Keep your head over the water! Get timely financial advice

As published in Telegraph on 5th October, 2016

The market is like an ocean that you can easily drown in. It’s better to opt for professional advice from financial planners and advisors. Here’s how you go about it.

1) Identify what you need advice for:

What do you exactly need help with? Making an investment plan or selecting the right Mutual Funds? Understand your needs first before you start searching for a financial advisor. This plays a big role in the next step.

2) Select the right kind of advisor:

There are three kinds of advisors available: Financial planners, who help you plan your investments and finances; Investment advisors, who help you make the right investment decisions; Portfolio/Wealth managers, who manage your money and investments.

3) Look for the credentials:

Once you have chosen the kind of advisor you need, look for credentials like Certified Financial Planners (CFP), Chartered Financial Analysts (CFA) or any other industry accreditation. This helps filter the good quality advisors.

4) What’s the pay structure?

Discuss money right away. Ensure you go through every aspect of the fee structure, especially if there are percentages involved. Also try to ensure you do not pay in case of any loss or poor returns. These are called ‘watermark’.

5) Try to get a trial period:

Why don’t you try out the advisor before signing the contract? After all, you are trusting him/her with your money, right? While this may not be industry practice, you can try for a ‘free trial service’.

6) Beware of over-promises:

Let this be an immediate flag. No one can assure returns in the world of investments. No one. So beware of financial advisors who promise a certain return or XYZ amount of money. It could be a scam.

7) Is there any conflict of interests?

Look for tie-ups and any sources of income from financial institutions. This could mean the advisor could sell you investment products from a certain brand whether or not it actually suits you.

8) Make a sound investor profile:

One of the biggest steps of financial and investment planning is making your profile. This should mention your goals, needs, income, restrictions, preferences, responsibilities, etc. Otherwise, the advisor could mistakenly suggest wrong investments.

9) Grill every recommendation:

Just because you have outsourced decision-making does not mean you should not bother. Know and understand every single MF recommendation and the reasons behind the Fund selection.

10) Fix regular follow-ups:

You are not done investing as soon as you buy your MFs. Timely monitoring and rebalancing is important. So check with your advisor and decide how often you want a follow up. It’s better to get this in writing.

Key takeaways:

1) Understand your needs and the type of advisor you need.

2) Get all the minor details of fees, services provided in writing.

3) Keep an eye out for mis-selling, conflicts of interest, over-promises.

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