The second article in the "In My View" series. Please feel free to leave a comment.

1. What to look for in an Investment Advisor – In My View
I have been involved with investing, directly or indirectly, for nearly ten years now and something I
have noticed during this time is how much investors depend on their investment advisor. Not all
investors are finance savvy, many do not have the time to sit and study the vast amount of
information that is available and many leave their hard earned money at the “mercy” of their
investment advisor.
Many have asked me, over the years, how to find a good investment advisor, whether the Stock
Exchange has a “rating” system for them and about how they get information about listed
companies and securities.
Everyone realizes their mistakes a little too late. Investors find that they have not kept in touch with
their investment advisor or with what is happening in the market, only when their portfolio value is
plummeting rapidly.
While a vast literature is available out there, which will help investors, both existing and potential,
about how to find a good investment advisor; I would recommend the following five points to keep a
look out for, when searching for an investment advisor.
Qualifications
Personally, I do not think that they need to carry a degree from a particular field or from a particular
university but DO need to be properly licensed to carry out the functions of an investment advisor
from the proper regulatory authority.If investors cannot determine whether they are properly
licensed, it is important to ask about it rather than being silent about it.
It is also good if they have a degree or even masters’ in their area of study but the license is
ESSENTIAL. The regulatory authority, which issues the license, specifies the requirements that they
need to meet including the continuous professional developments that they need to undertake
while they practice as an investment advisor.
Experience
Experience matters, especially in the field of investing. Practical knowledge is paramount together
with the theoretical knowledge. Hence, it is good if they have been “around” the industry for some
time. I am not sure of the time frame of experience (whether the investment advisor should have
five or ten years of experience) but definitely choose someone with a “sufficient” level of experience
rather than someone who is just starting their career.
The investor can be better “guided” if the investment advisor has been “around” as they have been
involved with the cycles, developments and other changes that are usually associated with investing.
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2. Knows what is happening
It is important that the investment advisor know “what is happening around” as almost anything and
everything can affect investment. This varies from issues such as political, economic, social and
technological to individual company performances. It is important to know that he/she is on “top of
things” as it may be a situation that needs decision making very quickly.
Many a times, information that comes to the market needs to be understood and dealt with quickly
(before it becomes yesterday’s news) as it can have a direct impact on the clients’ investment. It
could be that the investment needs to be sold off fast or the amount invested can be increased to
profit from an opportunity emerged.
Understanding the client
It is essential that the investment advisor understands the client. I have come to the conclusion that
the successful achievement of the investment objectives has a positive relationship with the
investment advisors’ understanding of the client!
The investment advisor needs to understand the investment goals or objectives of the client, both
short term and long term, his willingness and ability to take risks and other issues such as taxes.
Some clients may have special preferences, maybe due to their cultural or religious outlook. As such,
it is important to understand the client thoroughly before the actual investing happens.
Communication
It is important that the investment advisor and the client maintain an open dialogue. Open
communication is needed if both (the client and the investment advisor) are to achieve their
objectives. It is advisable that the investment objectives or goals are reviewed, at least once a year,
and the changes, if any, be clearly communicated.
Communication, which can be in any form such as email, text messages etc., should be initiated by
both parties. For example, the investment advisor needs to communicate about important
information, such as performance of particular companies or the impact of a macroeconomic factor
such as taxes. The investor needs to be vigilant and ask about new products that come into the
market or how his/her portfolio can be rebalanced to take advantage of a tax reform.
Hope this helps!
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