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Financial Planning

Answers to these 4 questions lead to right money advisor

This article appeared in Money Control on 27 April, 2015

You work hard. You are smart. You earn your money one rupee at a time. But who do you turn to when it comes to asking where to put all that hard-earned money? 

planning_356x200-1_2754_356Maybe you do it all yourself – Read the papers, visit websites and choose the best products and places to put your money. Maybe you rely on your family member – spouse, parent or that knowledgeable uncle. You may visit your Bank manager. Or an Agent or a broker. Perhaps, a wealth-manager helps you?

Whoever gives you advice better have what it takes, for you to do well – because money really impacts our lives in a big way. Good decisions and sound investments help us live securely. Bad decisions can cause stress and insecurity.

These are the 4 criteria to help you choose the right advisor for your money matters:

Q1. Does he/she have the time?

If you are managing your money all by yourself, then you should devote sufficient time in research, market movements, and in reviewing your portfolio at regular intervals. If someone else is giving advice, make sure that he/she has time for your investments. 

There is no such thing as a good or a bad product. It depends on whether it suits your situation and meets your needs. A good advisor should know about you, your life situation and then select the right product for you. This means time commitment from the advisor.

Q2. Is he/she qualified to give you advice?

I am amazed that very senior professionals take advice from people who are much less qualified in terms of education, income and knowledge. Sometimes all that the advisor knows comes from attending a few ‘product-training sessions’.

When we entrust our health to a qualified Doctor only, why would we entrust our hard-earned money without checking the qualification, experience, knowledge and competence of the advisor. The higher the amount, the more important this criteria. Also, different areas require different qualifications. For example, Property is a matter of local expertise and high-ticket investment. One should give a lot of thought before taking any random person’s advice on where to invest.

Q3. Is he/she comprehensive and rigorous?

Making money is a life-long exercise. Money comes into our lives and money goes out of our lives. Like energy. The right advisor is like a holistic healer. He/she tries to find out your circumstance, goals, fears (risk appetite) and family background. Only then a money decision makes comprehensive sense. This is very important issue and (as in Q1) needs time. Do make that time. Have an advisor who makes time.

Rigorous means once you make an investment, it should not be locked away in the cupboard. It has to be reviewed regularly, portfolio must be re-balanced for proper asset allocation. This discipline and rigour is what makes people wealthy.

Q4. Does he/she have ‘conflict of interest’ with your needs?

People are shockingly naïve in handing over their money to Agents, Brokers or other “money managers” or “advisors”. None of these advisors are “bad”. But you must know they sometimes have ‘conflict of interest’ which goes against your real needs. Maybe their boss is telling them to sell you a new product. Maybe they are lagging behind their targets and they need to make that one product sale to you to complete their month’s sales. 

All I would say is “Buyer Beware”! Be aware that these things happen. Educate yourself a little bit. Do not choose products blindly because your advisor is telling you so. Ask your advisor directly, if required. Ask him for options.

If you ask these 4 Questions that I have listed about “who is advising you of your money?” and the answers must be “Yes” except Q4 (Answer should be “No”).  Consider alternative options of where you can get good advice. Or work towards overcoming that weakness.

May you be wealthy by making the right choices! 

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