With an ever increasing array of investment options, it may be wiser now than ever before for people to consider hiring a professional financial advisor. Commonly understood investment options like FDs, RDs, land, Gold and real estate which were once the mainstay of investing in India are fast being replaced by Equity, Bonds, PMS, Alternates, and the like. Understanding of these newer options is limited which therefore brings forth the need to get professional guidance. In this article, we will dig deep into the top 5 tips for choosing a financial advisor in India.
Choosing a financial advisor in Mumbai or in other cities as well can be a daunting task for most people. When you’re looking for a financial planner, you want someone who’s got your back, someone who can help you understand the landscape of wealth management and make the right decisions for your future on an ongoing basis. While you may have started looking for one because you have a specific requirement at this point, remember that these requirements will change with your lifestage and goals. So choose an advisor who can handle a wide spectrum of investments and who is likely to remain by your side for a long time.
Here are the top 5 tips for choosing a financial advisor in India for you and your family:
- Knowledge and Experience: At a very fundamental level, you want an advisor because you expect him to know more than you. So remember to check for credentials in the form of certifications, training and experience. From a certification perspective, a SEBI registered RIA or an AMFI registered Distributor will do. But what you ideally want is an advisor who has seen at least 2-3 market cycles spanning over 15 years or more. Check for his total experience in financial markets. Any experience working with Mutual Funds/AMCs, Banks or large Financial Distributors is invaluable and a big advantage.
- Range of products and services: Your financial requirements will change from time to time as your income increases and your life-stage changes. You want your financial advisor to be able to offer a wide range of investment products that suit these requirements as changing your advisor later can be very cumbersome. Look for the following products from any advisor you choose – Mutual Funds, PMS, AIFs, Listed Bonds, Term Insurance, Health Insurance and possibly direct equity. A combination of the above will serve most customer needs.
- Integrity and reputation: In matters of money, trust is invaluable. Before identifying your advisor, do a reference check both online and offline. Ask for references if you can’t find any online. Or even check for Google reviews!
- Digital quotient: With the ever increasing usage of technology in investments, it is foolhardy to find a financial planner who is not digitally savvy. Check for tools and systems that make it easier for you to invest and track your portfolio 24/7, digitally and remotely.
- Check the fee structure: Remember that financial advice does not come free. A good financial planner will charge a fee for his services. There are two types of fee structures prevailing in India today.
- Commission Based: This is the more popular practice wherein the customer does not pay any fees directly to the financial advisor/distributor. Instead the advisor gets a commission for the products he sells from the company who’s product it is. The fee is usually directly linked to the size of the investment and increases or decreases as the investment value changes. To that extent, this form of fee is directly proportional to the performance of the portfolio.
- Non-commission based: Some financial planners charge a flat fee, while some might charge a fee based on a percentage of the assets they are managing. Sit with your financial planner and discuss the fee structure. Financial planners could charge you anything between Rs 10,000 to Rs 100,000 per year for their services. However because this is a flat fee, there is a risk of lack of attention from the advisor once the initial investments are made.
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Founder – Pagdiwala Investments
AMFI Registered Financial Distributor, Mumbai