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How to choose a right financial adviser?

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Choosing the right person to handle your personal finances is one of the most important decisions you will make. There are certain steps you can follow while choosing the right financial planner/advisor.

Understand what they are supposed to do

ä They understand your requirements and develop a plan based on your needs ä They help you identify the right investments ä They educate you ä They support you in administrative / paperwork ä They monitor and review the portfolio with you

Decide what type of advisor is right for you

When you begin your search, you will find advisors come under many labels: ä Independent Financial Planner (IFA), Agent, Advisor – They typically work on their own. You will find advisors of varying levels of competence, sophistication and integrity in this broad category. Their advantage is that they are generally more committed and keen on a long term relationship. ä Relationship Managers or Wealth Managers work for banks or large distributors. Most Wealth Managers are selective about their clientele, preferring to deal with HNI clients. ä Financial Planners draw up customised financial plans for you based on a deep understanding of a comprehensive range of factors. Many financial planners will also help you execute the plan i.e. select the appropriate investments

Do an evaluation

Interview the person whom you think may be suitable to your needs. Some of the 'must ask' questions are: ä What sets you apart from other IFAs? ä What is the advisory process you follow? ä How do you evaluate investments? ä How do you monitor investments? ä How do you keep clients apprised of market developments? ä What is the process for reviewing client portfolios?

Other checks

Apart from these steps, there are certain factors you need to look for while choosing the right financial planner/advisor. These are:


Experience: Look for advisors with a minimum experience of five years in the business. Not only would they have a better understanding of the ups and downs of the markets, they would also have a better sense of judgement.


Performance track record:


While advisors only recommend third party products, do find out if their major recommendations have worked for their clients. Avoid advisors who boast of superlative performance or those who 'guarantee' unrealistic performance.


Chemistry: Does the advisor answer with clarity? Do you feel comfortable discussing your financial affairs with him? These things are very important for a long term relationship.


Products offered: Does he / offer a fairly comprehensive basket of products? Watch out for those who specialise in 'high commission' products.


References: Insist on references and do referencechecks. Avoid advisors whose clients give a vague or qualified endorsement.


Client base: As far as possible, look for advisors who deal with clients with profile similar to your profile.


Compensation: Since fund houses and insurance companies have reduced their commission for those who sell their products, many advisors have started charging their clients a fee. This has the advantage that the advisor is compelled to perform better as he/she needs to justify his/ her fees. However, you need to ask yourself whether you are comfortable paying him/her a fee per transaction or 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.

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