How To Select A Good Financial Advisor For Yourself

By Suresh Sadagopan

 There are some very important things in life. Dentist’s appointment, Appointment with the Vet for the pet, grooming session appointments, tennis coaching sessions for the children etc. Each of these and many other such engagements are important. We depend on different professionals to get through life. They improve the quality of our life and ease the struggle which we would have been put through otherwise.

Financial Advisors

Financial Advisors can be an invaluable addition to that list. A real Financial Advisor is someone who understands your needs and goals, personal circumstances, financial position and creates a blueprint to follow so that the goals & milestones are met in a premeditated manner and provides ongoing advice.

Such an approach helps in meeting goals, create wealth and provides clarity, offers peace of mind and helps the client to live a stress-free, delightful and fulfilling life.

But, many times, the Financial Advisor tag is used by the wrong set of people like Insurance agents, MF & other product distributors, Relationship managers of banks etc.

That is why you need to be careful while selecting a Financial Advisor. Apply these filters and you should be able to get the right one for you.

Is the Financial Advisor SEBI Registered?

To deliver financial advice in India, one needs to register with SEBI, under the Investment Adviser regulation. There are specific requirements for education, experience and certification. There are clear guidelines on the conduct of the advisor, client engagement, processes to be followed, record maintenance, fiduciary responsibility, compliance requirements etc. This is the first filter. Engage only with a SEBI Registered Investment Advisor (RIA).

How Are Financial Advisors Paid

Everyone needs to earn. But the way they earn can matter. An “Advisor” selling products ( for commissions ) could look to promote products that they sell and not the best available out there. They represent a Principal as agents and their allegiance may lie with the Principal.

A fee-only Financial Advisor is independent and mostly conflict-free. They represent the client and sit with them on their side of the table. They do not sell products and are client-centric and product agnostic. They charge a fee for their advice to the client and entirely work only in their interest.

What Kind of Clients Do Financial Advisers Work with?

Many Advisors work with certain category of clients. Some work with business people/ professionals, some with those in service, some with retirees, some with HNIs etc. Knowing this, you will be able to evaluate if the advisor would be the right one for you.

Comfort factor

When evaluating an advisor, it is not just a matter of their felicity with numbers or their advisory capabilities. It is important to be comfortable with the advisor you would want to sign up with in all respects – their approach to the clients, their philosophy, advisory approach, communication style etc. Sometimes, these seemingly unimportant aspects turn out to be the stumbling blocks in a client-advisor relationship.

Transparency

Is the advisor giving you detailed and proper information about all things that are critical for you know? Are they disclosing everything about themselves, their advisory process, remuneration, team etc. in a straightforward manner? Do they answer all the queries, including inconvenient ones, in a direct manner?

Services offered

What services are on offer and whether what they offer would be suitable to you is important to know. Some offer portfolio creation and management as a service, some comprehensive financial planning, others Retirement Planning, Succession Planning etc.

Who Will I Be Working With

Different advisors have different methods of engaging with clients. Some practices are Principal-led and others may be advisor-led practices. In certain other cases, it may be that the Principal would handle the top few clients and the rest will be handled by advisors. You need to clearly know whom you will be dealing with.

Online or physical – Many Financial Advisors meet online only. There are some who still meet their clients physically and some have a mix of both. It is important to know what kind of engagement you would be having with your advisor.

Experience/ Track record

You would want an advisor who is experienced and has been around for several years, has handled a wide variety of clients and has developed expertise with the craft. You don’t want to be the first of the guinea pigs, do you?

Advisory setup

Many advisors are solo operators who may have a couple of support staff. This can mean major dependencies on that advisor. If the Advisor has a full team for advisory, client support and operations people, the service efficiency would be good, unlike with a single person dependency.

Credentials

Appropriate qualifications and certifications on Financial Planning and a SEBI registration as a Registered Investment Adviser (RIA) are essential for an advisor to have. It would be good if the advisor is well regarded and recognized in the Financial Planning/ Advisory field. Also, it would be great if the advisor has publications to his/her credit, that would help you understand their thought process and their authority in the subject area.

Investment Philosophy

Some advisors have clear policies and processes on how they go about with portfolio construction and which products they have in their consideration set. This will help in understanding the advisor’s approach and philosophy with regards the portfolio creation and management.

Testimonials/ References

It is good to talk to a few clients of an advisor who seems to be ticking all the boxes. Such conversations could throw light on aspects that are important like trustworthiness, quality of advice, response times, outcomes and achievements etc. This will reveal even more about what you can expect from the advisor. Also, go through the testimonials from existing clients.

Red Flags

While all of the above points are about what you should look for in an advisor, there are certain things which should get your guard up. If the “advisor” is singing praises of certain products, unduly focusing on it and pushing the same, it is a red flag.

Similarly, if the “advisor” offers guaranteed high returns through their services – Run! Also, if the advisor is evasive on questions about SEBI registration, their remuneration, qualifications, advisory setup etc., the person may probably not be a proper Financial Advisor at all.

When you have done this due diligence, you should be able to land a good Financial Advisor, who will best suit you, hopefully.

The author is the MD & Principal Officer at Ladder7 Wealth Planners and the author of the book “If God Was Your Financial Planner”.

(Disclaimer: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)