Wednesday, October 12, 2011

5 Steps to choose your Financial Advisor

The 5 Steps That Help Selecting The Best Financial Advisor

Preparing to start the choice:
 Satish grew concerned about how to manage his personal finance investments and asked his uncle, who is a very successful investor, if he knew a good financial advisor. His uncle knows a few each specializing in a particular type of financial consultation, and asked him about the type of consultation he required.

Then his uncle went to tell him that his first task lay in identifying his financial objective, whether he needed financial advice for goals like long-term financial portfolio, or tax planning, or providing for the higher education and marriage of his children. Uncle went on to tell him there were more than 50 type of specialists specializing in aspects like stocks, insurance, mutual funds, postal savings, financial planning, taxation and real estate and told him the five steps to select the best financial advisor.

1) Meeting and reviewing different financial advisors:
Once your financial objective and goals are set, your choice of a specialist would depend on whether you want one for your savings plans, tax advice and preparation, stock and equity portfolios, investment strategies, personal budgeting and debt management, retirement planning, estate planning, or insurance advice.
A search on the internet and referrals from friends, colleagues and relatives could help you find some appropriate financial advisors to look into your concern. Make sure that when the financial advisor suggests suitable financial plans, he also assures you to look into its maintenance, updating and implementation with periodic reviews of reports and correspondence.

2) Details about the financial advisor’s educational qualifications, certifications, and experience:
As all other dealings financial dealings too require the qualifications, certification and experience. So it is best to know and verify the advisor’s educational qualifications, certifications and experience. It pays to verify required certifications, like being licensed by IRDA to do insurance business and by by AMFI to deal in mutual funds in India. The extra qualifications like CFP add more value.

 In addition, the professional’s experience in the nature of business, and with sizable experience dealing with recession times plays a vital role in the choice of a financial advisor. The investment advisor’s past professional positions and his reasons for change will be able to tell how efficient he is, with a positive switch of revealing his good expertise.

3) Information of clients he has dealt with along with references:
I would say it is in your interest to not rely just on the positive talk of a financial advisor, and beware of his trying to belittle your ideas. Asking for a reference helps verifying his authenticity, honesty, integrity, and empathy and whether he specializes in the similar nature of business you expect of him. I would say if you are young, you would not benefit from a financial advisor dealing mainly in retirement and senior citizen plans.

Interviewing a number of clients would give you the best idea if the financial advisor can be relied upon confidently to meet your financial goals and objectives. In addition to this you may verify the testimonials given to him by his clients.

4) Verify his past records to judge his present and future behavior:
I would rather rely on written words like past documents than what he professes, and would say that a financial advisor’s past performance indicated well his present and future actions. I would also make sure that any disciplinary action for professional and ethic violation has been taken. I would also avoid financial advisors claiming very high performance, as they would highly risk my money.

5) The rate and method of compensation for services:
Now comes, the final stage of discussing and knowing your financial advisor’s compensation. Financial advisors have varied compensation methods for their services, charges could be hourly, a flat monthly fee, a percentage on the assets managed, and a commission on the financial products managed or could be based on the number of transactions.  Others could be a combination of 2 or more methods.

A word of caution in dealing with financial advisors charging on number of trades, or getting commission from the investment company, these fees or commissions can be profit motivated with no empathy to client needs.
You could always suggest changes in the fee structure, if not accepted you could always find a reasonable financial advisor to sign a compensation agreement with him.

The final note:
My best wishes for good financial dealings with financial advisors, but a word of caution, are ‘be selective, diligent and patient to understand well the philosophy of your investment and never be shy to ask questions and clarify doubts’.

(Ramalingam K, an MBA (Finance) and Certified Financial Planner, is founder & director of Holistic Investment Planners (P) Ltd (


Baron parker said...

It might help to begin by realizing some misconceptions about time management.That's good discussing of financial management matter.

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bradys bearss said...

Until now, the banking adviser aswell managed authoritative tasks such as affidavit and updation, all-embracing cooperation and allocation with axial ministries.

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Joan said...

Everyone needs experienced and trusted financial planner who helps them to take relevant decision. There are many financial planning advisors that offer free planning services to their clients.

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Anonymous said...

It is estimated that 95% of Australians will retire on an income that is considered insufficient or less than $25,000 a year.

There is a better way, and good financial advice is the key. So Who Needs an Adviser?

This is an important question and I think the best place to begin this discussion is to look at the different groups of people that exist.

There are many ways we could categorise people financially. There are people who would be considered low, medium or high income earners. There are young adults at the beginning of their working careers and those coming to the end of their’s. There are people that have very little in the way of assets and financial security, and there are those with great wealth, control and financial freedom.

The funny thing is, regardless of our stage of life we would all dramatically benefit from a solid financial plan and sound financial advice.
But isn’t financial planning reserved only for the wealthy?

The simple answer to that question is a resounding NO. Sure, in reality the overall majority of people likely to be utilising financial advice may be wealthy. The question I pose to you is: How do you think they became wealthy in the first place, and secondly how do you think they manage to stay wealthy?

It is through constant visioning and setting goals with trusted advice along the way. A long term commitment to planning and reviewing is the primary difference between the financially successful and the rest.

Using the previous jungle analogy you should clearly understand both the need and importance of a map (financial plan) and a guide (financial adviser). Most people lack good financial knowledge and experience.

There are far too many potential pitfalls for an everyday individual to know and understand all aspects completely.

Budgeting, investment planning, superannuation, share market, real estate, retirement planning, social security, taxation, personal insurance , estate planning and the list goes on.

A financial adviser is needed to educate and bridge this gap in knowledge. They will also support, motivate and provide direction. A good adviser will give you the best possible chance to succeed and achieve your chosen goals and desired outcomes.

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Everyone needs accomplished and trusted banking artist who helps them to booty accordant decision. There are abounding banking planning admiral that action chargeless planning casework to their clients.

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