envelope (relevant article)
    • Minimizing costs: On the whole, Indian active mutual funds do not beat the index (relevant article). Hence, I recommend only low-cost index fund and index-like funds which charge less than 0.2% p.a. (relevant article). This is similar to Warren Buffett’s advice
    • Minimizing mistakes: Not sufficiently diversifying one’s portfolio (between safe investments vs risky investments such as equity & real estate) is the most common mistake that one should avoid (article about 'how to minimize mistakes' in Business Standard)

Customized Process

  • I customize the engagement for each client
  • This is radically different from the Standardized Process which is more common in India
  • The Customized Process goes into sufficient detail with each client to try to identify at least one important issue that the client had not realized (e.g. that the client was taking too much investment risk) or address at least one critical question that the client has in mind (e.g. should the client retire now or later)
  • The Standardized Process typically requires the RIA to put in 5 hours of effort during the first year of engagement. While the Customized Process typically requires the RIA to put in 20 hours of effort (including discussions and back-end work) during the first year of the engagement
  • The second half of this article provides an illustration of the Customized Process

Decisions

  • My role would be to advise the client and occasionally, where critical, to try and convince a client
  • While there could be some iterations, and discussions about the recommendations, the client will take the final decision about which of my recommendations they will accept and implement

Implementation

  • The client will be responsible for implementing the Financial Plan. Typically, this can be done online
  • I will try to guide the client through the implementation of the Financial Plan, but I will not have any direct or indirect control over the client's investments

Logistics of the Process

  • The primary mode of discussion would be over pre-scheduled audio calls (else, occasionally video calls)
  • The secondary mode of discussion would be over email

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