Drink Your Glass Of Water; Put It Down!

Posted on July 19, 2010 by Ranjan

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Coming Soon! A "Financial Health Check & Planning Workshop". Stay tuned

Don’t hold on to it forever! Read the story below:

A lecturer, when explaining stress management to an audience, raised a glass of water and asked, “How heavy is this glass of water?”

Answers called out ranged from 8 ounces to 20 ounces.

The lecturer replied, “The absolute weight doesn’t matter. It depends on how long you try to hold it. If I hold it for a minute, that’s not a problem. If I hold it for an hour, I’ll have an ache in my right arm. If I hold it for a day, you’ll have to call an ambulance.

“In each case, it’s the same weight, but the longer I hold it, the heavier it becomes.” He continued, “And that’s the way it is with stress management. If we carry our burdens all the time, sooner or later, as the burden becomes increasingly heavy, we won’t be able to carry on.

“As with the glass of water, you have to put it down for a while and rest before holding it again. When we’re refreshed, we can carry on with the burden.

The above story on stress is very interesting. I have been holding on to my disappointments with people for decades. I guess I need to put that glass down now. And pick up new disappointments after a while! :)

What about your investment stress? Do you keep looking at the stock screens every day?

Just today, (19.07.2010), the stocks opened weak and there’s an update on my feed reader at 9.20 am: Financials Down (link updated to the second story). And just after an hour, another update from the same paper says, Markets turn positive, earning optimism!

But unless you enjoy the above stress, it’s a good idea to set up your finances in a holistic manner and check progress once in a while. Have a glass of water when you are thirsty and then keep it down!

That’s where I think that the 88% solution can work. Ofcourse you need to tweak it to suit your style and situation. But it will surely work for the majority while keeping all the financial stress away.

What do you say?

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Posted in Financial Behaviour, The 88% Solution | 2 Comments

Why I Have A Problem With Authority

Posted on July 16, 2010 by Ranjan

This post is about my defense for being “negative” and an “outsider”. Yes, I do have a perpetual problem with authority. And my parents would happily stand testimony to the above statement!

For new readers, the context is the following posts where I have taken pot shots at CEOs, Finance Minister and me too:
1. Financial Inclusion & Literacy: Intentions v/s Realities
2. Open Letter to CEO, Bajaj Allianz
3. Don’t Trust Me For Financial Advice

My Defense
Being negative is not always wrong.
I have often told my Boss that why his decisions may not work and that there could be better options. Some bosses have taken me as a negative character. But more often than not, my bosses look upto me for new ideas, ask for feedback when they want one and give me interesting & challenging assignments.

So, in a way, my boss listens to me. Instead of me sucking upto him! Isn’t this worthwhile? (Though not all bosses take to me that kindly!)

Black Hat Thinking Helps: In most Organizations, the way of doing a thing is to “refer to the old file”. If you question that, people protest that, “Hey, that’s how things are done around here”.

But things can be improved all the time. In fact I love the word Kaizen. And for any change you need to question the status quo. The questions are the fertilizers for innovation and change.

Nothing Personal: If I am saying negative things about anybody, it’s mostly about reminding him that he has the authority to change things.

Like as Amit Varma writes about our PM:
From a speech Manmohan Singh gave: “Are we encouraging crony capitalism? Is this a necessary but transient phase in the development of modern capitalism in our country? Are we doing enough to protect consumers and small businesses from the consequences of crony capitalism? [...] Do we have a genuine level playing field for all businesses? What should be done to inject a greater degree of competitiveness in the industrial sector?”

Amit asks, “One has to wonder, why on earth was he asking those questions? He’s the prime minister, no? “. I think Amit is not being personal, but prodding our Mr. PM to take upon himself to change things.

The Problems & Situation in Financial Services Industry:
IMO, the problems are real. And they are:
There is a huge information asymmetry in Financial Services industry where the sellers have much more information than the buyer.
This lack of transparency leads to uninformed financial decisions even by educated people.
We have lack of user friendly measurement tool to track our money before we even can start managing our money.
There’s information overload regarding financial data. And it is leading to “paralysis by analysis” instead of providing relevant wisdom tailored to individual situations.

Competition and active regulation has changed a lot of rules in the past few years. The rules of financial services are seeing a lot of disruptions. Examples of no entry load on Mutual Funds and the recommendations of the D Swarup Committee on doing away with commissions by 2011 come to mind. Mutual Funds being available on the NSE wef 30th November, 2009 is another example. Now even the IRDA is slowly waking up to actively regulate ULIPs.

So, that’s my defense for being negative. I challenge authority in the confidence that things can be better.

I know I speak to a very small audience. But I also know that my circle of influence will grow with time. What time will it take, only time will tell!

Don’t you think there is a unique opportunity to bring in personal financial services in tune with these changing times.
Join me. Thanks.

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Posted in Financial Awareness, Miscellaneous | 1 Comment

The Rupee Gets A Symbol Of Its Own

Posted on July 15, 2010 by Ranjan

Rupee Symbol


An IIT post-graduate D Udaya Kumar has given the Indian Rupee a symbol of its own.

The rupee will join the elite club of US dollar, British pound-sterling, Euro and Japanese yen to have its own symbol.

The symbol will be printed or embossed on currency notes or coins, information and broadcasting minister told reporters after the cabinet meeting.

Kumar’s entry was chosen from among 3,000 designs competing for the currency symbol.

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Financial Inclusion & Financial Literacy: Intentions & Realities

Posted on July 14, 2010 by Ranjan

The newspaper today has stories on financial inclusion and financial literacy. This post is about my thoughts on the noble intentions v/s the hard realities in the areas of financial inclusion and financial literacy.

Mumbo Jumbo? Finance Minister Pranab Mukherjee described the FE Best Banks Awards function held yesterday as having evolved into a “popular event” for India Inc to highlight the importance of bringing banking to those “who need the very basic financial services.” He said that the event could significantly contribute towards highlighting the importance of expansion of banking activities for economic development.

High sounding words: Speaking about financial inclusion, the Finance Minister said competing needs for the financial resources required for high growth necessitate that these resources should be used at the maximum possible efficiency.

“The financial intermediation for these financial resources should be cost-efficient and allocation efficiency should be high,” Mukherjee said.

My Questions: It’s all good to network and celebrate performance. But I fail to understand the connect between the celebrations and the financial inclusion part. I don’t really understand the rhetoric. Am I fast becoming a dyslexic? What about you? If you are able to make sense of the high sounding words, please educate me.

As an aside, the Akshaya Patra Foundation in India has found a way to feed a child daily for the entire school year on just $28. (Source)

As another aside, the event cost of the Awards would be in crores. Just a rough guess.

As aside no.3, I quote Subramoney on the poor small investor, “small investor, financial literacy, financial awareness, financial inclusion….what an amazing array of words we have created for bureaucrats, politicians, businessmen, capital market pundits to meet and eat!”

Next is Financial Literacy. Here’s another high sounding quote:

U K Sinha, CMD, UTI AMC said, “Swatantra’ is India’s Journey to financial freedom and is the largest investor campaign in the country which will cover over 300 cities in 100 days through 100 investor meets. Financial Education is very crucial for the growth of India’s capital market and India will progress at a faster pace if there is higher retail participation in the capital markets. This Campaign will target inculcating financial literacy to potential investors which will help them to take informed decisions.”

My take:
Handing out visually beautiful brochures about the do’s and don’ts of finance does not help the small investors take informed decisions. Financial decisions are personal and you need to understand each individual’s situation to help him make an informed decision. A town hall method of imparting financial education will be totally ineffective.

Further, the financial education needs to be unbiased and independent. But who will be the resource persons for imparting the education. My feeling is that the Branch Heads of the UTI Branches across the country (having stiff sales targets) will be used. What will they do other than selling UTIMF products to the investors.

Conclusions:
There’s a wide disconnect between noble intentions and hard realities. If wishes were horses, beggars would ride, an English language proverb , clearly suggests that it is useless to wish; better results will be achieved through action.

But here the action itself is useless, IMHO. A lot of effort needs to be taken to design a financial literacy program. What do you say?

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Posted in Financial Awareness, Miscellaneous, Workshop | Tagged , | 1 Comment

The Right Questions To Ask

Posted on July 14, 2010 by Ranjan

Ask

Ask

Asking the right question is a great skill. Ask “Why” everytime like a kid, and you’ll be treated like one. Asking the right question means that you have understood the context. More importantly, you can decipher the answer you get. And understand whether the answer really answers your question or is just a tangent!

For example, you ask your advisor what commission does he get. (If at all). The agent comes prepared with an answer. And that is, “Arre Sir, Aap jaise Bade log/ Bade Dilwale log/ ko aisi choti baatein shobha nahi deti”. You can’t really argue with that, no?. The answer just deflected your question to outer space!

I don’t recommend you to take kickbacks or what is commonly known as rebate. It’s illegal and is earned by your advisor for his service. But at the same time, we must be aware of the various distribution costs of various financial products.

So, instead of asking what rebate I get, I need to understand other options and their respective costs. More specifically, instead of what I get now, how does the product suit my financial goals?

You need to understand whether your advisor is capable of providing service as just a document handler or can provide a holistic financial service by understanding your specific profile, risk appetite and your financial goals.

So even before asking inane questions, you need to mull on what is your requirement. I mean do you need a document handler or a complete financial planner. Once you have decided what you need, you are ready for the relevant questions to the guy who tries to sell you a financial product.

Yes, this means preparing yourself to ask the right questions! And as I said earlier, it’s not easy.

The agent who tries to sell you a product has been trained on selling techniques and objection handling. He’s trained to ask the right question. For example, the agent asks, ” Should I collect the cheque in the morning or evening? What’s convenient to you?”

He does not ask, “Should I come to collect the cheque? And when?” There’s a lot of difference in the above two questions. This is what experts name as the Framing effect.

For further reading: And if you have questions on “How to ask”, you might like to read Joseph’s take on “How to ask for help”

Happy Asking! Any questions to me? :)

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