Is it a straightforward question? Not quite. Choosing implies that the individual knows exactly what he wants and more importantly, he is confident about the options he is evaluating, all largely address his needs. What is that you are looking at in the first place — someone who will advise you on your entire financial requirements (those apparent and also, those which are not), someone who will source your products at the cheapest cost, someone who can execute the fastest, someone who gets the best ideas and sources the difficult-to-access product… the list goes on. Once you know what you need, then comes the task of evaluating the advisors. But before that, you need to establish which among them addresses your identified needs. I will try and give some pointers which might be useful in your quest. The starting point is to know what you want. In an ideal world, we may want everything. But we do not live in such an environment. So, a more pragmatic approach would be to prioritise rather than choose among your various needs. It would be difficult to choose between unbiased advice/cheapest cost/product accessibility/etc. But you can definitely prioritise your requirements. Getting the benchmark in place will make it easier for you to compare the options available. And this will be a dynamic, ongoing process as you and your needs will keep on changing over the life/wealth cycle. Once you have done that, consider the following. But remember, it applies to both – individuals and the policies of the institutions they sit in, as they both come together to act as your advisor.
1) APPROACH:
Is s/he willing to spend the time and make the effort to understand your approach, needs, historical experience, financial acumen? Or is s/he looking at making a sale?
2) EVALUATION:
Evaluate advisors, not products or performance – does the credibility lie with the person or the products he is selling? Does his pitch start from you/your requirement/your situation or the merits of the product? Are comparisons made usually between the product which is being offered and competing products or more from the perspective of its fitment with your needs? Products and performance in today's world of open architecture can be sourced, what is important is to zero in on a good filter.
3) TENURE:
A good advisor will outlast markets, performance, products. Continuity and stability has a premium. Ask what is the average relationship tenure of his clients (irrespective of organisation changes)? Does his/her stints in current/previous organisations outlast most of the holding periods of the products being sold? Someone who is hopping assignments is betting more on his sales skills than relationships building; unless he spends time with his relationships, he cannot do justice to them.
4) EXPERIENCE:
Quality is overrated, quantity is equally important. Just because someone is with a particular employer/has a degree from a particular institution, does not make him a good advisor. The ability to understand the market, live through investment cycles, the experience of handling clients and situations, these come with time. Your wealth is important to you, so you should demand suitable experienced resource to address them.
5) INTEREST:
Your and his interest should be aligned. His rewards should be linked more to addressing your needs in line with your requirements, not by making sales. Transparency of risks, features and costs are important on an ongoing basis. And to keep this fair, you need to pay for services. Expecting free but fair service is not tenable; if you do not pay, your wealth management process would. There are no free lunches.
6) COMPREHENSIVENESS:
Your advisor should be able to guide you not only for your core investment needs, but related ones as well. Credit? Trust and estate planning? Overseas investments? Real estate solutions? Investment banking solutions? Taxation queries? Your needs would vary and emerge. It is important that solutions are not precluded because of the lack of platform.
7) ORGANISATION OR INDIVIDUAL – BOTH IN THAT ORDER:
The organizational philosophy will drive the engagement model, the organization platform will drive the product capability, the organizational history will drive its experience and track record. And all this will be experienced by you through the individual advisor.
Remember, your financial advisor, would be privy to your closest financial details, at times more than your family. It is important for you to be able to trust implicitly the organization and the individual. And this will come only with time, and advice, experienced together.
