How unbiased is the financial advice you receive?

As a fee-only advisor, we prioritize delivering unbiased advice to our clients. The absence of incentives from product sales or commissions ensures our recommendations are solely based on merit. However, bias can manifest in various forms beyond financial gains from recommended products.

Biases may influence our stance on policies, mutual funds, asset allocation, asset classes, and tax structures. It's crucial to acknowledge that a product disliked by an advisor or investor might align perfectly with a client's preferences or requirements.

Consider the comparison between Fund 1 and Fund 2:

- Fund 1: 11-year CAGR -15.9%, 11-year SIP returns 17.2%, 5-year rolling returns 15.8%

- Fund 2: 11-year CAGR -13.5%, 11-year SIP returns 14.4%, 5-year rolling returns 15.2%

• On a 3 year rolling period basis (more than 2,000 observations) Fund 1 gave higher returns 90% of the time

• On a 5 year rolling period basis (more than 1,500 observations) Fund 1 gave higher returns 100% of the time

Analyzing their performance, Fund 1 consistently outperformed Fund 2 across various time frames, indicating higher returns and lower risk.

Now, let me give the name of the two funds, Fund 1 is Canara Robeco Largecap and Fund 2 is UTI Nifty 50. How many people now would flip their choice of fund after knowing the name? The name of the fund creates a bias! 

Let me give another example, in health insurance policies I am personally biased toward companies that have a better claim settlement record. Recently I gave an option of 3 health insurance policies to a Client and he ended up choosing the one I least recommended. Why? Because his biggest fear was increase in premiums annually. The least recommended policy had a feature where premiums would not increase until any claims are made. The Client already had a health policy from his company and hence this really appealed to him since he would not be making any claims until he was in his job. Now, if I had let my personal bias kick in, I would have never even showed him this policy in the first place and he would end up buying my recommended policy. As an advisor I gave him options and the pros and cons of all the options.

As advisors, our commitment lies in mitigating such biases, offering well-researched options to our clients to broaden their investment horizons. Our goal remains to provide objective guidance, free from external influences, ensuring informed and strategic financial decisions.