I have a Financial Advisor

MYTH

Financial advisors are those who help me buy financial products, so that I need not worry about my money, as they will do it for me, and I will grow rich.

Given the variety of financial products available today, I have several financial advisors whom I can go to and get advice from. My bank’s relationship manager is a financial advisor, because the bank is an institution that can be blindly trusted on anything. My chartered accountant is an expert and, by qualification, a financial advisor. And, as I have a financial advisor, I don’t need to do anything further with my finances. As my finances are pretty much straightforward and simple, there is little for anyone to do anything with it.

The financial advisor is so sincere that he appears out of nowhere from time-to-time to do the financial soul-searching for me that I have very little to worry about.

The good part—he comes free, which means I can save on money to employ those who make tall claims of qualification and achievements.

I believe that anyone who has even a little understanding of financial products or is selling a financial product is a financial advisor. The list includes post office agents, insurance agents, mutual fund distributors, office accountants, and not to forget the neighbourhood uncle, who talks so highly about managing money; they all are financial advisors and experts in handling money.

REALITY

All financial advisors are not the same. Nearly every financial product entails special features that should be discussed with an experienced professional. For instance, your investment goals are unique and an advisor can help you find the right fund to match your needs. Likewise, your insurance needs will be different. So, an insurance expert will be the right person to suggest you on your insurance requirements.

There are several kinds of advisors, whose expertise differs based on education, experience, quality of service, compensation and, so on. A financial advisor could be specialised in a specific area, such as high net worth or tax optimisation and, so on. The right advisor is a difficult choice to hunt for, but do look at the credentials. Advisors who do not charge you are not necessarily doing it for free. Most often, they sell insurance and mutual funds on a commission basis. They are bound to disclose that and you should also ask them about their compensation.

To bring more accountability, market regulator SEBI has mandated registration to function as Investment Advisors. This calls for any financial advisor who is a fee-only based advisor, to register for continuing his practice. So, if someone claims to be an advisor providing equity advice or financial planning services or wealth management services or all of the above, on fee basis, they must be registered. But, if one is an intermediary for mutual fund distributors, the SEBI registration is not mandatory. Make sure you feel comfortable with an advisor before taking his services than blindly going to the first one you spot.

OLMdesk@outlookindia.com