Financial Advisors Need to move out of S into B!

Kiyosaki's cash flow quadrant is an interesting one not only for its economic sense but because it reflects the values and mindset of every occupant in this quadrant who in turn make up the business world.

E stands for Employee. The mindset here is to play safe, be risk averse, earn to save and not invest.

The S stands for small owners, essentially one-man outfits whose mindset is that only they can deliver best, no one else can, so they not only can’t grow their business but they are easily satisfied with their limited liquidity.

B stands for business owners, your typical corporation which has built a scalable, profitable organization around its business idea. There is a hierarchy, there is an organization structure and the people occupying positions on the org chart have been assigned roles and responsibilities. There are processes and systems which make them all come together, perform and deliver.

I stand for Investor whose business is to make money work for him. He identifies potential 'gazelles' at a very early stage, invests in them and goes to the bank laughing when the gazelle blooms into a beautiful, mature doe. The only interest an investor has in money is to the extent of how it can be made to beget more money for him.

In India, most financial advisors belong to the small owner category i.e. S. They are a one-man operation; they neither have ambition to become a B nor do they have the wherewithal. So we have a scenario in India where there is a proliferation of financial advisors in every lane and by-lane, much like the photostat shops in the past.

The danger in remaining an S is not just for the financial advisor but for the financial services industry at large. If he remains a mom and pop store, he will never build excellence in the industry. When the industry was unregulated, he ruled the roost by what can euphemistically be termed as 'trick-or-treat practices'! With regulation, the mortality rate shot up alarmingly and many of the financial advisors fell by the wayside. Along with them not only did their credibility take a beating became suspect.

In my next article I will talk about what are the things financial advisors need to do to move out of S into B!