If you have a financial planner / IFA helping you with your investments..you are in the right place. Here are the few things that an IFA does – and the most complex comes last. So this list is long and the basics appear first

  1. Choosing funds and helping you with the investing process.
  2. Portfolio rebalancing
  3. Managing cost and Fees
  4. Asset allocation and reallocation
  5. Managing Expectations and Influencing behavior
  6. Financial Planning
  7. Adding value to client in other financial matters – job switch, children career choices, etc.
  8. Encouraging good savings
  9. Converting more savings to investing, and handling Volatile asset classes better
  10. Client being able to handle almost all of this himself/herself
  11. Encouraging Consistent Savings, Investing, and getting the next generation to invest

In most places the financial planner is expected to pick a good fund. Good fund means it should make money all the time – how the underlying assets are performing is not material !! When an IFA has such an onerous task, it is obvious that the IFA is frustrated.

When the market goes up the client expects that the IFA should have captured more of the upside and perhaps more aggressively. When the market comes down the client is wondering why did the IFA not tell him in advance that fund A will fall less than fund B. Actually the client expectation happens because the IFA talks more like a fund manager and not so much like an IFA. Worse than that he takes credit for the portfolio doing well in a bull market. If you want credit for the market going up, you need to take the brickbats for the market coming down, right? IFAs will do well to distance themselves from the market performance. Say ‘I do not know’

Managing to this hierarchy will not make the markets any less wavy, but doing so will make the financial advice business much more satisfying, and gratifying. Even the client will understand your role better.  It can even make that business more predictable and profitable, at least in the long run. It will require carefully and putting the client’s interests first, even when the client doesn’t see it that way. Or the client does not know about the conflict of interest in the ‘advisory’ business/profession.


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