Management Advisor - Know Your Client

The contribution of the external advisors in supporting companies (on business or organizational issues) is open to a continuous dispute. As a professional in that area I would like to contribute to that discussion with the following argument; advisors need to know more about their client.

In the financial world the external advisor is kept to an increasing set of guidelines. Since the problems on the stock-exchange in the beginning of this new century, financial authorities have set out new rules for banks and commissioners and other agents that advise private clients on financial matters. The most important rule is the introduction of client profiles. Such a profile communicates the risk-attitude of the client in the investment process. In this way both the client and the bank (advisor) are aware of the risk that is acceptable. This is a strong management guideline.

Both the bank advisor and the business advisor have a stake in the advice. Banks are said to issue too much BUY advices, whereas business advisors too much dwell on the advice to change things in the business. A change in business is like a financial BUY; it will cost money and the advisor will profit from it.

"Clients are not interested that you tell them not to buy," is what you hear financial advisors say. It is true. Buying gives hope and expectations. You are in the game and you get excited.

Another argument is that financial advisors should invest for themselves. If not, "how can they be ever good advisors?" This is another argument but there is only a small fundament for it. You could equally argue that if this is true you are facing the risk that you enter a pyramid game. You can better trust the advisor if he is neutral (and not involved). This is why there are Chinese walls; the investment side of the bank and the retail side are not connected.

Neutrality is the best position for the business or management advisor too. If you are selling a package and you advise others to buy it they should at least know that the advice is biased.

Where business advisors can increase their professionalism is in knowing the client's business and organization. The financial advising industry has past this point, as explained previously: they know the risk profile of the client.

Advisors in business still have a way to go in this sense. There are often two camps. There are those advisors that know everything about (the) business. They have specialized on Logistics or Client Relationship Management. Others are perfectly knowledgeable about the organization, about culture or human resources. The first is the "hard" side, the second the more "softer" side.

If you are hiring a specialist than this shouldn't matter, the specialist can serve in any area in the company. Advisors on the other hand should know or understand "the company." This is more than a set of specializations. It is about understanding what they add up to. You might imagine that the business owner knows the business well enough. The contribution of the advisor is to explain where business and organization meet in case of a change (when BUY-ing a new instrument).

When it comes to the advise on a new investment the clients' profile is important. Different companies will require different solutions on a similar problem. What served one company doesn't necessarily suits another.
Financial advisors know the risk profile of their client. Management advisors should know about this (risk) profile too. And that is more than (knowing) the manager that hired you.

© 2007 Hans Bool

Duplex Hp printers all in one security system