How to select Financial Planner or Investment Advisor?

Our wealth is perhaps one of the most important things for us. Ranks may be just after our health and family. Financial Planner or Investment Advisor plays important role in managing our wealth. So how to find a good investment advisor?, What qualities they need to possess?, What educational qualification Investment Advisor should have? Should you go to company or person acting as Investment Advisor? If any of these questions pop up in your mind, read on.

What doctor is to your health, is a Investment Advisor to your wealth. Generally we don’t go to doctor unless we are unwell. Unfortunately, same is true for wealth as well. We seek investment advisory services generally when we feel our overall wealth planning is not in good shape.

Today we explore how do we find a good investment advisor for ourselves. What are things that we should look for.

SEBI registered Investment Advisor

As far as India is concerned, SEBI is prime organization regulating Investment Advisors. At the time of writing this post around 1500 investment advisors are there in India who are certified by SEBI.

Since SEBI is regulatory body in field of investment, you can consider them something similar to Indian Medical Association to doctors. As Medical Association makes sure doctor’s degree is given only to qualified person, SEBI is taking care that Investment Advisor also meets certain basic criterias.

Having advisors regulated by SEBI is safest bet. SEBI does some due diligence regarding qualification of person before allowing registration.

It has its controls to address customer grievance. If they have online presence / blog / website, you will see mandatory regulatory disclosure of complaint status like below. This in a way makes sure your complaints are addressed in timely manner.

Regulatory Disclosure for SEBI registered Investment Advisor
Regulatory Disclosure for SEBI registered Investment Advisor

How to find SEBI registered Investment Advisor near me?

You can search investment advisor here to find one near you.

Note : SEBI guidelines for Fees are not really advisor friendly. There is also limit of investors, an advisor can handle per year. So overall not all good financial planners may go for SEBI registration.

Educational / Learning path for Investment Advisor

For being SEBI registered advisor, there are two learning paths.

Easier one is to complete two levels of NISM certifications for Investment Advisor.

Tougher one is to do Certified Financial Planner (CFP) certification by FPSB. Let us see both in little details.

Certified Financial Planner(CFP) or NISM?

CFP is much more comprehensive and much difficult than NISM certifications. Focus of CFP is also on mathematical use cases which are more relevant in actual financial planning.

However NISM certifications are coming directly from regulators. So they ought to be good enough to qualify as investment advisors. This certification however focuses more on making sure theoretical concepts for investment advisory are clear. Less on calculations part.

Given a choice, I would go with CFP certified investment advisor over NISM if all other parameters match.

How to find CFP (Certified Financial Planner) near me?

FPSB has directory of certified financial planners available online. You can search and filter a CFP near you here.

Fee or commission based Advisor?

It is no brainer that fee based advisor is safer bet. SEBI registered advisors will only be Fee based.

Any good investment advisor in India would charge fees minimally Rs. 7,500 to 10, 000 per year. Not everyone can afford such fees during initial period of their career.

So in case you take help from non SEBI registered advisor, then you need to take this call. Fees or commission.

Generally on average distributors would earn somewhere around 1 to 1.5 % of overall portfolio value every year. So if your portfolio is small, you can start with commission based structure as long as person meets other qualification criteria’s.

Say you want to plan for investment around 2 Lac. Paying fee based advisor may not be economically good option. In such cases, letting person earn around Rs 2000 to Rs 3000 via commission makes more practical sense. Somewhere when portfolio is around 10 Lac or more, direct fee is definitely better choice.

Once your portfolio grows bigger, I would strongly feel one should move to fee based advisor. That will help you save a lot in long run.

Technology savvy

It is a big plus point if your advisor has some online presence and keeps up with technological innovations. That not only gives you assurance that he or she is in touch with latest trends but will also add convenience.

It will reduce lot of paperwork and admirative tasks. It will save lot of time for you to use technology for your benefit.

Having a blog or you tube channel by advisor is also good to have. That tells you about his / her views, approaches, overall thought process. You can see comments of users, investors, ratings to have better understanding about him / her.

Company or personal Advisor

There are two types of advisors. One like INDwealth which are more of advisor companies. Others like many of my friends are operating as individual advisors.

So which type is better for you? You will need to take your call based on advantages & disadvantages mentioned below.

If it is company then advantage is they have a solid system in place. They have team of researchers, their own app, customer support team, etc. They are also better for continuity. In case one advisor leaves firm then someone else can continue. Disadvantage in this type is generally there is lesser of personal touch which is important for most of the people.

If you go for personal advisor, then they are more approachable and easier to connect with. You can discuss your specific case in more details and bond is stronger compared to company based advisory.

They have limited clients and service is generally more focused. However do make sure advisor is doing this work full time. That shows commitment towards this profession unlike someone doing it as a part time work. Again continuity is issue. In case something happens to advisor, or some medical issues, out of town scenarios could impact you.

I know I haven’t given clear answer here. Personally I feel for investors with upto 20-25 Lac, personal investment advisor is better. Investors with more than 1 Cr corpus are better off with company based advisory services. People in between will need to take a judgement call.

Trustworthy

For Investment planning, one needs to reveal all the savings, salary details, all current investments to your advisor.

Sometimes one needs to discuss family matters, any complications in jointly hold assets also. Then only a fair job can be expected from your advisor.

To reveal details, there needs a strong trust towards advisor regarding integrity and confidentiality. So having some good reference from someone you know is strong plus.

My personal opinion, avoid Investment Advisor within family if you feel you will not be comfortable revealing all the details freely. Also better to avoid bringing money in relations.

Experience

Like any other field, Experience counts a lot in Investment Advisory work as well. Investing is much more than just returns. Advisor needs to really understand client well. Especially his or her psychological process is key to suggest a particular product.

No single mutual fund or insurance policy is best for all the customers. However good returns it may have given in past. What is good for someone, could be bad for you.

and some things come only with experience. So do check out how long person is practicing in this line.

If period is more than 5 years, that will also assure that person is likely making sufficient money and is likely to continue. I have see few people who left their jobs and came in this line but after few setbacks and struggling for couple of years, went back.

We don’t want to be left high and dry like that.

Client and corpus size

If you can try to find information like how many clients your prospective advisor manages and what is type of client base he / she focuses on, that will help you.

If advisor is more HNI (High Net Investor) focused and you are having small corpus of 10-15 Lac – then that is misfit.

Vice versa is also true. If advisor is currently handling clients with portfolio of say 5 – 10 Lacs and if your portfolio is say 75 Lac then too that won’t be right match.

Investment products differ based on portfolio size. Person managing small corpus may focus more on Mutual Fund as that is need for most of his / her clients but may not be doing lot of research on PMS which is for HNI customers.

Communication

Communication of advisor will generally reveal personality. Let me give few examples

If you are getting lot of not so useful whatsapp messages with launch of all new products like some NFO (New Fund Offers) then you are not in right hands. Your advisor should suggest you only relevant products suitable for you.

In major events like Corona crisis, you will need more support to hang in with your investments. Your advisor should arrange for personal call or group meeting to discuss common concerns. No selling talks.

There should be some regular say 1 hr call per month with group of clients on information on new developments like loan moratorium, interest rate changes, impact of say US elections etc.

If he or she is taking some effort to educate you, that is good sign. If however most invites are for launch of some new mutual fund, better look somewhere else.

Conclusion

I have tried to state few parameters that we should check in our financial planner or Investment Advisor. Not all of them may be straight forward available somewhere to check and then select a person.

You will need to try to get these details during your interaction with person. Single advisor will not have all the points tick marked but having more ticks that you feel are relevant will likely to land you in hands of a better investment advisor.

All the best!

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