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As we interact with a lot of investors, we find that some investors, have this habit of referring their Chartered Accountants (CA) for every financial decision including investments. We are not saying that this is completely a wrong practice, but one must also check that, is your Chartered Accountant so efficient that he can advice you on your investments or financial planning matters? By efficiency we are in no way referring to his qualification, but yes we are referring to his area of expertise.
We have seen that Chartered Accountants being given god-status
in some households.
Once I was with an aged investor and he was looking for tax
efficient returns without any exposure to equity as this was an investment for
around 6 months. The investor was into highest slab bracket hence I recommended
him Fixed Maturity Plan from a reputed mutual fund house. But investor insisted
that I should explain the product to his Chartered Accountant. Reluctantly
(because of my past experiences) I agreed.The first question that was asked by
the CA was pretty basic- “is this an open-ended product or a close-ended
product”. If an expert asks a question like this we all know the fate. He
insisted investor to go for a Bank FD saying that the mutual funds are not safe
and banks are. So invest in a PSU bank. And then he went for the final kill and
suggested that since equity market is in bull phase, you should take 2-3 large
cap stocks and sit tight. You will make the same money in one month that this
FMP would give.
Although this
Chartered Accountant had no vested interest and was working in favor of his
client but his knowledge limitations ruined investors portfolio.
Chartered Accountant (CA) is not a Financial
Advisor
Consider these
following points before you refer to your Chartered Accountant (CA) for any of
your investments decision or Financial Planning:
§ CA is an expert in
accounting and tax practices. He is not an expert on assets like Equity and Debt. Also he is
not an expert on tracking or researching factors which are must for any
investment decisions you take. These factors can be macro like European Crisis
or micro like inflation. He may have view on these as a spectator but he is in
no way qualified to analyze these facts to form an investment advice.
§ In case of individual investor, a CAs job ceases after
he calculates the amount of tax that investor needs to pay. Investments to save this tax fall
under the purview of your Investment Advisor or your Financial Planner. He will
help you invest a suitable tax saving instrument taking care of your overall
portfolio, asset allocation and other needs.
§ CA has no role in
Financial Planning. He is not equipped to
assist you in your goal planning or risk assessment. Also since he is not an
asset expert he cannot help you in assessing your future finances and
portfolio. CAs engaged into advising on investment just does it for the sake of
not losing their clients or for some monetary gains. Beware as his advice will
never be comprehensive.
§ Your Financial Planner
is expected to have detailed knowledge about economy and individual assets. He can also deal with tax related matters if
you don’t have too complicated financial life. Also as he is associated with
you since the early stages of investments, he has a broad picture of your individual
requirements. He is aware of your family needs and you get personalized
service.
§ In some cases CAs act like product sellers for
your insurance needs or tax savings bonds. This is not a correct practice in
fact the Chartered Accountants are prohibited by their practice
guidelines to act as commission agents. It is prudent that you take service of professional who is
suited for the job. For all financial planning related aspects, your Financial
Planner is most suited.
-
Roles of different Financial Professionals
If we look at the
roles or the expertise, Chartered Accountants are not Financial Planners or
even Financial Advisors.
§ Chartered Accountants
(CA) work in fields of
business and finance, including audit, taxation, financial and general
management. (Refer Diagram)
§ Financial Advisor is a professional who renders financial
services including investment advice, which may include pension planning,
advice on life insurance and other insurances such as income
protection insurance, critical illness insurance etc., and advice
on mortgages.
§ Certified Financial
Planner (CFP) is a practicing professional who helps people deal with various
personal financial issues through proper planning, which includes: cash
flow management, education planning, retirement planning, investment
planning, risk management and insurance planning, tax
planning, estate planning and business succession planning (for
business owners).
-
So next time if you
suffer prolonged common cold it is better to show this to a Doctor who is
expert in Internal Medicine and not to a Cardiologist, even though the
cardiologist is your friend and provides free advice over telephone. For god
sake stop worshiping the wrong deity.
Must share your
experience with Chartered Accountants for financial advice.
Vcare Investment Services Pvt ltd
201 Sai Sadan 76/78 Modi Street,
Fort, Mumbai 400001
022-66548814/15
www.vcareinvests.com
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