Hammurabi’s Code in Investing Perspective

February 18, 2016 | Industry Insights

Around 18th Century BC there lived a King named Hammurabi who instituted a social law now known as the Hammurabi's code. It was one of the 1^st laws ever written down. One rule in the law was about the architect. If he built a house for a man and if the house collapsed causing the death of the owner, the architect would also be put to death.

This punishment seems very unjust and harsh especially when there can be numerous other reasons for the collapse of the house other than the architect’s fault. But with such a heavy punishment, the architect had to be very careful in constructing the building, using the best possible material and building techniques to build the best possible house that would last for a long time. The builder literally has his own skin in the success & longevity of the building.

This type of a system ensures a very strict moral obligation & not just a professional responsibility. How could this same moral obligation be translated to the financial advisory business?!

The same could be extended to money advisory, here’s how!

There are two kinds of financial advisors:

The first kind advises you for a fixed fee, without investing their own funds along with you. In simple terms, HE DOES NOT LOSE EVEN IF YOU LOSE.
The second kind strongly believes in the scheme that he is managing, and hence, INVESTS HIS OWN MONEY IN IT. Hence, HE WILL WIN ONLY IF YOU WIN.

This is known as having our own ‘Skin in the Game’

Having 'Skin In The Game' results in:

Your financial advisors would be behaving more carefully.
Their financial interest is always aligned with yours.
They not only have their name at stake but their own money.

We at "Niveshaay" have our own Skin in the Game!!

Ideally, in the financial advisory profession, one way to instil a sense of responsibility is to ensure that the advisory team is investing their own money along with those of the clients'. Here at Niveshaay, this ideal extends to practice, as our research analysts themselves are invested in the schemes we recommend.

Having our own skin in the game makes sure our willingness to link our own financial well-being with yours. This also places an implied encumbrance on us to make optimum use of our time & abilities.

By investing in our schemes, and having this one disclosure will serve to inspire greater confidence among our clients, than thousands of assurances ever can.

Let's Uncomplicate - The Investing Journey !!!!

Thanks & Regards,

Team Niveshaay

(P.S: This article has been inspired by PPFAS Blog)