Investment corpus:
The first step an investment firm analyzes to understand if you are a HNI (High Net worth Individual) or not, is by evaluating your investment corpus. If you have assets worth Rs.10lakh – Rs25lakh then you may not be nominated as HNI. However, if your corpus is well over Rs50 lakh – Rs1 crore, and have the potential to increase your investments to Rs5 crore, you may well be considered as a HNI.
Experience:
Analyze the investment firm not on the basis of number of clients they cater to but on how well they manage risks and take good care of your savings. It is very important to do a background check on the credibility of such firms to know their debt standing. Try learning about the kind of solutions that the investment firm in question has managed to provide and how far have they been successful.
Tailor made solutions:
Wealth management is not based on stringent policies which are likely to be same for all individuals of varying corpus sizes. The decision regarding the same should be made on personal requirements. For example, there are individuals who wish to grow their corpus and have a good risk appetite, whereas there are some investors who do not have a huge risk appetite and are willing to be long term investors without taking any major risk. Also, depending on the kind of profession you are into your investment requirements can vary.
Investment products:
As a prudent investor, you must know that one must not put all their eggs in one basket. Investing all your earnings in one asset is quite harmful. Your goal is not to buy debts like loans, personal loan etc to fulfill your financial requirements. So ensure that the particular investment firm you are planning to opt for have solution specific products and cater to each individual’s needs differently. Investing your funds in assets like mutual funds, insurance products etc, across various asset classes. Also make sure that your fund manager has good tie ups so that you can get the best solutions regarding private equity funds selection by different fund providers and not from only one source. Limited options for insurance services for yourself should not be the course; the fund manager should be able to give you a wide variety to choose from.
Services:
Apart from the investment solutions, you as a HNI should be receiving services and advice on issues like taxation, legal advice, family or trust related issues. A desired wealth manager will be the one who can provide in-house services or at least have tie ups with such service providers who are the best in their respective fields. Also, it is important for you to ensure that the adviser doesn’t have any rights on the securities owned and is only buying (transacting) on behalf of the client.
Performance:
Like how you check the performance of a particular fund before you invest, it is more important for you to analyze your wealth advisor’s performance. It is not the performance of the funds that your advisor suggests but the effectiveness and the wealth creation solutions that your financial planner is providing you will help make a major difference to your portfolio’s returns.
Charges:
Mostly, the charges you are likely to face are an advisory fee which is about 2% of the overall corpus at the time you sign up and a separate product linked fee which is a percentage amount fixed by your fund provider. In order to increase your effective returns, especially if you are an investor in mass regulated products, any type of distribution commission; if they exist; is not a substantial amount. Sources say that SEBI is preparing a conceptual paper wherein regulation on wealth advisors pertaining to separating advising and execution and rationalizing distributor fees. However, it might take some time before this can come into effect
Quality of the firm:
Knowing the incentive structure and the longevity of the employees is also another factor by which you can judge the quality of the firm. Knowing what type of incentive structure they follow also determines the level of risk you may need to assume. For example, if an adviser’s incentive structure is such that it encourages him/her to sell more equity products, you may be saddled with an undesirable amount of risk. But if your adviser’s incentive is linked to achieving return objectives as per your financial plan, then you can be at ease with the products presented to you.