How to choose an Advisor

8 questions to ask when you are choosing a financial advisor/financial advisory firm

1. Is he registered as a RIA with SEBI?

 In 2013, SEBI came out with a set of regulations aimed at separating independent advice from distribution of financial products. In order to provide advice that is free of conflict and fiduciaryin nature, many financial advisors/ financial advisory firms chose to register under this Investment Advisor regulation to provide independent advice, which is in the interest of the investor. Do check with the financial advisor if he is registered with SEBI under the Investment Advisor Regulations 2013, and have him share his license details.

2. Does he offer advice across multiple financial products?

Different financial products may be needed to come together to form a robust portfolio that is aligned to your financial goals, investment horizon and tax bracket. These could include mutualfunds, deposits, bonds, stocks, gold, international investments, etc. An RIA can offer you advice across multiple products, rather than a distributor, who is restricted to offering single product advice only.

3. What is his experience across multiple market cycles?

Financial markets leave investors susceptible to fear when markets do badly, and greed when markets are doing well. A good financial advisor, with experience across good and bad market cycles, can handhold you during this period, and through appropriate asset allocation and rebalancing strategies, help you deal with this volatility in a manner that is in your interest and aligned to your financial goals. Seek to better understand how communication and hand holding is done by the financial advisor, in both good and not so good times.

4. How does he get compensated/charge for his services?

An advisory fee paid for advice, just like one pays for other professional services, has gained popularity across the world to align client and advisor interest. There may be different service models adopted by financial advisors – fee only, fee based or commission only. Understand from your financial advisor how he gets compensates and how he maintains transparency on the compensation received by him.

5. How can he help you stay on track to achieve your financial goals?

Having clearly defined financial goals like retirement, education for children, etc , and the impact of inflation on them, can help align your financial life with these critical goals for you and your family. Having investment portfolios aligned to financial goals, coupled with regular monitoring, tracking and making changes whereneeded, can go a long way in helping investors stay on track to achieve these goals.

6. Is he willing to allow you to speak to an existing client(s) of his to understand his services better?

Talking to a few existing clients of the financial advisor, can help you better understand how he works in the real world, and how he is able to keep his advice aligned to your needs and interests. Seek to speak to at least a couple of existing clients of the financial advisor to better understand the experience of working with the financial advisor. Please note that portfolio rate of return may not be the only parameter to use, so seek to better understand other aspects like processes, turn around times, data management, quality of advice, etc.

7. How does he stay updated with the latest happenings that will impact your life?

Considering that financial goals can change over a period of time, and financial markets can move up and down basis news flow , both domestically and internationally, it is critical that your financial advisor stays abreast of the latest developments in financial planning andfinancial markets, as well as changes in your personal financial situation that could impact your financial goals. Try to better understand how he does the same, and also keep you updated on the same.

8. What processes does he follow to ensure that high quality of advice and service aremaintained?

A robust financial advisory practice is driven by high quality processes and a disciplined approach to investing and client communication. Seek to better understand the processes that your financial advisor has, to help serve you better and stay aligned with your and your family’s financial goals.