What makes a good financial advisor

Lately, I have been giving free financial advice a few colleagues. I have noticed how eager I am to help them - equipped with my knowledge of a few basic ideas on diversification, inflation, cash flow and its valuation.

Doing this far too often, I can articulate very well these ideas. But investment theories is not the only thing I learnt at IIMA. I remember the lessons in slightly softer courses as well - which makes me resist the temptation of giving advice.

So I am now the financial advisor - who goes on ranting about possibilities - and doesn't deliver advice. I break down the problem at hand for the advisee (is that a word?) - and say - "think about it and take a call".

I wonder if the guys banks send when you want a loan, insurance or your friendly neighbourhood portfolio manager - only gave you 'analysis' - would you really be thankful ? Would such a behaviour result in loss of 'sales' .. because people want to hear - "this will make 20% return year on year" or .. "Unit linked plans are always best for you" ...

So who would you call a good financial advisor .. one who gives you assurance that your investment is going in the right direction .. or one who gives you all data and analysis and doesn't even tell you if you are making a right choice.

Because anyone who tries to do both - will have to end up using pretty confusing language like: "Diversified equity funds have traditionally done better than sectoral funds over any 5 year horizon between 1980-2000. Though past is not really a good measure of future - I would recommend that you put a significant portion of your savings flow into such a fund".