Wealth management: We often say, “Let’s get to the root of a problem and fix it in totality.” The same applies to our investments and financial planning in general. We all want to own the best products in our portfolio but as it turns out, the reality is actually far from it. While I know we cannot control everything, one thing we can control is how we build our advisor portfolio. Let us understand that no ne person or entity has all the skills in the world to help us navigate through the complex maze of finance, accounting and legal affairs.
Just like our investments, we must also diversify our advisor risk. Who is advising us? Who is managing what for us? How can we ensure that all is well with us and our affairs? These are questions to consider. Let’s start counting. Who are the people and entities we require? Here are some broad suggestions.
Bank & Relationship manager: It is good to have two banks to deal with. One bank account could be used for financial planning, while the other could be for general expenses or other matters.
Chartered Accountant: We cannot have two here but if you are running a private limited company you could have one for your company accounts and one for your personal accounts. For self employed and partnerships, you obviously need just one CA.
Financial Planner: You just need this person. He is your family’s financial doctor and capable of giving you a holistic view. He cannot be replaced but you must speak to a handful of planners to understand each ones way, style and methodology of work and, most importantly, how comfortable you might be with his/her approach. Remember this is going to be your most important and lifelong relationship. Take you time to sign up with one, but be certain that you are satisfied with the person. There are a few things that can be taken for granted here: It is most likely that you will not be mis-sold anything, relationship will be lifelong, advise will be in your interest and there will be transparency. It might be even better if the person is not attached to any one company like an insurance agent. This, however, may not be evident so better check this before signing up.
Life Insurance Agent: We need to shop really hard here as we could be misled so easily. This happens almost like routine. They know a lot about insurance, many of them will be experts and while that is an advantage, it is also an inherent disadvantage as insurance is all that they know. You could land up paying a huge amount of premium and have little benefit from the policy itself. A simpler way is that you could have a financial planner who is unbiased and you could then use your chosen life insurance agent to do your product purchases. This is tricky as most financial planner would be agents as well, so check before you take the plunge. An unbiased planner is hard to find.
Non-Life Insurance Agent: Here we need someone who we can trust, who will be there when we need him desperately in times of making a claim, or to remind us of renewals. The person needs to be really efficient. If your agent does not fulfill the above criteria, it is time you think of a change.
Mutual fund agent: There are three categories of people you will find here. One, who knows nothing and are simply product distributors. Buy at your own risk as there is no accountability for his advice. Second, they may be as large as a firm but I suggest that you simply avoid this category. The next is a person, who knows a bit about funds, investments, investment objectives. You could deal with this person by doing a bit of research. The third category is that person who understands risk management, asset allocation, portfolio volatility, who can create a strategy for you with a fusion of your financial goals, time horizon and asset allocation. He is you best bet.
Portfolio Manager or Fund Manager: In this area, most people will sound knowledgeable and that is because they all have the fundamental skills and knowledge of investment management. Per se, their knowledge is good but the slippery ground here is the philosophy of the company they work for. Building wealth is really very easy and is not as complex as it may be portrayed. Avoid philosophies where the focus is on a single aspect of portfolio management such as momentum or aggression or the ones that use complex jargon. Complex ideologies and techniques usually imply more churning, more expenses, more brokerage costs and all this reduce your return significantly. Do business with someone whose method you understand completely and don’t get carried away by his historical performance. Enrol him for his vision and not solely on his past numbers.
Lawyer: A good way would be to check with any of the above you are friendly with and who you can trust. Don’t shop here but go by recommendations from people you trust. This is a once-in-a-lifetime exercise but well worth it. Good luck on building your advisor portfolio.
— Author is Director - Transcend Consulting