Advisors real job
Being a financial advisor is a fascinating profession, many new investors think that our job is to find the best investments and we think that our job is to get the asset allocation ( between various assets such as equity, debt, real estate etc) right. For investors who have been our clients for long the conversations are always about upcoming financial goals, surplus available to be deployed, past real returns and likely future returns, never about the best fund or investment. Less time chasing the best fund and even lesser time discussing direction of markets.
There is no point in getting 30% return in equity in 2017 when you have 10% of your assets in equity.
So, firstly i feel that an advisors real job is asset allocation, not bringing you the “best” investment option. No one can with any accuracy say which asset / fund will do the best year on year.
Secondly and even most importantly the advisors job is to stand between the investor and his worst financial mistake. Some one i know ( im sure you know many like him too!) had bought a large flat in suburb few years back, Now after almost 5 years he is paying the large EMI but receiving a small rent if he is lucky as most of the time the flat is empty. He can neither sell this now as there are at few hundred unsold apartments in the complex. So, he is stuck paying large EMIs for next 15 years or so and get small rents in the meantime and hope for some good time to sell it off.
A retired librarian who went to bank to renew FDs was sold pension plans and other policies instead with lock in ranging from 5-20 years ! Many of these investors though affluent lack a financial advisor and do piecemeal investing, they have a broker for real estate, some agent for PPF, banker for investments etc with the result that after some time, they don’t have a clear picture. They dont have an advisor but a salesman for each product.
Imagine if both had taken some good financial advise, A real financial advisors job is to get your asset allocation right and stop you from making bad financial decisions that can not be undone for decades !
Yes we are all biased in one way or another but at least the bias of a financial advisor / planner is lower as client interest comes first and product sales is after that. And, no advisor / planner will suggest things with 20 year lock ins unless it was absolutely necessary ( annuity for retirement etc and even then only after explaining the lock in involved).A good advisor / planner will actively dissuade a client from bad investments.
Have a good advisor to get your asset allocation right, more importantly to stop you from bad financial decisions. If some one says he can get you the best investment year on year or makes some tall claims be rest assured that he is not likely to be a good advisor !
m padmanaban Said,
December 26, 2017 @ 12:25 pm
Nice blog to follow. Crisp and readable.
shankar Said,
March 16, 2018 @ 5:02 pm
Thanks for the feedback Padhmanabhan