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It is important to know and a understand a few things before selecting your financial planning advisor.

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Things to Remember While Selecting Your Financial Advisor

India is one of the countries with fast growing economy. This has made the country’s financial scene extremely dynamic. Therefore, financial planning has become a specialised need of the hour. This need has led to mushrooming of financial advisors.

Caution has to be exercised before choosing the financial advisor and there are a few parameters that will help in checking the credibility of such a person/firm.

Whether your financial advisor is an individual or an institution, there are basic things to remember. For verifying if an individual is good enough to be your financial advisor ask the following questions:

Does he have the right qualifications?
Check if the person is qualified to be a financial advisor. For e.g. a person holding a CFP (Certified financial planner) is qualified to handle your finances.

Does he have the requisite experience?
A newbie to the business could use you as a learning tool. If you have the right knowledge and can guide him properly you could provide him the learning experience. Otherwise it is better to hire someone with at least 3-4 years’ experience.

Does he have the required infrastructure to provide service?
He should have the right kind of resources to check the latest development and price movement and give timely advice viz-a-viz your portfolio. Liquidity is a crucial part of investments like mutual funds and redemptions, transfer etc. should be done at the appropriate time.

Is he commission driven?
If you are liquidating your bond investments and transferring it to mutual funds on the advice of your financial advisor try to find out if he is putting his ‘commission’ interests as opposed to your interests. Similarly, if he asks you to put all your eggs in the same basket, he may be working in the interests of the mutual fund company (or the company in which he is advising you to invest).  

Is there any value addition by hiring him?
You must analyse if the person you hired is giving you timely services and information regarding the maturity date of bonds and fixed deposits. Also keep a close watch if he is alerting you to pay your insurance premium and such. These are the value additions that he must do for the service charges paid by you.

Are his advices in sync with your goals?
Financial planners are meant to advise you on the best saving and investing options that suit your needs and future goals. Therefore talk to him and explain your goals and needs. For e.g. If you have embarked on a house buying project or planning for your retirement he must advice you on the best possible options that meet your requirement.

Who to avoid:
There are a number of advisors who make self-proclaimed predictions about the way they will help you make money in the market. Remember, no one can give guaranteed returns by investing or speculating in the market. Beware of people who tell you that they have studied the market inside out and will help you make quick money.

People who sell only insurance policies will try to convince you that investing in insurance is enough. The mutual fund agents will convince you that investing in mutual funds will spread your risk and give you returns also. A wise decision in choosing a financial advisor would be to find one who knows about all the above avenues and much more. He will give you a complete insight into the risks and benefits of investing in each of the segments.

What does fiduciary mean?
A fiduciary means a planner who has pledged to act on behalf of the best interest of the client. This implies that the advice that they give you should meet your needs rather than their personal gains. Checking these aspects safeguards you against people who are out to make money without treating the clients’ interest as priority.

Check the credibility of the advisor:
Do not fail to check the background of the person in whom you are going to trust your hard earned money. Check to see if there are any pending cases against them with any of the financial regulatory or the judicial court. Do not fail to ask for references and take help from other clients, if possible.
In conclusion, you must first understand if there is a need for a financial advisor and then run the above checks before trusting your money with them.