“Is Your Advisor Adding Value”
Dear Friends,
I have often wondered what is the role of an advisor!!
How would one judge the effectiveness of an Advisor?
- Is the Advisor to be judged only on the basis of “Alpha” returns that his
advice generates? - Is he to be chosen because his services are impeccable or he is good because
his back office systems are in place, etc etc?
I think that an Advisor’s role goes much deeper than the above. He is the one, who
helps you avoid an investment decision that would result in the wiping out of one’s
investment in totality or capital destruction!. More often than not, this aspect goes
unnoticed.
Can an advisor be right all the time? Obviously, not, but if one is able to avoid the
major mistakes, in my opinion, he is doing his job.
We at RSFS, took a stock check of the last few years and came out with some
interesting results:
1. Zero investment in National Spot Exchange: We correctly predicted and
advised our clients against investing in National Spot Exchange arbitrage
opportunities. Those who invested lost roughly 82% of their capital.
2. We had advised against investing in JM Mutual Fund Debt Schemes -Its
investors lost a substantial percentage of wealth in debt funds due to its high
concentrated exposure to one particular group, couple of years back.-Our
exposure: ZERO
3. Last week’s downgrading of ADAG Group Papers left all Reliance Mutual Fund
Debt Schemes in the negative. Our exposure to Reliance Mutual Fund Debt
Schemes is ZERO. We had liquidated all debt fund holdings a few months
back.
4. Couples of months back FMP’s of Kotak Mutual Fund & HDFC Mutual Fund
saw delayed redemption & partial redemption. Our exposure to these FMP’s is
ZERO as we were never convinced with such FMP’s and never advised to
invest in it.
5. UTI Banking & PSU Debt MF lost more than 6% in a single day last week–
our exposure ZERO.
We at RSFS, have constantly tried to avoid such pitfalls & have been fairly
successful so far. We shall keep endeavoring to provide value added services and
quality advice to all our customers in all times to come.
With warm regards,
Samrendra Tibarewalla, CFP CM
PS: You are the best manager of your money. Please take informed decisions only.
Disclaimer : The author in no way will be held responsible for losses incurred on the basis of above re
commendations. The investors are advised to take independent decisions after verifying all facts.
FAQ: Assessing the Value of Your Financial Advisor
Q1: How should the effectiveness of a financial advisor be judged?
The effectiveness of a financial advisor shouldn’t solely be measured by the “Alpha” returns generated from their advice. While performance is important, an advisor’s true value often lies in their ability to prevent capital destruction and avoid investments that could wipe out an investor’s portfolio. Quality service, robust back-office systems, and the advisor’s ability to sidestep major financial pitfalls are also crucial indicators of their value.
Q2: Can a financial advisor be right all the time?
No financial advisor can predict market movements with absolute certainty all the time. The key to a good advisor is not in never making a mistake, but in minimizing major errors that could significantly harm the investor’s capital. Successfully avoiding detrimental investments is a critical part of an advisor’s role.
Q3: What should an investor look for in a financial advisor?
Investors should seek advisors who demonstrate a comprehensive understanding of the market, prioritize the client’s financial well-being, and have a proven track record of avoiding investments that lead to significant losses. An advisor’s ability to provide personalized, quality advice and value-added services is essential.