Sadly there is no single course which could be said to prepare a person for being an IFA. I am assuming that a person should know the following:

Technical skills: Portfolio construction, reasonable portfolio management, fund performance analysis – at least enough to be able to read a detailed analysis, a little bit of macro economics, some micro economics, applied behavioral finance, client psychology, marketing, handling different software, calculating returns, IRR, xirr, npv, pv, fv, basic investment math, Income tax – as applicable to an individual at least – housing, capital gains, how to file an IT return, retirement, draw down during retirement, making a will, nomination, etc. etc. – this is just an indicative list.

Marketing and communication skills: ability to translate all that he knows to the client and help the client manage his money.

A good combination of the syllabus of the CFA, CA, CFP, and LLB is what is required. Currently all programs fall short. CFP covers some of these, but also falls short on the legal aspect, portfolio analysis portion, …etc. It is surely worth passing the CFP exams but holding the cfp charter (Rs. 5000 a year?) and the CFA (US $s – not sure of the amount) is surely questionable. So at least go and pass the exam. Membership is optional. Like I am now not a member of any of the accounting / secretarial institutes.

Having said that what are the things that a good IFA should know – lets see what can be taught and what has to be learnt. Let me start with a caveat ‘Experience cannot be taught’.

What cannot be taught, and has to be learnt:

Client Interaction and Sales: More books have been written about sales and motivation than even chess and golf, you can read all that, but client interaction and sales have to be learnt. Your kid should go and work in a nice, safe environment – book shop, children’s toys n clothes shop etc, right from the vacations of class 10th. Dealing with people is an amazing learning experience. Keeps ego well in check.

Clients rarely call you when the market is up: So you should call them and keep their expectations in check. Tell them that they got lucky. Tell them that they should take some happiness off the table and keep it in their head in a ‘happiness box’. They will need it soon. If appropriate take some money off the table. Take money off a rising midcap and put it in a fund with 70% debt and 30% equity. Do not bother about withdrawing from this in a down turn, but be happy that partial booking of profits.

In a down market hold the client’s hands and tell him/her that they do not need the money now, so a temporary dip will not hurt them, so they should stay invested. Retired people have one and only one thing to worry about. Will the money outlive them? How long will it last? are they living too lavishly or too conservatively? In a bull market making them withdraw is difficult and in a bear market making them stay invested is the challenge.

When a mutual fund you like sends out an amazingly stupid communication saying ‘you should be invested in a growth fund, a value fund, a mid cap fund, an elss, a balanced fund, a pension plan, a child plan’ – you need to say why that mail is stupid. That comes from a good knowledge base. The fund house is of course trying to sell, it is YOUR job to say ‘portfolio allocation’ is specific to an individual. Telling the client what is your role, the amc’s role, trustees role – etc. etc. is your job.

When you are planning to meet or in a meeting with a prospective client, you should ACCEPT that you are not just interviewing for managing that person’s risk and reward portfolio; you are also interviewing that client to see if he will make a good client.  Be upfront about this.  Some clients want to be “sold” , but most are looking for a trustworthy and competent professional.  Happy and successful relationships are built on mutually agreed upon expectations, transparency, understanding, conviction and reliability, on the part of the client and the adviser. No college tells you that.

hmmm…more to follow…