A man came in last year wanting to discuss which category suited him. Within ten minutes I'd asked about his father's health, whether he owned or rented, and how many brothers he had. I could see him wondering whether he'd walked into the wrong office.
He hadn't. Each of those questions changes the answer, and by the end of that meeting the recommendation was nothing like what either of us expected at the start. So here's what each one is actually for.
How are your parents
This sounds like small talk and it isn't.
If parents are financially independent, that's one household. If they're likely to need monthly support, or if a medical event could arrive at any time, the money in front of us has a claim on it that nobody has mentioned yet. Our page on supporting your parents treats those as two separate problems for good reason.
People rarely volunteer this, partly because it feels like discussing something private and partly because they haven't thought of it as a financial fact. It's one of the largest ones in most households.
Do you own or rent
Two quite different situations hiding behind a similar monthly outflow.
Somebody paying rent has a cost that will keep rising and no asset accumulating, which usually means a house purchase is somewhere in their future, and that's a dated goal the money has to respect. Our page on SIP for house purchase covers it.
Somebody paying a home loan has a fixed obligation, an asset, and a decision about prepayment that our post on the loan question goes into. Somebody who owns outright has neither and considerably more capacity than their salary suggests.
Three different answers, and I can't tell which one I'm dealing with from the income figure alone.
How many brothers and sisters do you have
This is the one that makes people pause, and it's more relevant here than it would be in most countries.
It tells me how a parental responsibility is likely to be shared, or not. It tells me something about how an inheritance may eventually work. And where there's a family business or family property involved, it tells me that some of what looks like the client's assets may be nothing of the sort.
I don't need the details and I don't ask for them. I need to know whether the person in front of me is the only one carrying something.
What did you do in 2020
The single most useful question I ask, and the one that actually predicts outcomes.
Not how they'd describe their appetite for risk, which everybody answers optimistically. What they actually did when something they owned fell sharply. Stopped. Sold. Nothing. Added more.
Somebody who sat through it can hold more equity than they think. Somebody who sold should hold less than they say they want, and there's no shame in that arrangement. Our page on risk and volatility explains why behaviour is part of the risk rather than separate from it.
If somebody wasn't investing then, I ask what they did when something else went wrong. The answer is usually just as informative.
Who else knows about this
Asked late in the conversation, and it changes the meeting when the answer is nobody.
A household where one person handles everything and the other has never been shown is carrying a risk that has nothing to do with markets. Our post on the conversation most couples haven't had is about exactly that.
When the answer is nobody, I'll suggest the next meeting has both people in it. Some clients find that presumptuous. I'd rather be presumptuous now than sit with a family in three years trying to reconstruct what existed.
What is this money for
The most obvious question on the list and the one most often answered vaguely.
"Just savings" is an acceptable answer and it's still worth establishing, because it means nothing here has a date and nothing needs protecting yet. What I'm listening for is a date the person hasn't registered as a date: a daughter finishing school in four years, a car they've been meaning to replace, a shop they'd like to take over.
Those turn out to be the constraints that decide everything, and our page on asset allocation is essentially the method for turning them into a split.
What do you actually spend
Asked plainly, and answered accurately by almost nobody.
People know their income to the rupee and estimate their spending, usually low. The gap between the estimate and the reality is where the investing capacity actually lives, and it is also what a buffer has to be sized against.
I am not asking for a budget or a spreadsheet. A rough figure from looking at two or three months of bank statements is enough, and it is almost always higher than the guess. Our page on how much to invest works from that number rather than from a percentage of income.
For a household approaching retirement this question stops being background and becomes the whole plan, because the corpus has to cover the real figure rather than the estimated one.
The question I stopped asking
I used to ask people what returns they were expecting. I don't anymore.
The answer was always a number they'd heard somewhere, and asking the question seemed to legitimise it, as though it were a specification I could work to. It isn't. Nobody can deliver a rate on request, and our page on compounding explains why any figure attached to that is an assumption rather than a plan.
Now I ask what the money is for and when. That question has an answer that's actually knowable.
Why I ask rather than sending a form
All of this could be a questionnaire. Some firms do it that way and it is more efficient.
The reason I ask in conversation is that the useful answers arrive sideways. Somebody says their father is fine and then mentions, two minutes later, that he has stopped driving. Somebody describes their risk appetite confidently and then tells a story about 2020 that contradicts it entirely.
A form collects what people believe about themselves. A conversation occasionally collects what is actually true, and the difference between those two is where most bad plans come from.
It is also slower and harder to scale, which is a fair criticism and one I accept. Our post on the part of this job you never see covers the rest of what does not scale.
What happened with the man from last year
He'd come in to discuss equity categories. His father had a condition needing regular treatment, he was the only son in the city, and he was renting with a purchase in mind within three years.
So most of what he'd brought wasn't long-horizon money at all. It became a stable holding for the medical contingency, a separate pot for the deposit, and a much smaller long-term instalment than he'd walked in planning.
He was slightly deflated, because it was a less exciting conversation than the one he'd expected. Two years on he's bought the flat, the treatment has continued, and nothing had to be broken at a bad moment.
None of that came from choosing a scheme. It came from three questions that sounded like none of my business. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014, and we'll ask you the same ones.
