The Buyt Desk
When you invest your hard-earned money you want to be sure about so many things. Where to invest? How much return can I get? Is my investment safe? But do you put so much effort into finding a Financial Advisor? Before we go to how to choose a financial advisor, let’s first answer the question: Do you even need a financial advisor to manage your personal finance? Or you could do it on your own? The answer will depend upon the kind of commitment you have with your money and investment. If you want to achieve fixed goals of life like buying a house, retirement or children education you must have a financial roadmap to achieve these goals. This is where a financial advisor will be of help.
What does a Financial Advisor do?
A financial advisor manages your financial situation as well as your behavioural attitude. He/She will help you to reach your goal by fixing a route for the journey. A meticulous plan will be made based on your income and expenditure. Where should you invest What’s your risk appetite? If the plan changes or the invested money doesn’t give the desired return the financial advisor will change and modify the plan.
Type of Financial advisors
Fee-only advisor vs Commission based broker or a Robo-advisor. All three have a defined role. A fee-only Advisor is a SEBI Registered Investment Advisor. He/She will have specialised qualifications. They will have a SEBI Registration number. They will charge you a fee as they do not get any commission or fee from the companies whose product could be a part of your investment portfolio. On the other hand Commission based broker is someone who gets a commission or fee from the company whenever you purchase an investment product from them. They are not allowed to charge any fee to the customer/investor. Robo-advisors are computer-based advisory. They suggest a plan on the basis of data provided by you. All the fin-tech companies are dependent on AI-based Robo advisory.
Fiduciary and Non-fiduciary Financial Advisor
The fiduciary financial advisor is legally bound to act in your best interest. Fiduciary advisors must put their clients’ interests before their own. They will be compliant with regulations of advisory. They’re also referred to as fee-only advisors because they don’t accept commissions on the investments they recommend. They can charge a flat fee which ranges from Rs 15,000 to Rs 1,00,000. Some advisors may charge a percentage of the investment. The fee model will depend on the specialization of the advisor.
Here is a checklist that you should adhere to –
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SEBI Registration Number- Must Check the advisor’s registration number on the SEBI website. The advisors who have this registration can only charge a fee for his/her advisory.
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Financial advisor’s credentials- How many years of practice does he/she have? More than 5 years is good.
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Referrals from friends or Google – Reach out to people who have advisors already working for them. Take some referrals.
4. Interview multiple advisors before finalizing- It’s a long term relationship. The benefits come later as the power of compounding works out slowly. Check your comfort with the person before on-boarding one.
