Know Your Financial Advisor

KYC? Risk-profiling? Setting out on a wealth management journey can be a hard nut to crack. Relationship managers or advisors flood you with forms that need details about your financial objectives, assets, and liabilities to aid their understanding of your capacity to bear risks and expectations for return objectives.

Your advisor sure knows a lot about you. But how well do you know your advisor? While you trust the bank or financial brand your advisor represents instances of forced selling of wrong products is not uncommon. This is a common phenomenon is even more pronounced between January to March, when their targets may over-ride your financial goals.

Here is a checklist to judge your newly appointed financial advisor:

Experience

Find out as much as possible about the advisors’ work profile and experience. Understand how long he’s been in the advising business and how long has he/she served with the current bank or advisory firm. Switching employers frequently is definitely a brow raiser. If you meet someone with less experience consider his or her educational credentials.

Market know-howDiscuss global and local trends in financial markets with

your advisor to evaluate his/her knowledge. He/she should know how the BSE Sensex has performed in the past months vis-à-vis global counterparts; why it may not be the best time to park funds in Gold or what is the likely impact on one’s portfolio from the RBI’s upcoming meet. If you are not market savvy get a low down from a friend or read a little before you test him/her. Remember you are entrusting your hard-earned money in your advisor and you don’t want to settle with ‘I may not know, but they ought to know’ in the end.

Understand the set-upThe advisor’s recommendations often

come from an in-house team of analysts. Ask your advisor more about the research team, their qualification, experience, recent recommendations and successes across products. It is not difficult to find out the best performing mutual fund but the entry and exit strategies for recommended funds make all the difference to your returns. For this an experienced team of analysts is vital.

Check performanceWhile you are most likely to see a sheet

detailing the outperforming recommendations and a portfolio glorifying a success rate of 90%, ensure you also get one for the buy-sell decisions gone wrong. Play by the 80:20 principle, which says that 20% of the decisions gone awry may wash out the gains made by the rest of the 80%.

Read More Here: Know Your Financial Advisor