Thursday Trivia ~ Your Wealth Manager is extremely underpriced – The Apple Connection!

If you’re an Apple fan, then September 15, 2020 is one of the coolest thing that has happened this year amidst the Coronavirus crisis. The company just continues to surprise us. At 10:30 pm IST Tim Cook went live to showcase their upcoming products for the year. Apple Watch, iPad and the highly advanced A12 chip. Steve Jobs would definitely be smiling from heaven looking at the new $5 billion campus and an amazing advancement in the products. A12 chip is 40% faster than A11 chip. It’s the fastest processing chip ever. So expect the new Apple machines to run super-fast, as if they weren’t fast enough.

Watch the event here – Apple Event

Warren Buffett, World’s Wealthiest Investor and his firm Berkshire Hathaway owns a majority stake in Apple explained that he loves this investment due to the power of its brand and ecosystem.

Last year, in an interview with CNBC he said, “I do not focus on the sales in the next quarter or the next year,” he said. “I focus on the … hundreds, hundreds, hundreds millions of people who practically live their lives by it [iPhone].” 

To everyone’s surprise he also called the iPhone “enormously underpriced,” saying that it’s worth far more than the $1,000 Apple charges. Here in India, we joke about selling a certain body part to be able to afford the phone.

“I have a plane that costs me a lot, a million dollars a year or something of the sort. If I used the iPhone — I use an iPad a lot — if I used the iPhone like all my friends do, I would rather give up the plane,” Buffet said.

That definitely comes as a surprise. Warren Buffet saying iPhone is underpriced and is so powerful that he would rather give up his plane. Yet, when the Oracle of Omaha says it, we should give it a thought from another angle. Apple is not just disrupting the phone industry as such, it has done that long ago. It’s now disrupting the healthcare industry. Its watch can now track your blood oxygen level too. That’s just huge.

Healthcare that has now become extremely data driven is well understood by Apple and this gives the company an edge in making a world class product. When it comes to iPad (I use it close to 6 hours a day and am completely addicted to it), reading, note taking, reproducing the notes when needed for communication, movies, music and so much more. I can say for certainty that Buffet is right and Apple products are enormously underpriced.

I can go on and on about Apple here. So let me share with you a perspective on how I view Wealth Managers and why they are extremely underpriced.

Let’s start with a few basic questions first. 

If you want to buy some shares in a company. Who do you call? 

Ofcourse, your broker. The one who sits in front of the trading screen every single day from 9:15 am to 3:30 pm. He doesn’t even have time to use the washroom let alone going for lunch. So you feel, he knows everything. And he is super smart too, when you call him and say. ‘give me some investment ideas as I have some money with me’, he will give you a plethora of ideas with stop losses and target price. 

If you ask him – WHY then he has an answer too. Because results are going to be fantastic or there is some insider or privileged information that he has that market doesn’t have. That sales pitch makes absolute sense and you run to with your money.

Secondly, you want to buy insurance. Who do you call?

An Life Insurance agent walks through your door. He shows you some papers and says, trust me sir, your money will double in the next 25 years if you invest consistently for the next 20 years or so. Trust is inbuilt because, come on its Life Insurance. 

So now you do a quick mental math and say after 25 years I will have a few lakhs in my account. Wow! And this Life Insurance agent is a relative or relative of a relative. So no worries, let’s roll. Plus, we have to attend a part tonight so let’s get the paperwork done quickly.

Going to buy a Car. What about its insurance?

Salesmen of car companies are extremely trained. They will tell you all the benefits and a ball park number to purchase it. Let’s be honest, nobody is bothered about the insurance. In the first year, we are going to drive carefully and slowly. So there won’t be any accident. So why worry or think about it. We’re just thinking about that drive to Ladakh and back. 

So we tell him, okay let’s do it.

Car loan?

Car salesmen are pretty smart here too. They will come out with different plans and sit with you through the process. Rates are competitive. And while you’re thinking about that drive to Ladakh, getting into the mess of understanding loan structure is tiresome. 

So you calculate your salary minus EMI of the car loan and after all other expenses there is still money left to enjoy. You jump the bandwagon.

Buying a home via a home loan?

The same drill. Monthly in-hand minus home loan expenses and all other expenses. If yes, then buy, if no then other. Most of us don’t understand the process, because come on, we aren’t from the finance industry or a commerce background. Plus, we really need this home so it’s a tiresome to look for the devil into its details.

And what happens when a Wealth Manager turns up-to your door?

The first question you shouldn’t ask is, where will you invest my money? Just because you already have a broker and someone from your family is a CA who looks at CNBC all day long having the best knowledge of which stock will work in next week. 

When the conversation turns to financial planning, basically you want to say that there’s no real need. Why? Because you lead such simple lives, come on. You might just have 2 cars and loans on them while your neighbor might have 4 cars, one of which is a BMW – can you imagine. So basically, we are extremely simple. Simplicity is intangible and dangerous when it’s someone else’s lifestyle is a benchmark.

Just because you don’t understand what to from a wealth manager, you are often simply waiting for an investment idea that will make us rich overnight. But to your dismay, he tells you it’s better to get rich slowly and enjoy the powers of compounding. 

With such a conversation, a wealth manager sounds expensive. He doesn’t make money immediately, plus he will cap my expenses and on the top of it, he will invest in mutual funds. Come on, my broker knows how bad these mutual funds are and they eat up so much money in expenses. So let’s go into direct plans and try to do it yourself rather than paying the Wealth Manager.

Okay, so I may have not captured enough or may have gone overboard in my perspective. But dear readers, I hope you get the picture somehow.

Now, let me tell you a little secret that only the incredibly wealthy people know. Are you ready to hear it from me?

The secret is – Wealth Manager can do the work of broker, insurance agent, loan agents and bankers much more efficiently. He becomes your single point of contact. Like a Personal Chief Financial Officer. 

A wealth manager does everything for you. He looks into the nitty gritty of every detail in your life. We have covered this aspect in our previous Thursday Trivia ~ Who is a Wealth Manager?

Now think about it this way!

You just have one person reporting to you every quarter about what’s happened with your money. Plus, if there is any new deal (home / car / bike / vacation), he is there to look into the tiniest details for you and then suggest the best alternative. While you still retain the power to make decisions. But that person does all the calculation for you while you are spending most of your time and office and with family.

Consider, you can attend your children’s school events without having to worry about money. Or you can send them abroad to study without any second thought of where that money will come from. Marriage expenses also get covered without you having to worry. 

At the same time, you are able to move into a bigger house in a good neighborhood. A better car and international vacations. While your children give their best performance at school because you are able to give them enough time. 

Plus, someone who takes care of your retirement too. So you’re working right now and want to work for few decades more. In the meanwhile, there will be marriage, kids – education + marriage and still you will be able to live a life post retirement with more luxury than the one you started with.

You might as well launch your own startup and not having to worry about money, you’re focused 100% on making the startup successful. What’s your chances of being successful? I bet a lot more if you had to worry about money at home all the time.

Would that be enough?

Would you like to pay for it? If yes, then how much? 

Do write to us.

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