A financial advisor guides you to

  • Allocate assets in the most optimal way
  • Save and spend better, and grow your wealth
  • Achieve your short-term, medium-term and long-term financial goals.

There are many individuals, firms and companies that promise the best financial planning and investment advice. How do you choose the most appropriate one?

As per a study  conducted by the CFA Institute and Greenwich Associates in 2017, credentials, track record and fees were key factors that Indians looked for, in financial advisors.

Let us look at these and other important factors that  help one choose the best financial advisor –

 1) Qualifications and Experience

Look for a financial advisor qualified to be a financial planner. The minimum qualifications are –

  • Professional qualification in finance or a graduate or postgraduate degree in finance and registration as an investment adviser (RIA) with SEBI.
  • Certification in financial planning or investment advisory services from a reputed institution like National Institute of Securities Markets (NISM) or Financial Planning Standards Board India (FPSB).

Financial advisors with experience of working for numerous years across a range of financial planning services and with clients who have a similar profile as you might be a good fit for you. If you can get referrals and reviews from people similar to your age and financial profile, it will help you to decide better.

Trust and Comfort

The financial advisor will manage your hard-earned money. You entrust them to guide you in reaching your financial goals. It is crucial that you are comfortable with them managing your money and you can trust them to share information.

In the initial meetings, find out answers to these questions –

  • Does the financial advisor communicate well? If she puts you down, dismisses your views, questions and concerns, it might not be a great partnership.
  • Does the financial advisor ask relevant questions to put you at ease to share information? You should be able to build a comfortable rapport with the advisor to share financial information and related concerns.
  • Does the financial advisor put your needs first? This is crucial for achieving your goals.
  • Do they come for meetings on time and prepared?
  • Do they share all information while recommending products, and reporting returns. Their communication should be complete and transparent at all times.

If you are satisfied with answers to these queries, you may have found a trustworthy financial advisor. This should continue throughout the partnership. If there are concerns in any of the aspects, talk to them. Look for alternatives if concerns are not addressed.

Operating Model

Find out the modus operandi of the advisor. A competent advisor –

  • Prepares a comprehensive financial plan which is reviewed regularly based on changes in your life and external financial conditions.
    • Recommends suitable investment products and makes changes if they become unsuitable due to changing market conditions or your financial status.
    • Has a clear, concise and transparent communication style.
    • Sends updates and reports on performance regularly.
    • Aims to achieve optimum returns with an ethical approach.
    • Provides solid advice across all aspects of financial matters.
    • Understands your risk tolerance level and time horizon
    • Manages changes in markets and economy well.

    Understand their investment philosophy. The investment process should be well thought of and  disciplined. It cannot change on an ad hoc basis. At the same time, one standard investment strategy across all clients may not be optimum. Your investment strategy should cater to your needs and goals. Check how they calculate and compare returns. They cannot be inflated or deflated as you will not get a true picture of your finances.

    Fees

    Do not look at fees only as an expense. You are paying fees for improving your financial life just like you pay a doctor for consultation. At the same time, the financial advisor should provide you services with a value equivalent to fees. Understand the amount of time and the range of services that will be offered to you.

    Some professionals charge a percentage of the investment corpus. Others charge a flat fee and a percentage on the returns if they are above a certain level.

    Choose a financial planner based on your requirements, your budget and what works best for you.

    A competent financial advisor who has integrity and can provide impartial independent financial advice will steer you towards a bright financial future.

    Vidya Kumar

    Dilzer Consultants Pvt Ltd

    ^1 – Source: https://nextgentrust.cfainstitute.org/wp-content/uploads/2018/03/CFAITrust-India-Report.pdf