Information Sharing With Advisors

Asset Class is a often used word in finance, especially investment & portfolio management. We also used the term many times in our articles. In this article a take a academic look at the various asset classes.

Information sharing and transparency with advisors is a touchy matter. Often the investors are not very sure of the level of transparency and openness to keep with their advisors.

The following are the likely questions in the minds of any investor…

• How much information should I share?
• When should I share the information?
• In what way should I share the information?
• With how many advisors should I share the same information?

The question of information sharing with any particular advisor can be answered by adopting the following 3 step approach where decisions would need to be undertaken in an environment of openness and mutual trust…

• Scope of advisory: Clearly define the scope of our relationship with the advisor and match your expectations with services / solutions/ products provided by the advisor.
• Scope of information: Ask your advisor of the required scope / nature of information to be provided in order to make proper recommendations / plans to you. In case you feel unsure of any information asked from you, feel free to ask your advisor for the reason why such information is needed and/or how it will be used by him.
• Information sharing practices: Finalise the methodology, format and frequency of information sharing to be done. You may also ask the advisor as to how he plans to record / document the information provided and the confidentiality practices that he would undertake to safeguard same.

Need to share information:
There exists a strong reason for fair & full disclosures to be made to the ‘right financial advisor’. The reason is to get comprehensive, proper and timely advice from your financial advisor. Often, in absence appropriate information, you are likely to get wrong advice or no advice at all, which may be more harmful to you. Acting secretive and unwillingness to share information asked by advisors can often also discourage your advisors to work hard for you. After few attempts, they may even stop asking for information that is necessary for the advice that they give. This can potentially become a self-defeating cause to you and you may end up incurring unforeseen monetary losses or opportunity costs. As a principle thus, we should try to be transparent with financial advisors, just like you are with your doctors and lawyers.

Apart from sharing information from your end, your advisor also has certain responsibilities regarding your information. These responsibilities are largely about keeping information confidential and safe, making sure that the information is not used for any other purpose. You should refrain from sharing important information in case you feel that these responsibilities would be compromised upon.

The following can be the scope of information, both present & future, that you may provide to your financial advisors, subject to scope of advice. For comprehensive financial planning, all of the following data would be important to be shared

• Financial goals
• Financial situation, including assets, liabilities
• Earnings & expenses
• Information that can have financial impact. Consider special cases related to health, marital status, family planning, etc.
• Above details for spouse, as well

Confidential data:
Apart from taking of the data that you should share with financial advisors, there also exists some information that you should not share with anyone, except say your spouse. Such highly confidential information would be related to your bank accounts, trading accounts, etc. where financial transactions can be executed. Further more sensitive details of your bank accounts, credit card, debit card, is also something that has to be kept confidential since, there is a risk that it can be misused. Next in line is login details / subscriptions of online accounts / finance portals where you are likely to store your financial / investment portfolio information. Lastly, with growing appeal and usage of social media, access details of online social media portals can also be treated as confidential since it is likely to contain all your personal information.

In brief:
Data or information is the basic element on which the foundation of any financial plan or decision is made. Sharing such information openly with your trusted advisor is important. Also important is the respect to confidentiality on part of the advisor. Strong mutual trust, understanding and transparency are the ingredients for a successfully relationship.