Are you with the right investment consultant?
Most investors go not give this question much thought.
They are more focused on answering questions like whether they are invested in the right bond, mutual fund, insurance company, etc. These questions are pertinent, but if you don't have the right investment consultant, you will never have the right investments.
Most investors have a neighbourhood mutual fund distributor, insurance agent, bonds/post-office schemes agent, who they contact for application forms, which the agent collects as soon as it is filled.
In all likelihood, the investor doesn't hear from his agent after that.
The next time he contacts the agent is when he wants to invest again, alternatively the agent will contact the investor when there is a new scheme in the market that he needs to sell.
This is the kind of minimal interaction and communication between investors and investment consultants, if you can call them that.
Most consultants don't have a lot of value-add to offer to the investor apart from suggesting the 'hottest' mutual fund scheme or giving you copies of the RBI Relief Bond/Infrastructure Bonds, which is a no-brainer really and does not require any degree of proficiency on the part of the consultant.
Ideally, the investor needs to get more value out of his investment consultant than just forms.
The investment climate in the country is getting more and more volatile and there is increasingly a need for knowledge-based advice and consultancy.
As the investment climate undergoes a transformation, as the interest rates get more volatile and as the tax provisions change (from year to year), an investor's needs also change and there is a need to be realigned in line with the new developments.
To cite an instance, until the last budget the high net worth individuals could invest any amount in the RBI Relief Bond, so the Rs 200,000 ceiling must have come as a blow to them.
He needs an investment avenue that can absorb his surplus investments. His investment consultant must be in a position to chalk an investment plan outlining exactly where he can invest his surplus funds.
The investment consultant of today not only needs to be more professional and informed but also more independent and unbiased.
You need to ask yourself - Why should I invest through my existing investment consultant?
Below are listed some criteria that investors can apply while choosing an investment consultant:
AMFI (Association of Mutual Funds in India) certification has now become mandatory for all mutual fund distributors.
Likewise the IRDA (Insurance Regulatory Development Authority) insists on certification for distributors of life insurance products. When you wish to invest in a financial product be it a mutual fund, life insurance, bond or fixed deposit, make sure your agent/distributor is adequately qualified to help you.
Indeed with the proliferation of the internet, business and news channels the investor's `reach' for information has increased manifold.
The problem seems to be that the investor seems to have benefited more from this than the agent.
If you find that you know more than your agent or that he does not know something that he must know, then you need to ask yourself whether you are with the right agent.
Nothing serves a better foil for qualification than experience.
Make sure your agent has been dealing with clients like yourself for some time. This will be a major comfort factor for you and you know that your agent has dealt with enough cases like yourself and is indeed experienced enough to advise you.
Or is he recommending the same products again and again. Most agents peddle a pre-determined set of mutual fund schemes that is driven more by greed for higher incentive (from the fund house) than fundamental factors like performance, volatility, risk-return trade-off.
When your agent recommends a product ask him a few product-related questions to test him and also ask him why the product's peers should not be considered for investment.
Investment advice at all times must be unbiased and independent and your agent must be willing to inform you about the pros and cons of a particular investment.
Single team agents/distributors (as is the case in India) is not ideal for investors.
Ideally, your agent must have a team of consultants that can serve a large number of clients. Often, agents acquire a large number of clients but do not have a team to service them.
The investor suffers in such a scenario as there is not enough follow-up from the agent's side for pending account statements and redemption cheques with the fund house or there may not be adequate follow-up with the life insurance company for the medicals and/or policy.
In other words, the turnaround time could be higher than otherwise.
Also agents cut corners by having one team that sells all kind of products. Ideally there should be distinct team for investment advisory, life insurance, etc.
This will ensure that you get better advice and service. Investments is a dynamic business, there is no one-size-fits-all alternative.
Your investment does not end after submitting the cheque. As a matter of fact, it has only started. You now need to track your investments. But how wonderful would it be for you, if your agent could do that too!
There are few agents who give post-investment feedback or allow investors to track their investments online through a tracker.
Go for agents that let you keep in touch with your investments through online tools and trackers. If your agent also keeps you posted by updating you on events like interest rate volatility, pre- and post-budget analysis, monthly/quarterly financial publications, then you have a winner on your hands.
The criteria outlined above are only some fundamental factors that investors need to consider to assess their agent's capabilities.
There are a host of other factors that you may want to assess based on your individual needs and objectives.
The bottom line is - investments demands professionalism and you will be doing yourself a favour by sticking to professionals to let you handle your investment needs.