When investing, it's a must to spend time analysing your short listed options. However, relatively few do this. And even fewer spend time analysing exactly how good or bad their advisor is.
An experienced advisor who has an immense urge to learn could provide you with the best possible risk adjusted returns.
Quick exercises to help you judge your advisor
Check if he promotes only one type of investment
A good advisor would be able to give you advice on equity mutual funds, debt, insurance, tax planning, etc. and not just plug one of these. If you don't see a mix of different asset classes, it's a red flag.
Ask why
When he advises you (on a certain equity fund, for example), ask him why he recommends it, and not another comparable scheme.
Discuss and debate
Talk to him about issues other than specific schemes. You could for example ask about his experiences in the field, the domestic and global economic scene, etc.
Quiz him
Ask questions about complex investment options like FMPs, Gold ETFs, Arbitrage funds, capital protection funds, etc.
These will give you a fair idea of his intentions and competence and you will be able to judge if your hard-earned money is in safe hands or not.
The future of the financial advisor
The field of investment advisory is set for a sea change. Investors are getting savvier, and will increasingly analyse and compare returns on investments going forward.
Most advisors today joined the profession when commissions ruled the day; and advisory -- well, what advisory? Thus incompetent and salesmen/ distributor type advisors may find themselves out of a job in the next five years.
Take a look at what happened in the UK.
In 1995, there were three lakh financial advisors in Great Britain. Today only 4,400 thrive. I foresee that only 30% of Indian advisors will adapt and survive in the new environment. The sad part is that many financial advisors are in denial, and just don't want to deal with the change.
What to look for in your advisor: The future
Does he offer any value apart from the products that he sells?
Soon investors will start seeking education from advisors. Advisors will be questioned for any underperformance of their recommendations. Investors will seek valid reasoning before issuing cheques.
Just sending forms across and collecting them back promptly is not value addition. Sound advice is. People will no longer put up with wrong investment.
Is he really indispensable?
What is the advisor doing in addition to what can commonly be had elsewhere? Is he really a trustworthy advisor who is fully integrated into the fabric of financials?
Is he a genuine wealth manager?
These days, individuals and bank/ financial institutions who may be no different from mere salesmen, term themselves as 'wealth managers'. No wonder we hear and read of so many instances of people losing their hard earned money, because of wrong advise given due to the lure of higher commissions.
India by 2012: My vision
* Less than 30% of today's advisors will survive. * Charge for advice: Advisors will candidly ask clients what they come to him for - products or advise. Most will choose the latter. * Investors will value quality information. * Clients will wonder why financial advisors don't charge for their services. * Successful financial advisors will become increasingly immune to competition and commoditisation. The following true story is indicative of things to come: A financial advisor decided to reinvent himself as a Wealth Manager. He spent Rs 50,000 on a stylish brochure that touted his newfound talents and presented it to a top client. After reading the brochure, the client told the advisor, "You don't do any of this stuff." He then closed his account.
The author is Jaydeep Kashikar, Director, BrainPoint Investment Centre.
Check if he promotes only one type of investment 
