Watch out…if RM is handling your money

Never Trust Your Relationship Manager Blindly

Hiring a wealth management firm is one of the most important decisions of your life. You are going to trust someone with all your life’s savings and investments. The last thing on your mind would be to fooled by the company or any of its representatives. Goal based financial planning and its periodic review and portfolio rebalancing are the core of wealth management practice and there must be a written commitment for such services. The Citibank fraud case may not be an isolated incident and there might be several such wealth management ‘professionals’ in the market ready to cheat you on the first opportunity they get. So be ready with your list of questionnaire when you meet any relationship manager next time.

Know What You Are Getting Into

When your relationship manager recommends some investment,ask for the details even if he says ‘trust me’.  It will be advisable to invest in an instrument which has a proven track record of several years. Many wealth management firms advise their HNI (high net worth individual) customers to invest into private equity funds and similar other avenues on pretext of higher returns. Get into such investments only if you are 100 per cent sure. Take all assurances in writing,howsoever your RM persuades you. Secondly,you must be aware that insurance policies give handsome commissions to its agents. This means that when next time your RM asks you to invest in an insurance product,you must know how much the company is earning through the commissions.

 The internet is full of information on pros and cons of various financial products. It will pay to doing a quick Google search and see if people have complained against the products that your relationship manager is recommending. Howsoever you are busy,read all the papers properly before you sign.

Need For Wealth Management Services

Zeroing on a financial planning firm is a difficult task. It is not at all necessary that a big bank or a large wealth management company would give you better services than a smaller one. Avoid being swayed by the advertising campaigns. It is easy to get influenced when a relationship manager from such a firm comes to you,neatly dressed in a suit and shows you a nice presentation and tells you about his fancy management degree. You must meet several wealth management firms before finalising one. Avoid saving too much money on the fee being charged by the wealth management firm. There are no free lunches and wealth management services come at a cost.

Finalising A Wealth Management Firm

When a RM from a bank or a wealth management firm approaches you,give proper time and listen to what the company has to say and what are they promising. The sales team of all financial institutions are under pressure to sell products. The appraisal and raise of a RM depends greatly on how many clients he/she makes for the company and how much business he/she generates from those clients. This sometimes leads to hard selling techniques where a manager is not ready to hear a ‘no’ from you and will do everything in his/her kitty to convince you to sign as a wealth management client. But do not forget that the emotions have no role to play when it comes to outsourcing wealth management services. Only sign an account payee cheque and write the beneficiary name yourself.

The best indicator of the service levels of the company is through referral. Ask for some referrals from the representative and take a feedback about the services from them.

What Should Be Your Approach

Ask the relationship manager about the back-end support his company provides,what are the working hours,when do they review your investments made through them and the frequency,will they provide a written financial strategy or not,what are the charges on each transaction and what is the annual fee,what are the disclosure norms of the company,do they disclose the commissions earned on the investment you make,and last but not the least do they focus on some specific products or on your overall financial objectives.

You must remember that it is important for you to meet other senior staff of the wealth management firm after you meet the RM. In this age of attrition,you may well find that the RM you were dealing with since last few months or years has switched to some other company. You will have to explain everything to the new RM who replaces him/her and the process can be quite painful.

Do not divulge more financial details to your RM than is mandatorily required. If he/she insists on some detail like net banking password or other bank account details,then be smart enough not to trust him/her and report this immediately to his/her organization.

It is important not to live in a world of some financial fantasy where you can expect astronomical returns from your investments. You are heading for trouble if you ask for more than normal returns in any asset class in which you decide to invest as then you are letting yourself to being manipulated by the wealth management firm. If you show your weakness for higher returns you may be tricked into such investments which will benefit only the wealth management firm.

It will pay to look at long term and not short term gains while making an investment strategy. There are no short cuts to making money unless you have some windfall gain.

ritukant.ojha@expressindia.com