# Free advice can cost you 1 billion

### How a Free advice can cost you 1 billion (1 crore rupees)?

Why pay for financial advice when you can get it for free? You get it free from friends, colleagues, relatives, bank executives and insurance agents, right?
But have you ever wondered that the free advice can cost you a lot of money? For example, if you buy a costly insurance plan that you don’t need or a mutual fund that does not suit your investment profile, you will lose much more than the annual fee of a financial planner. True Financial Planners are not Advisors or Product Sellers and they prepare a Financial Plan that is based on your need, your situation, your goals and your risk appetite.

### Let’s do some Maths

To find out how much the free advice can cost you. Let us assume that a paid financial plan where the recommendations are not based on commission considerations will fetch you a better return. If you are prepared to assume this, let’s move forward.

Here are the assumptions. Imagine you invest Rs 15000 every month and that adds up to Rs 1,80,000/-. We have assumed the returns for 8% and 10%. Generally, the commission’s work out to just 2% of your investments and the difference between the returns @ 8% and 10% would be the cost of free financial advice.
Initially, the difference looks too small. It is only Rs 3600 in the first year and approximately Rs 68000/- for an investment of Rs 9 lakhs after 5 years. But the difference continues to compound and the difference of Rs 1,05,47,560 happens at the end of 30 years!
Here’s the table that calculates the cost of Rs 1 Crore, 5Lakh, 47 thousand and more! (INR 1,05,47,560/-)

#### Difference

180000 194400 180000 198000 3600
374400 404352 378000 415800 11448
584352 631100 595800 655380 24280
811100 875988 835380 918918 42930
1055988 1140467 1098918 1208810 68343
1320467 1426105 1388810 1527691 101586
1606105 1734593 1707691 1878460 143867
1914593 2067760 2058460 2264306 196545
2247760 2427581 2444306 2688736 261155
2607581 2816188 2868736 3155610 339422
2996188 3235883 3335610 3669171 433288
3415883 3689153 3849171 4234088 544934
3869153 4178686 4414088 4855497 676811
4358686 4707381 5035497 5539047 831666
4887381 5278371 5719047 6290951 1012580
5458371 5895041 6470951 7118047 1223006
6075041 6561044 7298047 8027851 1466807
6741044 7280327 8207851 9028636 1748309
7460327 8057154 9208636 10129500 2072346
8237154 8896126 10309500 11340450 2444324
9076126 9802216 11520450 12672495 2870279
9982216 10780793 12852495 14137744 3356951
10960793 11837657 14317744 15749519 3911862
12017657 12979069 15929519 17522471 4543402
13159069 14211795 17702471 19472718 5260923
14391795 15543138 19652718 21617990 6074851
15723138 16980989 21797990 23977789 6996799
17160989 18533869 24157789 26573567 8039698
18713869 20210978 26753567 29428924 9217946
20390978 22022256 29608924 32569816 10547560

We will also talk about the other costs like cost of buying a product you don’t need, cost due to lack of holistic financial planning, the cost of buying term insurance from an agent compared to buying it online, etc. Stay tuned for the updates on the cost of free advice.