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 professional in Mumbai or in other cities as well can be a daunting task for most people. When you’re looking for an investment professional, 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 investment professional in India for you and your family:
- Knowledge and Experience: At a very fundamental level, you want a professional 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 should do. But what you ideally want is an professional 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 investment 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 professional you choose – Mutual Funds, PMS, AIFs, Bonds, Term Insurance and Health Insurance. A combination of the above will serve most customer needs.
- Integrity and reputation: In matters of money, trust is invaluable. Before identifying your distributor or 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 an investment professional 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 / charges: Remember that financial advice does not come free. Whether you choose a SEBI Registered Investment Advisor or an AMFI Registered Mutual Fund Distributor, there will be a cost / charge for the service they provide. There are two types of fee structures prevailing in India for mutual fund investments.
- Commission Based: This is the more popular practice wherein the customer does not pay any fees directly to the investment professional. Instead the AMFI-registered Mutual Fund Distributor gets a commission for the products he sells from the company whose product it is (AMCs). Keep in mind that in this case, mutual fund investments are made in Regular Plans which have a higher expense ratio as compared to Direct Plans. The commission is usually a percentage of the size of the investment portfolio, and therefore goes up or down in proportion to the growth of the portfolio. To that extent, this form of charge is directly linked to the performance of the portfolio.
- Non-commission based: SEBI Registered Financial Advisors or RIAs charge a fee which is payable by the investor. Sit with your financial advisor and discuss the fee structure before investing.
Get more such information and regular updates on Pagdiwala Investments.
Rohin Pagdiwala
Founder – Pagdiwala Investments, Mumbai
AMFI Registered Financial Distributor ARN 186203
9004231834