how to choose financial advisor

Financial advisors suggest you how to best save, invest, and grow your money. Anyone including mutual fund distributors, stock brokers, and insurance agents can claim to be a financial planner, but doing so doesn’t make them good financial planners. While professional qualification such as SEBI RIA certified is a good sign, even those who have the license may be short on skills and credibility. Even the past performance isn’t a credible predictor of future results.

That’s why we suggest you look for a fit when choosing financial advisor – you don’t choose your financial advisor, financial advisor chooses you. We suggest looking for a mix of professional certification and personal attribute when deciding the fit.

Professional Qualification:

There are several licenses and certifications that an advisor can have, but the following are considered gold standards in India:

  • AMFI Registered Mutual Fund Advisors: In order to promote best practices and ethical standards in the business of sale of Mutual Fund schemes, AMFI has formulated broad guidelines and norms including a code of conduct for the intermediaries, which is applicable to these advisors. These code of conduct and best practices ensure high standards of services.
  • SEBI Registered Investment Advisor (RIA): In 2013, Market Regulator, Securities and Exchange Board of India (SEBI) felt the need of segregating distribution and advice. SEBI come out with Investment Advisers Regulations. The RIA registered with SEBI is compensated only through the fee paid by the investor. This ensures that the RIA protects the interest of the investors.
  • CFP (FPSB): Certified Financial Planner Certification is granted to individuals who meet the stringent standards of education, examination, experience and ethics set by FPSB India. FPSB India is the principal licensing body that awards CFP Certifications in India through an agreement with FPSB. The CFP (Certified Financial Planner) is generally considered the gold standard in the industry. Advisors must have several years of experience, take an extensive course and pass a six-hour exam to become a CFP. Once certified they must complete continuing education and are held to strict ethical standards.

Personal Attributes:

  • Your comfort to share personal information

You need to trust your advisor. It’s an intimate relationship and much like a lawyer, your financial advisor will know your most personal details. As advisors have different styles and philosophies, look for one with whom you are comfortable to share personal details.

  • Seek a referral from friends and family

Ask your friends and family to suggest you a financial advisor. The fact that they are so happy with their advisor that they have referred is a good sign that he or she will do a good job.

  • Track record

While you can’t be certain of excellence with just past records, it’s surely a good sign. Moreover, you should always check the background. I will suggest that always ask these two questions: Have you ever been convicted of a crime? Has any regulatory body or investment-industry group ever put you under investigation, even if you weren’t found guilty or responsible?

  • Experience

How long has the advisor been in practice? While certification is important, advisors need to also have the experience in dealing with real-life financial situations.

  • Specialisation

Some financial planners specialise in retirees, sports stars, or estate planning. It’s a good idea to ask about specialisation and references of current clients whose goals and finances match yours.

  • Avoid market-beating braggers

As the stock market is doing good currently, there will be a lot of advisors promising high returns and even predict market-beating performance for your portfolio. That’s not a good sign. No one can rationally make such promised, and anyone who’s trying may be taking risks that you don’t want to take.  

  • You will know when you get there

While the statement is definitely poetic, your fit with an advisor is a sort of magical. When you will have conversations with right advisor, things will click. You will get sound, rational advice across a range of issues, not just investment. You will feel comfortable sharing with this person. Instead of market-beating brags, you will end up discussing risk you want to take, your investment horizon, and decently optimistic assurance to achieve your financial goals.

Good luck with your search! I am sure if you follow these tips, you will get what you looking for 🙂


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