17 December 2010

Are Financial Advisers listening to their customers?

As study by EDHEC as reported by the Financial News "revealed that when portfolios are designed for clients, private bankers take market factors into account more frequently than client requirements". In our opinion this distracts attention from the real problem that exists in the relationship between investors and their financial advisers. We mean the insufficient ability to measure the performance that is produced by the investment firm. Of course it is important to attend to the customer's wishes but this should not become a convenient smokescreen to excuse poor investment performance. For example, who can blame the portfolio manager for doing a bad job when the customer asked him to be 'careful'? Clearly stated performance benchmarks that are easy to monitor should be the essential building bloc for any investment mandate and all other aspects of the advisory relationship should be arranged around this cornerstone.