I found myself on the opposite side of the desk last week requiring medical advice for a minor surgical procedure.  The doctor discussed the procedure with me detailing exactly what was required and a week later I was booked into hospital.  The admitting sister asked me to write down in my own words what the doctor was going to do.  I then realized how important it is to record the expectations of the client and to make sure the solution matches the expectation and understanding of the client.

In the investment world this is called a mandate.  The mandate determines the composition of the underlying fund and dictates the relative benchmark for measuring performance.  A mandate should also detail the relevant risk based on a time horizon for achieving target returns.  The mandate should be specific you would not describe the removal of an appendix as “remove one of my organs”.  The mandate should also be realistic “make me look like Tom Cruise” is probably an early warning to a plastic surgeon that this patient is not going to be happy and the same applies to investment advice.

Many investment advisors and their clients neglect to establish a mandate and therefore run the risk of a breakdown in their relationship through poor communication and mis-understanding down the line.

A few weeks back I read an article in the Sunday Times about the discovery of diamonds in the rain forests of South America and how this had affected the forest Indians.  In a nut-shell the promise of great wealth and fortune brought only misery to these poor Indians.  I would like to close this week with a quote from a tribal leader “I used to think that money was good and that I wanted to be rich, but now I don’t.  A little bit might be good, but a lot is not.  It only brings problems and suffering, when what we really want is tranquility.”

Maybe it is a good idea to have a mandate in life detailing exactly what we want and expect and what we are prepared to offer in exchange.


Mark Williams
Mcomm, CFP®, HdipTax
T. 021-851 3746
Email. service@synfin.co.za



Establish a mandate with your advisor