Minimum Ideal Practice of a Financial  Advisor – A 7 Point Checklist

I come across many Financial Advisors who seem to be constantly in search of and in pursuit of an ideal practice. They look at and compare themselves with other advisors in the fraternity to check if they are on the right track and if if they are doing well. While this introspection is good for growth and to avoid becoming complacent, this should not take away one’s peace of mind.

For an Independent Advisor, there is no end to aspiration and no end to perfection. This may lead to unrest and impacts quality of life. I think an advisor should first strive hard to reach a minimum ideal practice and then on try to grow constantly but with a proper work-life balance.

Based on my observation of advisors in India and worldwide, here is an attempt to lay down some points which I would like to call as “Minimum Ideal Practice” of an Independent Financial Advisor in the Indian scenario. Those of you have already reached this level, this framework might help you to relax, pat your back and know that you are on the right path. Those of you who are yet to reach these levels, this framework will actually help you to set your professional goals and achieve them in the next few years.

I will try and keep the points short and will try to write separate articles on each of the points in the coming future. So here is the 7-point checklist of a Minimum Ideal Practice;

1) Income Level

An IFA is both a professional & an entrepreneur. You deserve a good income for your expertise, your hard work and for the risks you have taken to be on your own & set up your practice. I think a good IFA with 5 years plus experience should be earning no less than 6-12 lakhs p.a after all practice related expenses. The figures will vary widely within the range based on your location of practice, your background and your own capability. This kind of income will put you in the slightly upper middle class bracket which a professional truly deserves. A healthy net income growth of 10-20 percent from hereon is good. But this is a figure which each and every IFA should aspire to surpass irrespective of if this income is coming from commissions or fees or a combination.

2) Number of Clients

An IFA should try to service a minimum of 50-100 clients/families. The number will vary widely based on category of clients, your own efficiency, technology used and range of products/solutions which you are providing. I think anything less than 50 families; an advisor is not creating a social impact which is expected from a professional. One can acquire this kind of a clientele in 3-5 years of starting the practice. Getting the initial 25-50 clients is always a challenge and will require an advisor to try out different ways of client acquisition including reaching out to natural market, then on you will have enough referrals to grow your practice year on year.

3) Working Hours

Many good advisors are working long hours and during weekends with no dedicated time for family and self. After all they have achieved success with such kind of hard work. While it is agreeable to have a 50-60 hours’ workweek in your startup phase of 3-5 years. This is not a healthy practice to maintain a good work-life balance. The ideal workweek for most knowledge workers is around 40 hours with at least 1 fixed day off in a week which preferably is a Sunday. It takes a little bit of communication, nerve and disciplining your clients not to disturb you beyond work hours and on holidays.

4) Office Space

A separate office space will draw a line between your personal life and working life. Working from home is good while getting started to keep the costs low and minimize initial investments. But one should aim to have an office space once your income grows and can afford one.  Even a 100 sq ft office in a not so upmarket locality is good enough. Now there are also many co-working office space facilities available ranging from 5-10 K per seat per month. Even this is great idea to get started with. An office also helps you to invite your clients and prospects for meetings and also hire team members.

5) Team Members

Having at least 2 teammates to help you with your practice can bring in unimagined benefits. One who is like a Para planner and can help you with collating and analyzing data and also be a second touchpoint for client interactions. And another staff to handle back office, operations, administration of office. Both can be low cost resources. How much ever technology you use, you can figure out utilizing these 2 resources for further efficiency and growth of your practice. Also having a team ensures, you are not left to work in isolation and have someone to talk to / share your ideas.

6) Qualification

Many advisors proudly mention in their profiles being AMFI / IRDA qualified. I think there is nothing much to be proud about them. Both hardly require any rigorous education or examination. It’s true that in this field, qualification is not a critical factor for success, still a good domain specific professional certification will give confidence/build trust in your prospects/clients, gives knowledge to do your duties in a better way and boosts your self-confidence. I think currently good professional certifications in India are CFP and CWM. Although they fall short of actual knowledge required to set-up and run an independent practice successfully, they have a comprehensive curriculum, robust examination system and are better amongst the lot.

7) Professional Identity

This one is ultimate test. I think an advisor should strive to live with dignity and command respect amongst his/her clients and social circle. What we think we are; might not be what others think we are. Here is a simple test. If your clients were asked to describe you, how might they describe you (a) as an agent/ distributor/ broker or (b) as an advisor/ professional/ consultant. Whatever is your practice model, adopting a client first approach, being ethical, having right qualifications and a regular perception building communication can help you create a desired perception about you in the long run.

I want to reiterate the point I mentioned in the beginning, there is no end to aspiration and to perfection. Things I have mentioned in the above 7-point checklist are kind of the mental benchmark for an independent advisor to aim for and be at peace after attaining them. And then keep growing constantly, organically and without compromising on other aspects of life; like family, health, hobbies and strive to lead a life wherein you become an inspiration for your clients.

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