How to select a fin advisor - Prem Khatri

Choosing the right person to handle your personal finances is one of the most important decisions you will be making. When you entrust your hard-earned money to an advisor, you do it with the hope that the advisor will use his or her expertise to help you reach your financial goals by making the right plan and identifying the appropriate investments. In doing so, you want the advisor to service you well and display high standards of integrity and professionalism.
The ‘ideal’ advisor should help you make the right investment choices based on an in-depth assessment of your financial circumstances, should help you remain committed to your financial strategies and not get carried away by excessive euphoria or pessimism, should monitor and review your portfolio regularly and advise you on course corrections when required, should educate and empower you to have a fair sense of the developments in the financial world and their impact on your investments, and finally should support you in documentation and paperwork related to your investments.
There are several three types of advisors. Firstly, the independent financial advisors (IFAs), also called agents. Since they work on their own, more often they are committed and keen on a long-term relationship. Then there are relationship managers and wealth managers, who work for banks or large distributors. They usually offer a wide range of products but these professionals are themselves selective about their clientele, preferring to deal with HNI clients only. Then there are qualified financial planners who help you draw up customised financial plans for you based on a deep understanding of a comprehensive range of factors. Most of them also help in executing the plan.
Before you begin your search, you also need to be clear about a few things about yourself. Ask yourself if you are knowledgeable about financial markets and products. If you are not, you should go to an advisor with the right investment expertise. However, if you have some understanding of the markets, you may choose to deal with an advisor who keeps you disciplined and gives you support in paperwork. Next is if you can make your own investment decisions and also have the time. If your answer is yes, you should go to someone who will draw up a financial plan, leaving the execution part to you.
Next is the question of compensating the advisor. Of late, some advisors have started charging their clients. Here the advantage is, to justify his fee the advisor is compelled to perform better. So you should decide at the outset if you want to pay them a fee per transaction or an annual fee based on your portfolio size. Also, some advisors charge a fixed fee for drawing up a financial plan — irrespective of whether you execute the plan or not.
To select an advisor, you should meet them and have a detailed discussion. Some of the must ask questions are like what sets him apart from other IFAs, the advisory process he follows, how does he evaluate and monitor investments, the process of keeping his clients updated about market developments, and his process for reviewing client portfolios.
While finally zeroing on the advisor, look for a person with a minimum experience of five years, a good track record, the person's clarity of thought and quality of answers during your discussion, strong references that the person is willing to share with you and lastly the client base.
As with all things pertaining to your money, it pays to be meticulous in choosing the right advisor. Don't settle for someone you are unsure of because there are many advisors to choose from. Find one with that you feel comfortable with going by the criteria given above and all these come at a reasonable cost. Happy Investing!
The writer, a mutual fund
industry veteran, is the founder & CEO of Cafemutual, a company focussed on B2B
services in the fund industry ALWAYS SEEK EXPERT ADVICE
tIf you don’t have knowledge about financial markets, you should go to an advisor with the right investment expertise
tIf you can make your own investment decisions, you should choose someone who will draw up a financial plan, leaving the execution to you
tDecide at the outset how you want to compensate your advisor

NEW YEAR RESOLUTIONS Seven key things that investors must keep in mind

1 Keep investment papers updated Ishall check if all the papers relating to my investments are in order: This is as critical as investing since a loss of an important paper can lead to a lot of inconvenience. For example, if your mutual fund account statement is not updated with the number of units that you hold, you may miss out on the amount of dividend. If your contact address is not updated, you may lose out on important communications from the fund house, the broker, or your insurer. Also make sure to read all the papers, documents and letters sent to you from your mutual fund, broker, insurer and other companies related to your investments. If you don’t understand something, seek help from your investment advisor. Over time that should help you evolve as an informed investor. 2 Don’t invest on mkt trend Ishall not look at the market trend everyday and calculate the value of my portfolio: If you are a long-term investor, do not look at the sensex, the NAVs of mutual fund units you hold or the prices of stocks you have in your portfolio. Such an approach is for the traders and speculators who play in the market on a regular basis, and are used to market's fluctuations. For long-term investors, such acts can make you very concerned about your money. As a longterm player, you have time on your side. Your investment horizon can even out the daily volatilities over the years. 3 Keep objectives in mind Ishall call up my financial planner/advisor and confirm if my portfolio and its objectives are fully in sync: In case the objectives of your portfolio are not in sync with its asset allocation, consult with your advisor to change it accordingly. Make it a habit to speak to your advisor on a regular basis, say 2-3 times a year, and generally try to have some idea about the investment scenario and check if your portfolio is performing in a way that should meet your long-term financial goals. If you don't do it on a regular basis, one fine morning you will find how off track you are from realising your financial dreams. 4 Never invest on tips Ishall never invest based on tips and market rumours: Investing your hard-earned money on tips and rumours is akin to gambling. If you are not a speculator, but a long-term investor, never go for tips or fall for market rumours. Often, it is seen that a group of unscrupulous people, at times in cahoots with a company, spreads unsubstantiated news about the company to jack up stock price. Once gullible investors have fallen for such rumours, they exit and the stock price crashes. In the process these people make some money at the cost of small, unsuspecting investors. Invest only in good companies with a sound track record. If your risk profile allows you to invest in the stock market directly, your financial advisor should be able to guide you to the right stocks to put your money in. 5 Maintain a record Ishall have all my investment information well documented: This is different from keeping your investment related documents in order. Maintain a notebook or a diary for this. When you make the investments, write the rationale for investing in the particular asset, be it mutual fund, stocks, bonds, gold or any other asset class. It should also contain the expected rates of return on the investments that should help you achieve your financial goals. Also write down the information that you believe is important to your investment decisions. Flip through its pages once in a while. This should help you evolve as an alert investor. 6 Keep it simple Ishall keep my investment plan simple: Invest in those asset classes that you understand, at least a little it even if not fully. You may be tempted to invest in exotic products that promise far greater returns, but maybe there are some hidden costs, or ever worse, greater risks hidden in the fine print that can lead to big losses. So remember the adage about investments: "Be simple. Be stupid'. Such an approach may not make you a star investor, but at the same time in all probability you will not be left to count your losses. 7 Fight for your rights Ishall fight for my rights as an investor: As the number of companies offering investment products grows, along with the number of investors, there is bound to be some problem for some investors related to their investments. In case you are one of those at the receiving end, for whatever reason, be sure to address the problem without much delay. The problems could be non-receipt of dividend in mutual funds or from companies, non-payment of interest on FDs or bonds, non-renewal of FD post maturity, or something else. But remember to approach the right forum to resolve it. And if not resolved on time, or to your satisfaction, escalate the problem to the next higher level.


-source Times of India 03/01/2012 Pg. 13