Sophia Kafui Teye’s thoughts …Choosing an investment service provider

Photo: Sophia Kafui Teye is the author of the following books: Start Right: A Guide to Financial Investments in Ghana, and other books

For sustainable wealth creation, investment is your surest bet. An investor would get the best of their investments when they establish their investment objectives, choose investments options based on their risk tolerance, investment time horizon and most importantly, choosing to invest with the right investment service provider.

A right investment service provider is any player in the financial services industry with the requisite license to manage your investment. They often have products that the investing public can buy into in order create wealth. Typically, when it comes to investments, licensed fund managers have licensed collective investments scheme like unit trusts and mutual funds on sale to the investing public.

They may also manage funds for clients who prefer that an investment portfolio be designed for them to meet their unique investments objectives. Investor can buy into these products to create wealth for themselves or towards their retirement.  It is essential for investors to be wary of who manages their investments. If you keep your fish with a cat to keep safely for you, then you might as well eat your own fish. This article would discuss extensively on how to choose a good investment service provider.

Remember investments are like seeds; they grow when exposed to the right amount of moisture, sunlight, essential soil nutrients, and a bit of pest and weed control. Likewise, your investments are safe only with the right investment service provider. An investment firm can be considered right or safe on a case by case basis.

Some key factors such as their legal mandate (right standing with the regulator) should be the first checklist. Other factors include but are not limited to whether or not they practice good corporate governance, their professional competence, their compliance with regulations governing their work, availability of professional insurance cover, among others. Do they have the information and communication technology resources to keep good records, etc.?

Deal with only licensed firms

Investing with a non-licensed firm is a non-starter. It is the license that gives the firm the right to practice as a firm and give them the mandate to work within some legal remit. If you take your money to a company that is not licensed, you are actually giving a gun to a baby for safe keeping.

Though the child may know how to handle a gun by virtue of exposure or experience, per the law, you are acting infantile. A lot of things have happened in our developing investment market where people have lost their investments to unlicensed firms without remedy. Remedy only comes when there is an intervention from a regulator.

Professional competence

Professional competence deals with how capable a firm is in performing its professional mandate with skill of an acceptable quality. This implies that an investment service provider needs to be well resourced to deliver their mandate to clients. Clients should look out for experience (track record), the human resource capability of the firm in the area of research, investment management, risk and liquidity management, customer service delivery, etc. If these key ingredients are missing, then, you need to watch out.

Check for good corporate governance

Corporate governance guidelines provide that companies should be run in certain ways per best practice and regulation. Companies need to be responsible and accountable to their key stakeholders. It spells out how a fiduciary relationship between an agent and principal should be managed, reporting to key stakeholders, risk management, board composition, meeting, amongst others. When good corporate governance is practiced, the probability of losing your funds is minimal.

Cast your mind back to the financial and investment sector crisis that happened in Ghana. Most of the collapsed firms in one way or the other flouted good corporate governance principles. This implies that irrespective of the fact that the company you are investing with has great human resource with solid experience and expertise, if they are practicing bad corporate governance, you are likely to lose your investment.

How do you know a company is practicing good corporate governance?

A company that practices good corporate governance ensures transparency in their operations towards their clients. Does the company publish their financial results regularly as required by the regulator? For example, the law requires that mutual fund managers organize annual general meetings with their shareholders where the directors of the fund present the fund’s performance to clients. You can check on the website of your prospective fund management firm to see if such annual general meetings have been held and if their financial statements in years past have been published.

Furthermore, do they put in the necessary control and preventive mechanisms to discourage or prevent issues of conflict of interest? As a prospective client seeking to invest your hard-earned income with an investment entity, it is in your best interest to do due diligence to ensure that whichever firm you seek to invest with upholds good corporate governance practices.

Are there any records of infractions with regulators?

Investors need to check if their investment service provider is in good standing with their regulator. A company can only be in good standing if there are no records of regulatory infractions with their regulator.

To be able to know if they are in good standing, you can check if their license has been renewed after expiry, the number of times they have been fined, sending an email to the regulator to enquire of their status or officially writing to them. You can equally surf the website of the regulator to know of public notices that might be of interest to you. If an investor is bent on knowing the status of their investment service provider, they can always get the information.

A firm’s standing with a regulator changes based on the availability of information that might adversely affect their existence. Be a proactive investor and do yourself some good by making that enquiry now!

Do they have a professional insurance cover?

A professional insurance cover is a necessity for companies involved in financial intermediation and advisory services. It is the insurance policy cover that the financial institution takes to protect it against some risks associated with their work. As a proactive investor, you need to check if the company you are investing with has something like that in place.

Who are behind the company?

Every company has people in their top hierarchy who steer the affairs. Investing with a firm implies that you are lending the money to them for a period; hence, the need to enquire more about the professionals managing the funds in the firm. Most often, those behind a company reflect the result that the company delivers to its clients.

Usually, the directors and top-level managers are those to consider when deciding to invest with a particular entity. Are they credible professionals with the requisite educational backgrounds, or questionable characters who have a track record for mismanaging funds? Do they belong to any professional body that can sanction them if they act unprofessionally? Do they possess the requisite skills and expertise to manage your funds? Does the company have a solid team of investment professionals licensed by the Securities and Exchange Commission as investment representatives? You may not see the importance of getting answers to these questions until you lose your investment. If you find affirmative answers to the above question, then you can be rest assured that your money is in safe hands to some extent.

Information and Communication Technology Infrastructure

Just like every other industry, ICT infrastructure is key. It helps in data keeping and management of client records. Prospective clients need to know how robust the ICT infrastructure of the firm they are intending to invest with is. It is also essential to know how susceptible they are to hackers and other emerging ICT risks.


Just like choosing a life partner, a school and a business venture to invest in, you need to do that with thorough vigilance. You owe yourself that duty to ensure that you are entrusting your investment in the hands of the right investment management service provider. You need to choose with caution and do not hesitate to change your investment service provider if you see some red flags. There is a wealth of information available to assist you decide on where to take your investments. Do not invest only based on relationship with a customer service person there. Sentimental investments do not end well. Invest right! Choose the right investment service provider.

>>>Sophia Kafui Teye (BSc, MBA, GSE Cert. and CA Ghana (Student Member) is the author of the following books: Start Right: A Guide to Financial Investments in Ghana; Overcoming Infertility: What to do When Childbirth Delays; Contemporary Parenting; Stepping up Your Life. She can be reached on [email protected]

Disclaimer: Views expressed in this article are the personal views of the author and do not reflect the views of the organization she works for.


Leave a Reply