Many IFA have a very confused view on what role they play in a client’s life. Clearly, they do some investment management and a lot of investor management.

While they do not actual fund management, they do have a role to play in the clients asset allocation, time frame planning, expected returns, risk tolerance, etc.

When it comes to investor management it means that they have to REALLOCATE from equity to debt when he/she is near the goal. Asset allocation is NOT something that a fund house can do. It is the responsibility of the IFA and I can assure you it is very difficult. It means removing money from an asset class which could be booming. Clients may have already reached the target amount say 3 years in advance – which means the money has to move from equity to ultra short bond fund. Can you handle that?

The IFA has to handle creating GOAL BASED INVESTING portfolio. The IFA has to ensure that the client makes his will, his retirement plan and various ‘boxes’ of goal based investing pockets. No amc can do this. Amc may give you child plan, retirement plan, etc. HOWEVER it is the job of the IFA to create a child education plan – it may include 3/4 schemes or just one fund. Remember even solution funds are not target date funds. You have to still manage asset allocation near the happening of the event.

You have to help the client with asset allocation, portfolio construction, and risk management. Turn it a little and you realize it is emotional risk management which is a greater skill. Go do it. IFA has to sit with the client and discuss his/her goals, reasonableness of goals, expected returns (dynamic concept), need for certain amount of balance. Have the guts to tell the client that if he wants to buy a Jaguar XJ in 3 years time he has to do a sip of Rs. 3L per month for 3 years. If he invests Rs. 10,000 a month for 3 years he will be able to make a down payment for an Indigo. Facts are facts. Honest financial advice is about telling him how much he should save for this future needs. Investments tell him how much that investment can become. Saving is behavioral finance and and investing returns is a matter of chance, luck and economic situation.

While fund managers should be compared against benchmark, while IFA should be measured against only one benchmark – meeting goals without any sweat. Nothing else matters. Nowadays IFA talk a lot of jargon. One IFA tells me “I have done back testing in all fund scenario…”In India we will ALWAYS be able to withdraw 9% p.a. from a Balanced Advantage fund”. I wish to shoot all fund managers who have suggested such shit in their public posturing. Why 9%? why not 11%? Simply because nouw at this point in time 11% sounds wrong. Four years later if interest rates are 4% in PPF, this figure of 11% will look atrocious, right?

I could just go on and on…but I hope you get the draft..