You will get risk-profiled, balance sheeted, budgeted and neatly put into a category. Seventy per cent of all clients end up in the conservative category, but that is another issue. An investment scheme that falls into your category is then explained to you and the adviser will write a proposal.
You are given a short amount of time to think about it before you get a call asking you nicely if you'd like to sign-up. In some cases, you are given zero contemplation time and will be asked to commit on the spot, once the laminated document lands softly in front of you. All the advisers in the country go through this process in one way or another. And, in many large institutions they call it a sales process.
A sales process is designed to produce behaviour that would not otherwise have occurred had the salesperson not intervened. For example - cash at the bank, or with a rival, is identified by the adviser and the client is then persuaded to engage in a series of interactions that result in them investing a defensive portfolio, say, rather than the cash.
An advice process looks a little different and is more usually initiated by the client. It is more ongoing, personalised and flexible. The difference lies in what the adviser does.
Those who sell cookie-cutter portfolios run by other people, (external fund managers), are likely to be paid bonuses linked to the dollar value of fresh clients they sign each year. Their job is to hunt new business, whisk people through the sequence and move on to the next deal.
Advisers who provide fully managed portfolios, (adviser constructs, watches, makes changes and selects shares for you), are almost sure to receive a nice annual percentage of the cumulative dollar value of their book, putting client retention up front rather than new sales exclusively. Do you see the difference? One aims to make you happy once and the other aims to keep you happy forever. Because that is how they get paid.
Does all this make any difference to you in the long run? Well, the sales guy in the large institution could be any new or old AFA and it probably does not matter - the investments are not run by him.
But the man offering the fully managed service needs closer scrutiny. Does he have a big, satisfied set of clients spanning decades in the business, extensive share broker experience, buys stocks for himself and is addicted to the markets? Or did he dispassionately sell other people's stuff for 30 years prior?
If I am fully managed, I know which one I would want keeping an eye on things.
#Caroline Ritchie is a former AFA, sharebroker & portfolio manager. She runs Investment Stuff, an investment coaching service. Visit her at investmentstuff.co.nz. Statements in this column are not financial advice.
