What is the IFA in the life of a client?

Well it seems to be a very difficult question to answer. It ranges from being just a form filler to a detailed adviser.

So where does one draw the line? What kind of questions should you answer and which ones do you say ‘sorry this is beyond my jurisdiction?’

Very difficult questions to answer. Let us look at some of the questions that clients ask:

1. What should be my asset allocation? – Most IFAs would go by some thumb rule and not a rigorous Risk Profiling. Those who do a rigorous risk profiling do not REPEAT the risk profile on a regular basis. That is actually like not doing it at all….

2. Which fund should I choose? ‘Ena Mina Maina Mo…’ remember the game that we played while at school? To choose a fund for a person who is not sure about his tenure, risk profile, and EQ among an alphabetic soup of small cap, large cap, value, growth, contrarian, foreign, index, index plus, aggressive value,…..relax the IFA is as confident as your 3 year old daughter. If he sounds confident, he is acting well. If he is right, chances are you will not remember.

So what should an IFA do? Simple short list 8 and ask him to pick 3

3. Is this the best fund to invest? well that is a Myth that an IFA can (should) pick the best performing fund. Yes we can put some parameters and some calculators, but the experts too are shooting in the dark.

4. Should I buy gold for my daughter’s marriage? (this is a loaded question which your male clients are going to use when they are fighting with their wives). This can be seen as an asset allocation question or a philosophical question. To me the answer is “buy gold for consumption” not for investing. Having said that, many clients continue to hold gold as an investment. Use excel and  IRR over various periods of time and vis-a-vis the US $ and you may have an interesting chart to talk about.

5. Which school / college should my daughter join?

6.  I am quitting job R to join job H – should I do that?

It is up to an IFA to decide how he should he be treated  – like a family doctor who gets invited to all family functions or like the guy who takes the waste paper away. Both are necessary, and very critical, but you know that a doc chooses his clients, but…