It helps to entrust your money to a wealth manager. But be sure to ask some questions before you sign up one
These days it is common practice for banks as well as brokerage houses to offer you a dedicated relationship manager. A relationship manager is your contact point with the organisation you are dealing with. Be it making a financial plan for you or helping you in your transactions like buying or selling shares or mutual funds, the relationship manager is supposed to make things simpler and easy for you. Every organisation has different criteria on the basis of which it offers a relationship manager. It looks at the client's investible surplus and then assigns a relationship manager to the investor.
MANAGING MONEY
Due to paucity of time and requisite expertise, most investors find it difficult to navigate the complexities of the financial market to keep track of their investments across asset classes. This is where the need for expert hand-holding comes in. This could be either in the form of an independent financial planner or a bank or a brokerage house. If you choose a bank or a brokerage house, you will interact with the organisation through the relationship manager.
A relationship manager is the primary contact for you within the bank. There are some banking services that can be provided by the relationship manager himself, while others can be sourced from other departments and specialist units within the organisation.
It is this relationship manager who introduces you to the gamut of services on offer. He or she develops a thorough understanding of the individuals' needs, designs solutions to help manage long term wealth. The relationship manager also offers resources needed to take advantage of new investing opportunities and stays focused on your success every step of the way.
IDEAL EXPECTATIONS
As you have entrusted your hard earned money to the relationship manager, it is only fair if you expect the best inputs from him or her. In the backdrop of a strong regulatory framework in India, relationship managers have necessary certification from regulatory bodies to advise and transact in equities, derivatives, mutual funds and insurance. Depending upon the quantum of relationship and the organisation you are dealing with, the relationship manager emerges in various roles such as a distributor, facilitator, advisor and, of course, a comprehensive financial planner. For example, with a brokerage, the focus will be more on the distribution and facilitation, whereas in a multi-crore relationship with a private wealth management, it will be comprehensive financial planning. In most cases, the relationship manager should be able to suggest an asset allocation for you. He should have a thorough understanding of products and be able to decide which will best suit his or her clients. Being a knowledge-driven role, more talented relationship managers make it to the large-sized accounts say more than 5 crore. So does that mean your relationship of say 25 lakh does not count?
It makes sense to choose an organisation of repute. Large organisations put in a lot of resources at the back end. The relationship manager takes that view forward to the clients, ensuring justice to you even if even if you may not be one of the biggest clients.
Ideally, all this is expected to work well for clients. But straight relationships turn soar when the client and relationship managers are not on the same page. There are allegations against relationship managers that they push products on the basis of high commissions and not on the basis of customer needs. Not all products required by the clients offer remunerative commissions and a few clients are willing to pay service charge.
That leads to the conflict of interest in some cases where relationship managers chase the commission targets at the cost of client's interest, points out a relationship manager with a wealth management business. Instances such as the alleged fraud by a relationship manager in Citi Bank further raise questions about how much one should rely on a relationship manager.
Before signing off, the client should be aware of the compliance procedures that each organisation follows. Customers should ask if the organisation has a compliance manual. If there is one, he should have access to a copy of it. This ensures that customers are aware of their decision flow and implementation of decisions. They are also aware of levels of escalations in case of they are not happy with the services rendered by the relationship managers.
Generally, most services providers keep the clients posted about their actions in markets. A simple buy or sell transaction amounting on a stock exchange, is notified to the customers free of cost using SMSes and email by the brokers on the same day. This is over and above the contract notes and ledger statements that the customers get.
Depository services providers – NSDL and CDSL – also send out SMSes to the customers about the movement of stocks in and out of their demat accounts. That should help the customers monitor their accounts. If there is any deviation you should scrutinize. There are allegations that the relationship manager with brokerages trade in the client accounts. But a point to note is that most of the allegations arose following losses. Allowing the relationship manager to trade on your behalf can become an invitation to unlimited losses. Your relationship manager is just a facilitator and cannot be a decision maker. Most good brokers make a clear mention of contact numbers of the branch managers and zonal authorities with whom such errant relationship managers can be reported to.
There are instances where the customers are mis-sold third party products such as life insurance policies, mutual funds. The customers should gather as much information possible about the product before buying into one. The client should ask questions about the functioning of the product, especially the exit strategies. It is the duty of the relationship manager to provide the client with inputs on both possible loss and possible gains associated with a product. How much it can go down? Is a question a customer can use to fathom the risk. For example, in case of the products offering returns linked to the stock market or other volatile assets, you can ask the relationship manager to arrange for the 'worst yearly returns' in the past 10 years from such products. This will help you assess the risk in a prudent manner, keeping aside all emotions.
Clients should seek the house view in written format. This will ensure that the strategy originates from the house and not from the individual relationship manager, points out Srikanth. This also minimises risk. There is always a risk that the relationship manager may change jobs. If you adhere to the organisational advice, even if you get a new relationship manager, your portfolio remains on track.
