Young Investor

How to choose a financial advisor

BL RESEARCH BUREAU | Updated on November 15, 2017


That you should save is a given and the earlier you start, the better it is. But with all the advice that abounds from market experts, Web sites, books and the odd uncle or two, planning investments can be a flummoxing process.

For any investment portfolio, asset allocation is of great importance. The mix of equity and fixed-income instruments depends on how much of a corpus you want to build in a particular period of time. Within each asset class there's a plethora of options, each with its own pros and cons. If you're a novice when anything financial is concerned, understanding the information you look up will not be easy.

So, before you do it your way and risk mucking up your investments, why not seek professional help? Financial planners or advisors help decide what you should do with savings in order to achieve certain goals.

A financial planner helps by looking at your income, budget, taxes and savings in the context of your goal. That goal could be to buy a house, build a retirement fund, fund your wedding and so on. Here's a lowdown on how to choose a financial advisor.

The basics

Financial planning isn't the domain of only high-net-worth individuals. You also do not need a portfolio manager. Financial planning involves designing savings strategies in order to build a corpus for a particular purpose. Your advisor will outline the steps to take in order to achieve your goal. Its execution is left to you.

Depending on the complexity involved, such as the corpus you want, the sum you can save, your risk appetite, fees can start from as less as Rs 5,000. Of course, it could go up to a sizeable Rs 25,000 too, but then its far better to pay a price now than mess up savings.

Go to, a professional body for financial planners in India to get a list of planners in the country. Brief profiles of the planners are also listed here. The Web site also gives information on the financial planning process.

Choosing an advisor

Coming to actually selecting a planner, there are certain points to keep in mind. Anyone can claim to be a financial advisor. To weed out the posers, look for their qualifications.

A financial planner should be licensed to impart financial advice. It is, therefore, best to go for a Certified Financial Planner (CFP). The course to get a CFP certification puts them through a strict program about the specifics of personal finance. It also requires maintaining their knowledge and education about all things financial. Look at the professional bodies they are associated with, and check their authenticity.

The second point to check is how long they have been practising. A longer and wider experience is a plus point. The third is to see how your planner is making money. Do they get a fee from the insurance they're telling you to buy? It is always better when planners charge a flat fee for their services since they do not have a vested interest in where your money goes. Also remember to ask for references. Talking to a couple of clients to authenticate the planners' claims is a must.

The final point to keep in mind is that you cannot expect instant or outlandish returns of say 30 per cent a year. Returns calculated by the planner are also not guaranteed and depend, to an extent, on market and economic vagaries.

Published on January 14, 2012

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