Yesterday I did a note about recruiting a relationship manager for a friend. Then I realized while talking to the candidate how different a relationship manager is compared to a financial adviser. There is a big difference. Here is my view…

Continuing with yesterday’s story…a 27 year old having to deal with 640 families looks so daunting to me. Each family has its own peculiar needs, worries, documentation, time of investing, risk profile,…and so many other challenges. How can one single human being handle so many variables beats me. This kid was intelligent, and was pursuing her CFA and had cleared level 2 and was appearing for her 3rd level. She wanted to be a product manager or a fund manager at a later date. She wanted to work with my friend as a RM to learn how to do financial advisory – realizing that in the bank she was not able to add much value to herself.

And she’s supposed to be doing financial advisory work for them all. Phew! She realizes (I am sure) that what she is doing is NOT FINANCIAL ADVISORY. Instead, she is taking a bunch of phone calls and the in-person meeting with people she hardly speaks with! She is handling a transmission of mutual fund for a client, opening a minor account for another and giving advice on which foreign medical cover to buy for a 73 year old travelling to the US! and none of these persons she really knows. She is checking off boxes and filling quotas. The clients don’t necessarily know her and all of them save her number as “relationship manager” not by her name!

And so they’re her “clients” – till she gets promoted, or transferred. Or she leaves of course! Once she leaves another person replaces her and he/she is called the “relationship manager”. Then the client and the RM will not meet again. Just not meet again.

This girl really wants to be a financial adviser and then become a fund manager, She realizes that being one out of 13000 RM she si not really unique, but she is enjoying the client interaction. I liked her attitude of saying “I wish to learn how to communicate about investment to the highly sophisticated customer investing Rs. 2 crores in a single transaction as well as to the school teacher who reluctantly started a sip for Rs 5000 a few years ago and now thanks me for her “success”.

When you read about big banks and brokerage houses recruiting MBA and CA to be doing financial advisory, they do not mean that you will do FA as it should be done. It is just upgrading the call center so that you can up sell more subtly and do bigger ticket sales.

A financial advisor is someone who talks to say 50 families (the more experienced ones) and becomes a part of the family and its finances. However, she speaks and engages with them on a far more regular basis. She is a resource allotted to them to make sure that the family meets its pre- decided goals. Of course she helps in the execution, but that is just a part of the work that she does.

When a Relationship Manager gets a call from the client saying “I need more dividends from my mutual fund” , a RM says “sir we have this balanced fund which gives 1% dividend every month, it is a great fund”. The financial adviser says “sir you really do not need current income now at your age of 51..we will be in the growth option as of now, and shift to a SWP at your age of 65…you DO NOT NEED THE CASH FLOW AT ALL…for the next 13 years”. That is the difference. Gotcha?

A financial adviser should normally not deal with a client who does not participate in the process and does not listen to the adviser. The RM has to just keep pushing products to the client. If the client does not bite, try another method especially if the client is leaving too much money in the savings account.

A financial adviser is either competent by training or experience or creates an array of service providing professionals who will be able to be able to talk to the client and help him with – taxes, debt, insurance, savings, esop, epf, ppf, other retirement plans, risk, expenses, children’s education, etc. An RM is not trained well enough in all these aspects. Even the clients do see them as product pushers, who may end up pushing their most valuable product. There is a huge conflict of interest, and it is well nigh impossible to bring this down.

An adviser presents a full picture financial plan and knows that it will get executed in whole. A product pusher may not understand the importance of the full plan and may allow the client to pick and choose. For example an adviser SHOULD insist that as soon as a loan is sanctioned the client SHOULD enhance his life insurance / critical illness cover. As soon as the loan is disbursed the policy should be in place. Delay of even a day could be expensive – and FOOLISHLY so. An RM may not understand that linkage.

Most importantly, the financial advisor knows the client, and is a stakeholder in the client’s outcome. There are ways in which the outcomes for the client and the adviser can be aligned. That does not happen for RM.