How do you choose your Unit Trust Consultant?
If you want to invest in unit trust scheme, foremost you must start to shop for the best
UTMC (unit trust management company) in town. Assume that you have done that part and
now you are left to find the best consultant/agent whom you can entrust to manage your
investment throughout your aspired investment period. How do you go about with this task?
Word-of-mouth is the best information sharing tool that can fast disseminate information from
one source to another. In the International Bestseller book 'The Tipping Point' authored
by Malcolm Gladwell, he mentioned that 'connectors' (people who goes around telling
about another person's meritocracy) were vital pillars in social circle that promotes social
epidermic. Likewise, if you want to pick the best consultant, start looking and start asking for
'connectors' around you!
Now, let me tell you how i manage funds of investors who have chosen me as their
intermediary.
Initially, throughout my first meeting with clients, i will extract among other things, the investors'
Risk temperament or their Risk tolerance profile. There are 2 ways i can do this task, namely
by letting them to answer the Risk Tolerance questionnaire or alternatively by allowing them to
narrate to me of their behavioural pattern in finance. I conduct this because i need to understand my
client's attitude and feelings towards market volatility, and from here to enable me to pick the
best asset allocation strategy. All potential investors should know that there is always a trade-off
to return in any investment. Riskier investment promises high reward, vice-versa.
Subsequently, while still in the first meeting, i will require my clients to determine their proposed
asset holding period or timeframe. By knowing how long they can part-away with their invested
money, i will choose the appropriate funds (asset).
For an example, if clients can part away their money for approximately 3 years, i will ignore
picking high volatility types of funds as these funds require longer gestation period. Money
market or income funds are of better option in this context.
Now, since i know my client's risk tolerance plus their asset holding period, i am now ready to
jump to my next task, i.e. to construct a simple 'Expected Rate of Return' table.
You have reached the end of Part One, please go to the next article -Part Two; to
discover how i construct a simple 'Expected Rate of Return' table for my clients.
