Is it better to rent a house or buy one?
Should I prepay my home loan by liquidating investments?
Are fixed deposits better than equities?
Should I take an education loan for my daughter's education or use part of my retirement corpus?
Should I invest in NPS or mutual funds?
Is comprehensive health insurance better, or is a super top-up sufficient?
Is regular-premium term insurance better than limited-premium?
Should I buy gold jewellery or Gold ETFs?
Should I exit my ESOPs and diversify?
These are financial planning questions. Yet they are invariably asked to bankers, mutual fund distributors, insurance agents, real estate professionals and investment advisers.
And therein lies the problem.
The person answering the question may have a financial interest in the answer.
A real estate professional naturally has an incentive to recommend real estate.
A mutual fund distributor may be reluctant to recommend redeeming investments to prepay a loan if that reduces his future commissions.
An insurance agent may naturally focus on insurance products.
A product seller is paid when you buy a product. Therefore, the conversation can easily become product-centric rather than client-centric.
But good financial planning often requires something very different.
Sometimes the best advice is:
"Don't buy it."
And that raises an interesting question:
How do you price advice that prevents your financial adviser from earning money?
One of our clients wanted to purchase a plot of land during retirement.
On deeper discussion, we realized that the decision was driven more by emotion than financial necessity. We advised him not to proceed.
His response was:
"Thank you, Naveen. You saved my ₹25 lakhs."
But there was an interesting conflict.
The purchase would have been funded from the investment portfolio we were managing.
By advising him not to buy the property, we retained his wealth in investments—but we also accepted that our advice could have resulted in a completely different outcome and potentially affected our own fees.
That is the nature of genuine fiduciary advice.
At Naveen Rego Capital, a fee-only wealth management firm and non-individual SEBI Registered Investment Adviser, we have attempted to address this conflict structurally.
Under our comprehensive financial planning engagement, we charge a separate financial planning fee on areas that may otherwise create conflicts—including non-billed investment assets, ESOPs, insurance and loans.
This allows us to look at the client's entire financial life, rather than being rewarded only for the products or investments we actively manage.
Because sometimes the right answer is to invest more.
Sometimes it is to diversify.
Sometimes it is to prepay the loan.
Sometimes it is to buy the house.
And sometimes, the best advice is simply:
"Don't do it."
That advice has value too.
So, before accepting financial advice, ask one simple question to your financial adviser:
"How are you getting compensated for this advice?"
The answer may tell you more about the advice than the advice itself.
If you have missed any of our previous articles, please visit https://naveenrego.com/blog-grid.php?aW5pdGlhdGl2ZXNfdHlwZV9pZA=MQ
Happy Financial Planning!
Naveen Julian Rego – CFP®
MD & Principal Officer
Naveen Rego Capital
SEBI Registered Investment Adviser
Reg No: INA000019211
BSE Membership ID: 2178
Disclaimers:
- Investment in the securities market is subject to market risks. Read all related documents before investing.
- Registration granted by SEBI, enlistment as IA with Exchange, and certification from National Institute of Securities Market (NISM) in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
- Financial products recommended by us that are under the jurisdiction of other regulators are beyond the scope of SEBI’s grievance redressal mechanism.
