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