Several of my adviser friends contacted me after reading my previous column. They belong to the category of advisers, who are struggling to be identified and differentiated. They have a business that is not too big, but brings them and their clients, great satisfaction. They represent the unique optimism this country holds in its numerous small entrepreneurs.
They continue to earn their commissions from producers, whose products they distribute, but cringe on being identified as distributors. How should one identify and deal with this class without dumping them as salesmen? First, these advisers are compliant with the know your distributor (KYD) norms of the Association of Mutual Funds of India ( Amfi), and have obtained their EUIN, the new number that enables identifying a distributor with a sale. They will not pass back the commissions since they believe they have earned these.
They will also have a clean business structure that may be a sole proprietorship, but pays tax and is compliant. They may not have the finances and capability to record each transaction, keep records for several years, or have an internal audit that approves all their vouchers, but if you speak to them about their work, you will realise that they are serious about their profession and are in it for the long term.
They invest in themselves and ensure a longterm orientation for their business before persuading their investors to seek a similar orientation. Second, they will make a factual case for the products they bring to you. Instead of leaning only on literature provided by manufacturers, they will conduct their own research.
The quality and intensity of research may vary, but they will know the product's basics, they will be able to tell you how it works in rising and falling markets, the return you can expect, and the risks you may have to bear. They will explain what you should expect from the product, without getting into the generalities about why equity is always good and how the fund manager is the best among his peers.
Interacting with them will be a learning experience for you, and over time, they will help you pitch your expectations realistically. Third, they will be willing to provide you the information you need. Before they come to meet you, they would have done their homework. If you want to know about the short-term debt fund with the lowest expense ratio and exit load, they will be able to give you a precise answer.
They will be able to compare, provide alternatives, and help you see the choices you have and how you can exercise them. If you ask them questions on technicalities, which may require expert interpretation, they will not pose as knowledgeable, but will promise to return to you after consultations, and keep the promise.
They will always support the information they provide with data. Fourth, they will complete your paperwork meticulously and without error. While you may still sign only the forms and cheques, they will provide you with correct and complete information required for your taxation, report your portfolio's performance periodically, and enable you to keep tabs on your investments easily.
They may not have the sophisticated systems to generate fancy reports, but they will be able to provide you with accurate and neat information that you may require. Why should investors deal with such people, who are distributors and earn commissions? Investors need to understand that the advisory profession is in transition, and labels may mean much, yet.
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