There are various types of advisers who are in the business of advising (not necessarily finance, just advisory) though predominantly my experience comes from the wealth and health industries..let me list them find out in which category you fall or if you are an end investor in which category you adviser falls:
- Evidence based advising: there is too much evidence that the funds that they are peddling have a good track record. The fund house, the managers, the scheme. This is simple, but requires some confidence to sell same boring products day in and day out even though the incentives are bad, the fund houses are arrogant, and they may give poor service to the IFA and to the investor. These advisers do not attend mutual fund meetings, do not hear the noise, and know the difference between noise and information. At some stage this can sound like over confidence.
- Eminence based advising: He more than she has been in the business of advising for more than a couple of decades and can draw examples from ‘when you were going to school…this is what used to happen in the industry’. His experience may be in selling one life insurance product, know nothing about equity, and may largely be capable of getting you to buy 30 policies of Rs. 6000 per annum premium. Largely a guy who cannot have any courage to ask your for a Rs. 180,000 per annum premium because he cannot even think of paying that kind of premium himself!
- Have a product to sell: He and in this case increasingly she will sell you a range of products -a very small ulip, a small endowment, a small term insurance. Then you will have a range of mutual funds. Now that she has no way to approach you it could be a chit fund for your mother. Gold coins for your wife, and of course the trophy second house or a piece of land. Again like Pandora her box will have about 30-40 assets and she will slowly up your stake with her assets. Her logic is simple – sir you need diversification. Rarely does she bother about knowing the difference between diversification and diworsification. Over a long period you will see him / her gravitate towards less or least regulated products. She holds you like an octopus. A loving one.
- The fear based adviser: Your child’s education will cost you Rs. 5 crores, your retirement will require Rs. 20 crores. You are by now mellowed down to sell your undergarments to pay for the ‘dreams’. Rarely does he allow you to relax. Keeps track of your goals, and tells you how far away from your goals you are. Stress based adviser.
- The commission oriented adviser: He will try every new fund which pays well. So you will have a long list of mutual funds. His logic? something will do well, right? If we do not encourage new fund houses, who will? He is clearly crooked. He will not mind selling any product which is risky, unregulated, or whatever as long as he is sure that he gets his commission.
- The volume based adviser: Look at my AUM so many people cannot be wrong. I have Rs. 400 crores assets under management and have been having if for a very long time, so I must be good syndrome.
- The Intuitive adviser: ‘Sir this fund has had a 5 year great run, now it must go down ONLY. A few times he has got it right, and hence he feels invincible. Given the small range of funds in his list of products that he wishes to sell he is not too far away, but there is not enough reason to deviate from his current portfolio.
- The self righteous adviser: he will not listen to what the client wants or what change is happening in the world around. He is clear that what he is doing for the client is best and nobody should question him. Not at all.
- The one asset only adviser: Believes in either equity, gold or debt or Real estate. Has not heard of diversification. So gold is buy on dips always. When gold goes down, it is a must buy. When it goes up ‘see I told you’.
- The nervous adviser: Exactly opposite to the first adviser. He gets intimated by the customer / potential customer. So he will go by what the client wants and at some stage tell the client ‘sir you chose that asset allocation and the schemes’. You do not know whether to laugh or cry.
this is not exhaustive. There are the ones who will say “sir I do for all the Brahmins, Yadavs….’ or functional specialisation…or….there is no end…just a simple attempt to see if you can classify your adviser. What the adviser thinks and what you think may not be in congruence either!! Have fun…
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