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10 Questions to Ask While Deciding On a Financial Advisor - Outside View by PersonalFN
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10 Questions to Ask While Deciding On a Financial Advisor
Jan 14, 2016

We see that corporations across the globe face similar challenges. Depending on the size of the business, financial strength of the company and quality of management, the severity of the challenges and concerns may differ. Nonetheless, the hot topics at meetings remain more or less the same. Unsatisfactory performance, low/moderate growth in sales numbers, and the like are most common.

Case in point, Gautam works for a manufacturing company. Let's see what happened to him recently.

Time: 6.30 p.m.

Venue: CEO's cabin

Departments involved: Production, Purchase and Marketing

People present for the meeting: Department heads and the officers directly reporting to heads.

Agenda: Discussion about exceptionally poor performance and progress of one of the key projects

"Gautam, this is not a Government office. The management won't tolerate this delay. Why couldn't you get your job done last week? It shouldn't have taken you more than a day or two, yet you dilly dallied for a whole week. We are a pioneer company in this industry; you can't mess up with such an important project. It affects our image in the industry. To top it, Ritesh and a few of your team members got their palms greased in the tendering process. What's happening here? Do you understand where we are going to land up if we continue like this?"

The CEO of the company was dressing-down the employees responsible for the poor progress of the project. These are not one-off cases. If you work with a private company, you can relate to this situation. Unfortunately, the functioning of Government departments has become synonymous with bureaucracy, corruption, and unproductivity. In reality, a bunch of dishonest and badly behaved 'babus' give all Government employees a bad name. Private companies are not far behind.

But it would be unfair to point fingers at Government employees only...

How can we forget the private sector banks employing 'relationship managers' to distribute third-party financial products? Very often they misguide and mis-sell financial products to clients who evince trust in them, leaving us to wonder: do they actually know what a 'relationship' means? And if yes, do they value it? There are numerous cases of innocent investors being fleeced! The only thing relationship managers are bothered meeting is their targets, which earn them fancy incentives. The same also holds true for mutual fund distributors, agents, brokers and those who act in the capacity of 'financial advisors'. They've all made hay when the sun shines, literally 'pushing' products which earning for themselves good commissions, as against 'advising' what's in the best interest of clients. A qualitative assessment, which is imperative, in most cases hasn't been conducted as rigorously as it should have been. Investors using their services don't rate their performance either. And if there are ratings, don't rule out that ratings can even be influenced.

Honesty and ethics seem to be misplaced in this ruthless 'materialistic' world. So, it's high time that you as an investor act responsibly!

Here are 10 questions you need to ask while deciding on a financial advisor:

  1. Is the financial advisor / relationship manager / agent driven by commissions?
  2. What are the credentials of the advisor?
  3. Does he/she understand my financial goals?
  4. Does he/she follow a holistic approach that helps achieve my financial goals?
  5. How have the investments avenues been selected - what is the basis of doing so?
  6. How and when will be my investment portfolio is rebalanced?
  7. Is he/she proactive in their approach even during distressed times (when the markets are tanking)?
  8. Is there transparency in their dealings?
  9. Does he/she have enough support and backup staff (to service you well)?
  10. Will he/she be able to adhere to timelines?

If you can get the answers to these questions and many other legitimate ones you have in mind, you are very close to finding the right financial advisor, who can handle your money with as much care as he/she would managing his own.

What matters the most is adhering to highest level of ethics and honesty and putting your interest as a client, first. PersonalFN stands for these traits and with that philosophy, brings to you a new initiative that enables investors to discover and connect with qualified and honest advisors whom they can trust. To put it better, a 'guardian' for your investments, not just an advisor!

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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