30 December, 2016

What does 2017 hold out?

                                                                     Picture Credit - www.Pixabay.com
Today is the last day for exchange of the old notes.  Demonetisation has been debated in these 50 days ad nauseum. There are votaries & there are detractors. Detractors are not able to find any redeeming feature in the exercise, which in their opinion, has just inconvenienced people & had no real purpose to start with. The supporters see this as a major weapon against black money, terror funding & graft. This debate could go on and on… till winter turns to summer.
Let us look at the effect on the economy & by implication on all of us. Certain sections of the economy have been notorious sinkholes for cash & black money – Real Estate, Gold & Jewellery & to a lesser extent super luxury goods. 
The disruption caused due to sucking out of the old notes and introducing new notes had led to a slump in transactions across sectors. Auto sector – especially the two wheeler & the truck sector has been affected. Car sector has been affected too, albeit to a lesser extent. Similar trends are seen in other sectors too – like FMCG goods, especially the premium segments, electronics, white goods, restaurants, jewellery & real estate among others. 
The disruption in some of the sectors  like Restaurants, travel, FMCG goods, white goods would be temporary. Hence, these sectors have either already largely bounced back or are on the verge of doing so. Real Estate has had it on it’s chin – as it was already tottering and this cash blow would confine it in ICU for quite a while. Jewellery is another sector which dealt In cash and would see a drag for some more time.
The problems that we are facing are not some systemic problems in the economy or due to certain demand side issues. The demand is intact.  There has just been a postponement of purchases in many categories.  That would mean that the coming quarters would see better traction as the purchases that have been postponed would materialize.
People are getting used to dealing with less cash and are getting more & more used to electronic modes of payment. Many small, even petty establishments are accepting electronic payments. Even footpath vendors are accepting payments from apps like PayTM. That’s a huge change in a country which used to deal almost entirely in cash.  Normalcy has returned in a lot of markets, across the country.
An area that is causing concern and has been widely discussed is Foreign Portfolio Investment, where Rs.30,000 Crores has apparently moved out, in this quarter. The reason this time is not just demonetization alone; it is also due to interest rates going up in the US and also due to Trump Presidency. But this is hot money & moves in and out very fast. There is nothing very surprising about this. The only way to protect this is to strengthen our domestic institutional players as well as deepen the equity participation of our retail investors.
So, what is in store for 2017 from the economy?
Demand should be back to normal in most sectors & even better due to pent up demand in a few sectors like automobiles. There can be a blip still in JFM quarter. But after that, it should be business as usual for most sectors – except probably for Real Estate.
So, for all those people who were worried about how the economy will perform after demonetization, this should come as a balm. Also, the hot money which has now flown out is expected to come in – sooner than later. India, warts and all, is still one of the emerging markets which hold potential.
The real unknown is what has the government got up it’s sleeve in 2017. Demonetisation is just the first salvo in the fight against black money & graft. There would be many other measures which would come up, like – enumeration of all real estate assets in the country, compulsory electronic payment for transactions above Rs.50,000, rule based systems in the government which could bring down citizen interaction with officials, potentially bringing down corruption, use of big data and deep data analytics to pin point those who are generating and hiding slush funds etc. In short, there is expected to be a lot of action going ahead. Some sections have a lot to be worried about. Most of us have nothing to fear.
Let me answer the other question before signing off… Is this the right time to invest or will the markets correct further? The right answer is – I don’t know. But, the economy is going to be back on the growth path sooner than most people realize. So, invest now is my suggestion.
The only thing that can disrupt this is a Black Swan event. But black swan events have become quite the routine these days… Brexit, Trump win, demonetization… Let’s accept this new normal.  The world is a changed & unpredictable place. And hopefully a much more interesting & energizing one as well!
Article first published on Linkedin: What does 2017 hold out?

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

20 December, 2016

Lead Kindly light...

I had attended a five day Life Planning program called EVOKE. 
Just to jog your memory, Life Planning goes beyond the usual financial planning & seeks to discover those things which are meaningful to you and make your life far more fulfilling than if we only take into account the material considerations. This involves a fair amount of work from our side as well as yours. 

Simply put, Life Planning process of Exploration, Visioning & Obstacles are a prequel to the traditional financial planning exercise. This ensures that we are able to address the true heart's desires and make it part of our plan. That would make the life truly worth living & something to look forward to.

George Kinder, one of the key proponents of Life Planning, has this to say - 

Life Planning as Financial Planning done right!  

That beautifully captures the essence of Life Planning in a few words!

Now that I have completed it, I wanted to give you a roundup of what happened. 

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7


01 December, 2016

Should you stay with FDs or go for debt mutual funds?

Falling interest rate has forced many investors to look beyond fixed deposits in search of better returns.

This is a question that is now on many people’s lips – especially with falling FD rates.  Those who depend on FDs for a regular income, like retired persons, are super worried.  Taxes are eating into their money; inflation is another rodent that is gnawing away at their spending power (even though the inflation monster has been tamed largely now).

Many people are feeling poorer due to these twin assaults.  Hence, the question arises as to whether they should consider other investment options. Many people are wrongly considering entering equity markets, as it appears to have better prospects in terms of returns.  Nothing could be more seriously flawed than that. It is a different asset class with completely different characteristics.

Investments should be made considering the risk-return equation, tenure, liquidity, regular income potential, tax treatment & more.  However, most investors only look at returns in exclusion & leave out the other factors which are equally critical while putting together a portfolio that would take care of their future, in a holistic manner.

The search is hence on for viable alternatives and many people despair that there isn’t any viable alternative. But, there is – debt mutual funds. 
Let us now understand why debt mutual funds are superior to FDs & why one should embrace it.

1)    Better return potential - Debt mutual funds invest in various debt instruments like certificate of deposit ( CD issued by banks ), commercial papers ( CP issued by companies ), debentures, bonds, treasury bills, government bonds (gilts), structured obligations. Most of these are traded and their value is reflected in the net asset value (NAV ) everyday.  Debt schemes are hence composite instruments which offer the returns offered by the underlying instruments as well as capital appreciation (or depreciation ) as the instruments are traded. In a falling interest rate scenario, which is upon us, the value of existing holdings will go up, due to which NAVs appreciate. Due to this many funds are offering 9% + returns today when the average FD is offering 7.5% or less.

2)    Another reason for better returns - There are several opportunities available for mutual fund managers, which are not available to small individual investors.  There are private placements and even one-to-one deals at very favorable rates, which they get access to. The ticket size would be big – even running into hundreds of crores of rupees – which a debt fund manager would be able to commit. The fund manager also has access to a credit appraisal team which also assists in keeping the credit quality of the portfolio in check. One can enjoy all these advantages by simply investing into a debt mutual fund.

3)    Fund manager plays a vital role - The capital appreciation can be different for different instruments. For instance gilts are highly liquid and are mostly long duration papers, which would appreciate the most in a falling interest rate scenario. Corporate papers or T-bills of short duration would appreciate much less in value though. Hence, the capital appreciation potential of a fund is a factor of the portfolio components. Again, it does not mean gilt funds are the best now. In one sense it is – but they can be volatile if the interest rate rises again, for some reason.  Scenarios don’t always unfold with textbook fashion. 

Demonetisation itself is a black swan event, which has ensured that funds which have gilts of especially long duration appreciating significantly (some even as much a 3% in these past two weeks). A small individual investor may find it difficult to understand movements in the debt market, much less take advantage. A skilled fund manager would be able to put together a portfolio to take advantage of market movements and make any changes as may be required in the unfolding scenario.

4)    Advantage tax – In case of FDs, the interest earned is treated as income. Hence, the yield post tax can be significantly lower for a person in the higher income tax brackets. For instance, if the interest earned is 7.5%, the post-tax returns for someone in the 30% bracket would just be 5.18%.  In case of debt mutual funds, one would pay the same tax like a FD if the investment duration is 36 months or less. However, for durations above 36 months, the earnings are subject to long term capital gains treatment. This capital gains adjustment is to factor in inflation. After such adjustment & calculation of long term capital gains (LTCG), one needs to pay 20% on that. Effectively, the tax paid would be 5% or less. On a post-tax basis, even a 7.5% pretax yield would translate to 7.13% returns post tax!!!

5)    Get it when you want it - Debt funds are open ended and are completely liquid; they can be encashed when needed. Also, one can invest in the appropriate category of debt fund based on one’s tenure, liquidity needs, risk bearing ability etc. Many funds have exit loads for a particular period, after which it is nil. Some funds do not have any exit loads at all. 

FDs have a tenure and if one exits prior to that, lower interest rates would apply, depending on when the cash out happens. Hence, debt mutual fund scores especially if the timing of an event for which money has been invested, is unpredictable.

6)    Setting up an income is a breeze –  FDs offer predictable income streams, which is one of the reasons which endears it to the investing public.  However, the income normally can come in quarterly, half yearly or annual manner only. Also, the amount coming in is fixed, based on the interest being offered. It cannot be tailored as per one’s needs. For instance, if one wants just half the interest income & wants the other half to remain invested, it is not possible. Nor, can one stop receiving an income.

In a debt fund, one can setup a systematic withdrawal of an amount of one’s choice ( which ideally should be at or below the earnings of the fund), stop it if needed, increase it if necessary, set the frequency as convenient… in short, it is very, very flexible. If income is not needed, one can simply allow the corpus to accumulate and set up a systematic withdrawal when needed.

Again in systematic withdrawal, the tax incidence is less as the withdrawn amount is treated as redemption as against income. Hence, one pays capital gains tax (short or long term ) on the difference between current price less acquisition price.

There are several things in favour of a debt mutual fund. Debt mutual fund is a big category. Within that too, one needs to choose the right fund based on one’s needs. A good advisor can assist here to select an appropriate fund that will work well for an investor, based on their requirements for funds in future. 

Debt funds have always been a good choice. Today, one may have very little options apart from this.

Article first appeared on Money control :
Should you stay with FDs or go for debt mutual funds?

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

28 November, 2016

What do you do when FDs are no longer lucrative...

FDs have been a weapon of choice for many when it comes to investing. Apart from being safe, these are uncomplicated products that are easily available in the friendly neighbourhood bank. 

But, alas, the party is coming to an end. FD rates are trending down and have gone below 7% mark.  With the tax & inflation biting into the returns, many are wondering what is left for them !

A real challenge especially for people in the retirement mode, who have a fixed corpus, income from which is dwindling. But, there are better options in debt investment space itself. Debt Mutual Funds present a great opportunity - people can worry less & earn more now ! 

You may be aware of it. But, here is a refresher which will be published on moneycontrol.com ..

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

08 November, 2016

A good overhaul of investment advisory regulations

The investment advisory regulations of 2013 allowed a corporate entity to both distribute and advise, within itself, with proper segregation.
Abhijit Bhatlekar/Mint Abhijit Bhatlekar/Mint

The advisory regulations of 2013 by the Securities and Exchange Board of India (Sebi) were brought in to create a new class of advisers, who would primarily focus on offering advice on fee-only basis and assume a fiduciary responsibility. This was a major break from the past and a harbinger of things to come. But there were loopholes that could be exploited, and others that were open to interpretation. The new consultation paper—Consultation Paper on Amendments/Clarifications to the Sebi (Investment Advisers) Regulations, 2013—has addressed these concerns. Here are some of them.
Subsidiary: The investment advisory regulations of 2013 allowed a corporate entity to both distribute and advise, within itself, with proper segregation. This has practical problems. Within the same entity, information sharing between departments violates client privacy. This keeps happening in banks where privileged client information gets shared with the sales team, which then approaches clients to sell products.
This violates the principles of justice: while a corporate entity is allowed to do both the activities, the individual adviser has to choose between advisory and distribution functions. This issue has been addressed in the paper.
The transition period of 3 years (for companies and for banks governed by the Reserve Bank of India (RBI)) is excessive, when a mere 6 months were given to transition when the investment adviser regulations were introduced.
Consideration: The paper reduces the ambiguity surrounding ‘consideration’ too. Even if an adviser does not charge fees and she—or her subsidiary or associates—receive commission or get any economic benefits, it is still remuneration and she will have to comply with the investment adviser regulations. It is made clear that any monetary arrangement would come under the ambit of these rules.
Demarcation: The consultation paper also seeks to sharpen the distinction between advisory and distribution functions. So, a person or firm needs to decide whether they would like to distribute products or provide fee-only based advice. In this context, there is a lot of sound and fury about whether the time has really come for fee-only advisories. Changes have been happening the world over after the market meltdown of 2008. Financial services and have major implications on the lives of people. Hence, regulators have been closing in.
Fiduciary is the new standard that regulators prefer. They want advisers to act in the best interests of their clients, which is the correct way. In the US, they are looking at introducing a fiduciary standard on even retirement-product sellers. Transparency and true advice are gaining currency the world over.
Earning a commission is not wrong, but regulators increasingly want consumers to access proper advice before buying products. It’s time for financial advisers to change; to adapt to the emerging environment of advisories. Done right, it will not only work well for everyone, it will be immensely satisfying as well.
Incidental advice: This was another aspect of the investment adviser regulations that was being loosely interpreted. Some interpreted that if the income from the advisory is not significant, then the advisory practice itself is incidental. Some others felt that if they do not collect fees, then it can be termed incidental. Some professionals—like chartered accountants—felt that any advice they offer along with their practice, was incidental. Now, the speculation surrounding incidental advice has been put to rest. Anyone who wants to provide advice, needs to register with Sebi.
Designation: The regulator also wants to curtail the loose use of the terms ‘independent financial adviser’ or ‘wealth adviser’ by distributors. Those wanting to use such appellation now need to register. Those who want to continue distributing products, would need to use the term ‘mutual fund distributor’.
Satisfactory discharge of duty: There is again consternation about the fact that distributors would still have to provide a certain level of advice, but are not allowed to do so as mutual fund distributors.
My understanding is that distributors can do need-satisfaction selling. They could match client needs with the appropriate product benefits, which, in their case, would be satisfactory discharge of duty.
An adviser, on the other hand, would need to understand the needs, goals and the timing; analyse the client’s situation; look at her risk-bearing ability; examine alternative strategies and finally come up with an appropriate asset allocation and specific product options. These two are entirely different.
Clarity on automated advice: This consultation paper recognises automated advisories and their potential to offer advice in a cost-effective manner.
Robo-advisors, or any others hybrid models providing advice, need to comply with the investment adviser regulations. The consultation paper also specifies various controls for such automated tools that are used for giving advice or leading to advice. Such tools need to be fit and suitable for the intended client set. There has to be proper disclosure on how the tool works, and comprehensive system of audits needs to be complied with.
This iteration of the regulations offers many other clarifications and directives, which make for a much more robust regulation. Focus on advisories, fiduciary standard, segregation of functions and lowering the cost to clients have been given importance. The loopholes, that were exploited have been largely plugged. There is more clarity now about advisory and distribution functions. This is indeed good for everyone: the customers, distributors and advisers.

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

27 October, 2016

American sojourn - comes to an end!

I have completed the final & concluding pat of the American Sojourn - here it is  :)

If you have missed the first part, of my trip diary to San Diego, it is here -

The second part, can be found here - 

Thanks for patiently reading my rather long trip diaries !

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

21 October, 2016

What is green on the other side may be moss & algae!

We all have somebody we envy. It may be someone with that fancy car or a home in a tony neighbourhood... or could be another who does those foreign vacations every year... or that guy who owns a business & whizzes across the country / abroad, incessantly.
These days, that guy who owns a business - who sits in the corner office in that glass & chrome building, is the cynosure of all eyes. He is that guy who has broken out of the rat race, the stud who has achieved glory by doing his own thing. He is the ultimate achiever & role model - never mind if his startup has been kept alive by oxygen pumped in periodically by angel investors. He has not made money yet, in the past two years- but he is living his dream & has a 25% stake in the company. If it goes public, he will be a rich man !
I find such adulation & envy among a lot of people, I deal with. People are fed up with their day jobs...it's staid, predictable & to a great extent linear. It's not that they don't earn well... they do. But, the grass seems greener, much greener on the other side. But that’s not the whole picture.
The risks involved -  Though business may appear exciting, it comes with a large dollop of risk. Many businesses, especially at the startup stage may appear to have some very unique business model, with a unique solution to a problem. The business potential may seem  insanely exciting. However bullet proof the business model may appear, there are lots of reasons why it may not work.
One of the reason is prosaic & straight forward – a business can fail if the execution/ operations are not upto the mark. Many do, just for this reason. There are so many other gears which need to engage & perform seamlessly – like people, production, service delivery, efficient management of capital, sales & marketing etc. 
Competition is another problem. Every business / idea can be copied & differentiating one’s offering becomes difficult. When service offerings are similar, the businesses start competing on price – which depletes everyone.
Starting a business for wrong reasons - One of the reasons people start a business is to get rich quick! Many businesses look great from outside but takes a lot of doing to run them well, as a profitable business. Every business needs to make money & every business has the potential to make money, if run well. 
Good businesses happen when someone establishes a business which they are passionate about & have deep knowledge / insights about. Such businesses have the best chance of success. There are many who pursue this course. These businesses have a high probability of success. How much money the business makes is a factor of how well the business is run.
The chances of success comes down -  when people start businesses in entirely different fields, the service or it’s delivery is completely novel  ( hence how successful it might be is not known in the beginning ), when the business is capital intensive, when the business is not self-sustaining & needs cash infusion at regular intervals etc. Inspite of all this, we find people regularly talking about starting businesses in unrelated fields  & some actually end up doing.
There are others who start a business with the idea of just starting up something, getting it going and selling it after a while. Many startups today do not have a business model which can make a profit at all. There are too many me-too businesses. Many of them are stuck in client acquisition & topline, while the bottomline is in the red.  The model itself depends on just building a business ( albeit without any profit which is the raison d’etre of a business ) and selling it off  to make money!
Getting away from the rat race -  When someone is in a corporate job, they get fed up with their jobs for various reasons.  It may be the boring routines, the cantankerous bosses, the business pressures to deliver performance, growth prospects for them are dim etc.    That is when disillusionment settles in & the job which they are doing seems like a drudgery, even meaningless. That is when they decide to get away from the rat race & do something on their own. Also, people form the impression that they are working too hard in their jobs for someone else’s benefit and they deserve to do their own thing & earn all the profits – for some, that is their other reason for getting out of the rat race!
But, there are things which they will realize only when they are no longer in the job –like the certainty of a pay-cheque every month, the many perks which their job was offering, holidays & leaves which they could avail,  the fairly high remuneration for the time they were giving, the insurances which were available for them and their family etc.  
So, getting away from the “rat race” is not always easy, especially when one has EMIs, lots of commitments & a fairly good lifestyle that needs to be sustained.   This becomes all the more pronounced, when the prospect of taking any money out, is a long time away. It creates all kinds of stresses, which they have never experienced before.
Flexibility & timing - People want to get into business as they can be their own boss, it offers flexibility & freedom to pursue what they want & they can do it in their own time!  
Being one’s own boss suits people who are very disciplined - not all.   While flexibility & freedom would be there, the onus of shouldering enormous responsibility, also comes hand-in-hand.
Some people think that they will have more time, which is the biggest delusion! When one starts a business, 24 hours are not enough. There are going to be no leaves, no holidays & lots of back breaking work. The other aspect is that in a corporate job, there are people and systems to take care of almost everything.
When one starts a business, one may have to do virtually everything – from strategy, composing the marketing brochure, client pitches, admin work to even  paying bills! This would be very trying for the corporate types!  Not everyone is going to like doing all these & only those who have fire in the belly and are ultra-passionate about their vision for the business, are going to get past this.
Conclusion – While one may have rants about the current job, one needs to evaluate whether throwing up the job & entering a business is really suitable for them. Inexplicably, many want to throw up their well-paying, enviable jobs & start a business, inspite of the enveloping uncertainties. 
This is what I would call the black widow spider syndrome (a  male black widow spider offers itself to be eaten by the female during copulation ) as one wants to throw up everything that they have for a chance of a potentially glorious, but uncertain future.
The grass certainly looks greener on the other side. Only when they get to the other side do they realize that the green carpet  is super slippery moss & algae & not the green grass they had imagined it to be! And then, the grass on the other side would look greener!!!

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

18 October, 2016

American Sojourn Part 2

You already know what I did in 3rd & 4th week of September... the story advances further... the scene shifts from Del... I find someone who looks like a TV star... we do podcasting & much more... all captured in this edition.  
Read on -

If you have missed the first part, don't worry...you can still get to know about the land that celebrates motherhood and applepie. Read here -
 Thanks for reading!

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

10 September, 2016

Are you setting up your children for failure?

Spare the rod & spoil the child is a well-worn slogan, from the past.  It’s import & context is now largely lost. Most of us have spared the rod & I fear we are spoiling our children. While the use of corporal punishment is long past, we have turned far too indulgent for the child’s well-being.

Today is the best time to be a child. Parents fawn over their children and do their every bidding. So, today, there is not anything that the children will not be able to make their doting parents do for them. It’s a happy situation for these kids, right?

The answer is – No.

Pampered Little tykes :  Children from families where they have got everything on a platter would not have developed many life skills.  Firstly, they just do not know how to adjust – for they have always got what they wanted!  These kids have not undergone any hardships… many of them have not even travelled in trains and buses. They have always been chaperoned in cars. They have always travelled in the cool confines of AC coaches in trains or have just flown from place A to B, in an airplane. 

These kids have also got the best shoes, a surfeit of toys, books & other knick knacks - so much so that, even when they get an expensive gift like a playstation, these children don’t go ooh-aah. They are quite blasĂ© even about things that the parents have spent time, effort & money to get them. Nothing excites these kids any longer.

Indulgent parents :  Parents have been indulging their precious little ones in the notion that they are giving them a head-start in life.  They put their children in fancy schools & spend small fortunes on their activities, classes & tuitions.  Parents these days don’t spare any effort to give their children that head-start in life.  They eagerly put them in Cricket/ football coaching classes – never mind the expenses. Their children can expect a full-fledged pro kit right at the start, which even a professional player would have been  proud of!  I have seen children kitted up so nicely, that it would appear they represent the district/state, when they have just about joined the classes !

Also people plan to send their children abroad – even those with comparatively modest means.  But educating children abroad is an extremely costly affair.  Many children are not able to land jobs when they complete – hence the situation is far from pretty. This takes away a significant portion of their accumulated wealth, which is not desirable considering the fact that people need to be cognizant of their own retirement needs.  The retirement period these days has become pretty long – between 25-30 year period.

Maladjusted children :  While the parents are doing everything with good intentions, there is an unintended consequence of their largesse.  The children, due to their privileged upbringing, have not experienced the hard knocks of life. They have been largely insulated from the hurdles which for normal children is par for the course. Many of them develop a chip on the shoulder attitude, which does not help anyone in life.

Since these children have been getting everything very easily they tend to have lower thresholds of patience, perseverance  &  hard work,. The drive & the burning desire to excel and come up in life, is largely missing. They already have everything, so why bother - would be their thinking.

 It’s not their mistake. They have turned out that way due to their charmed existence till that point. So the advantage which the parents are trying to confer can actually turn out to be a bane for the child.

Some parents may be thinking  - my children are from well-off backgrounds too – but they are doing well.
True. But the 80:20 rule applies here as well. 80% children  tend to be adversely affected when they are cocooned in luxury; 20% will be able to adjust and make the grade.

A litany of woes :   There is another problem, when the parents are putting their wards in “International “ schools.  Some of these children tend to develop inferiority complex after comparing themselves with other kids in their class/ school.  Even children from well-off families tend to feel poor as many of their peers are from richer households!  Children are actually upset that their parents are not taking them on foreign jaunts, every summer vacation!  And the fact that their parents own only an “ordinary” car rankles, as opposed to the Jaguar, BMW or Mercedes Benz, like the parents of their friends. The list goes on. They are unhappy with their shoes, birthday parties, their bags etc. They are poor by comparison!

There are also instances where children have started seeing their parents as “failures”, just because their parents are not CEOs, Executive Directors or business owners like that of their classmates!  That is so very unfortunate given the fact that parents have been trying to do their best for their children and are helping them to put their best foot forward!

Financial woes : Frugal living is not something these children have been taught. They have been weaned on brands and the high life. When they start earning their living, they will find it extremely difficult making ends meet -  for years. Their progenitors will have to extend life-support for them – for a many more years. That is all the more depressing for these children & their self-worth is undermined. Many parents have helpfully bought houses for their children;  they need not even work towards that!

Also since they live the high life they need to earn very well, their savings need to be good too, to take care of their goals. All these continue to exert pressure on the children and there is a level of tension which hangs over them like a pall of gloom.

Conclusion  :  Parents are overwrought when it comes to their children.  Considering the problems we have discussed, parents would probably do well to stay grounded & act sensibly when it comes to their children’s needs. They can ofcourse give them the creature comforts, but not overdo it. They can give them a good education. But a good education does not necessarily come from a snooty institution.  It’s a fallacy that educational institutions are exploiting to the hilt!

By exposing their children to the normal life that people live, they would be preparing their wards for properly integrating into the world as a productive citizen.  Indulgences & gifts should be measured and should be ideally linked to some outcome, to bring out the competitive spirit. Any money ( including pocket money ) given to them should be within reasonable bounds. Parents should not become an ATM for children!  All children should be put through the experience of using buses & trains.  I have heard that children of Godrejes used to travel by the same school bus as other children! 

In all this, parents will also do themselves a favour as they would not need to demolish their hard earned savings in Quixotic expeditions, thinking that they are helping their children “start life with an advantage”. A bit more discipline  & strictness – would do the parents a world of good!

Parents need to understand that, by being doting parents, unwittingly they may be setting up their children for a lifetime of underperformance & failure - which is in fact the last thing they desire!

Author  -   Suresh Sadagopan  | Founder | www.ladder7.co.in

#SureshSadgopan #FinancialPlanner #FinancialAdvisor #Fiduciary #LifePlanning #FeeOnly #HolisticAdvice #Ladder7

Image courtesy of Graphics Mouse at FreeDigitalPhotos.net