A small investor should never invest on her/his own. S/he should choose a mutual fund. But is it easy to choose a mutual fund? Heck no. S/he needs a financial planner to tell her/him whether s/he should put money in a mutual fund, a structured product, a unit linked plan, a classic endowment plan, a pension plan, real estate, or what have you.

And what will a financial planner do for you? S/he will structure your portfolio, s/he will suggest that you file your income tax return through a particular CA, ask you to invest in a particular mutual fund, buy a particular insurance, suggest that you make a will, check your nominations in the existing assets that you have�etc.

Then you go to a CA to file your return, a bank to make your deposits, a mutual fund agent to buy you mutual funds, a life insurance agent to buy life insurance, a lawyer to make your will � the story goes on.

Ha ha, now how many 'professionals' do you deal with? Here's a small list. You ca add your own to this at leisure.

Professional	Her/his fees per annum
A financial planner	Rs 25,000
A CA to file your IT returns	Rs 10,000 (assuming 2-3 returns in a year)
A mutual fund	cost approximately 3 per cent as asset management charges
A life insurance company	cost same as a mutual fund in the long run
A portfolio manager for your shares	4 per cent charges
A broker + banker	2.5 per cent charges

To keep all of them happy you need a portfolio in excess of at least Rs 1 crore to start with! And all these guys (or gals) smart, sophisticated, nicely attired and perfumed cannot stand each other. So you need to find them all on your own.

Let us say you do have a handsome amount of Rs 3 crores and you employ the above orchestra to play for you. Let us see how much it will cost you.

• Salaried employees and their tax issues

Also, let us assume that this orchestra helps you earn 13 per cent return on your Rs 3-crore investments, which amounts to Rs 39 lakhs per annum. Then this is how your expense cookie will crumble:

Expenses
Financial planner	Rs 25,000
CA	Rs 10,000
Mutual fund	Rs 90,000
Insurance premium	Rs 90,000
Portfolio Manager	Rs 1,17,000
Banker	Rs 1,00,000
Total costs	Rs 4,32,000

At a portfolio of Rs 3 crores this amounts to ALMOST 10 per cent of the return that you received. After all this, they will tell you the following:

"We are paid on efforts basis; we cannot guarantee results. Mutual funds are subject to market risks"

Past performance is not a guarantee of future performance -- or like Sehwag should we say "past non-performance is not a guarantee of future non-performance"?

Interestingly, if instead of this whole orchestra you were to put your money in PPF, a long-term bond fund and an indexed fund and earn a little less than 13 per cent per annum, you may still be better off.

But, I do have a financial planner who says that I need the fellow professionals to help me. What do I do?

Well, er, if your financial planner was selling car loans, home loans, mutual funds, life insurance and s/he has suddenly turned from a larva to a butterfly, well s/he still wears some of those hats. So surely out of the 10 per cent charges that this client is paying some of the money goes back to her/him.

Let's look at this conversation between the client and his financial planner:

Client: Hi I heard you are a financial planner, can you plan my finances?

Planner: Yes of course, I can and will.

Client: Will you promise returns superior to the market?

Planner: Oh no! I can help you set your financial goals, risk profiling, finding you a lawyer who will make a will for you, a CA who will file your returns etc. But for selecting which mutual fund to invest and such other questions you should be asking a Portfolio Manager.

• Financial planning for the young

Client: And how much will you charge me for this service of yours?

Planner: Well I charge Rs 25,000 or 1 per cent of your assets � whichever is higher.

Client: Thank you. Now I will meet the portfolio manager.

Client: Hello, Mr P M, will you manage my portfolio please? Of course, I know you will but what I want to know is how much will you charge me for doing this?

PM: Of course I will, and I will charge you about 3-4 per cent of the assets under management.

Client: Well, that's too high but will you promise me a return greater than the average return in the market for the fees that you charge?

PM: Well I will actually decide on how much money to keep in debt instruments, how much in cash and how much in equities. I hope your financial planner has taken care of your life insurance. By the way, you will be glad to know that I am also a life insurance agent.

Client: Oh yes. My planner has asked me to buy a very low up front charge based unit linked life insurance plan.

PM: Oh this life insurance? Their initial charges are low, but their asset management charges are quite steep. Why did you choose this plan?

Client: I thought my planner was keeping my interest in mind.

PM: Of course, of course s/he must have thought of you. By the way I think you should invest 30 per cent in RBI bonds, 20 per cent in a unit linked pension plan which is equity based, 30 per cent in a classic endowment plan, and keep about 20 per cent in cash.

Client: In which mutual fund do you think I should invest?

PM: Here are some mutual funds with an excellent track record for the past 3 years -- they all have given about 45 per cent return and I think they will do well in the next few years.

(After a few days)

Client: Mr Planner out of the money that I gave you for life insurance only 70 percent has been invested? Why?

FP: Sir I did tell you that it is low front end loaded unit linked life insurance�.

Client: But 30 per cent charge on such an insurance plan cannot be low, can it be?

FP: Of course it is low. There are some schemes which have 70 per cent load, comparatively this is low; is it not?

Client: Oh I see. And the endowment plan which the PM recommended to me. In that case I do not know how much the charges are. Correct?

FP: Yes, Sir.

Client: the mutual fund has also charged me about 2 per cent. That is very low is it not? Is it not lower than the 3 per cent that you told me?

FP: Yes sir. However, I have to tell you upfront -- in keeping with the best practices -- annually the mutual fund is allowed to take 2.5 per cent charges. You see they have to pay the trustees, the fund management company, the distributor's trail, the audit fees, custodian, the registrar and transfer agent, the bank, etc.

Client: Oh I see. I hope these are the only charges that are levied.

FP: Yes of course, but for some small brokerage that actually gets added to the cost of the shares and is hidden from you by the mutual fund.  

Client: But I am happy to see that my RBI bonds got invested fully.

By the way it is nice to see that my planner, my portfolio manager, my broker, the trustee, the auditor, my CA who files my return, my lawyer who makes my will, the custodian, the asset management company, the distributor, the auditor of the schemes, the registrar and the banker will all make money. I really feel good.

By the way, will I make money�er, do I have guarantees?

FP: In this whole investment cycle which you saw, did I ever tell you to do any work?

Madam/Sir it is a very fair world -- those who work hard make money.

The client goes away -- to watch television which will tell her/him how easy it is for the common man to make money using futures and options. But then that is another story all together.