How to Evaluate Your Financial Advisor?

You cannot hand over your hard earned money to any Tom, Dick or Harry to make a financial plan for you. Financial plans are made so as to increase your wealth over a period of time. The financial advisor is someone like your personal money manager. They make plans for your investment to grow over a period of time. Their duty is to safeguard the interest of your finances first. They should see that their planning and execution should be such that your investments grow at a better pace then you can grow it. They do charge a fee for it. They guide you through different investing opportunities. It may seem that all financial advisors are super successful, did the financial course, or are best in the field. But in reality, it is not. All are not investment gurus. Many have created an illusion in the industry. Just like in any industry, there are good and bad advisors. The trick is in choosing the one who gives you best result. This is in reference to the stock advisory company. Here are some tips how to choose the best one. Licensed advisor There are many sites which list out financial advisory company or individuals. In India and in regarding stock they are available on SEBI website. SEBI is the apex authority which gives registration number to the advisors. Advisors have to pass their licensing exam before they are issued certificates. They are given a certificate to practice. Check out for these certificates either on their webpage or physically verify. It is after the licensing process the advisor can give you tips like commodity tips, share tips, and other information. Question your advisor One should ask for their fee structure. Some work on commission basis. That is every time they make recommendations for you and you agree, they get paid. Others work on percentage basis. A fixed percentage of the asset under management. Others work on lump sum flat fee. If you are a buy and hold investor the commission basis fits you better. As you will be trading few times a year. If you are an active trader then commission on asset under management will suit you better. If you want regular nifty future tips he should be able to provide you. The second question to the advisor is to ask him point blank if he will have the fiduciary duty towards you. The fiduciary is supposed to manage the assets for your benefit rather than his benefit. The simple example is the obligation of a lawyer towards his client. Another question that should be asked is with whom he is working with. With some firm or independently. If he is working with some firm or large broker company then you are getting involved with a brokerage firm. If it is a firm, than you have to comply with their rules and regulations. The firms can be such that they may have a group of brokers in many major cities. Every individual broker will have his own responsibility. Like compliance, supervisor, and operation people. An independently working advisor, they may have an office at some place. Maybe compliance might be carried out at some other place. And things like that. Warning Signs There are few warning signs which appear in the initial stage. That is they do not give you enough time to make a decision. They just want to sign few papers here and there. And let you know that they are in a hurry as they have to submit the documents on urgent basis. Find an advisor who has time for you. After all, you are paying for his services. If needed, he should be able to provide you with nifty options tips. He should not make excuses regarding it. Another sign is pushing those products down your throat in which they get high commission. When asked, the advisor should tell you how much commission he is getting. If he is not ready to disclose and is hiding from you then there is something fishy. Advisors should ask their clients about their actual investment needs. Goals, time period and risk-taking ability. For all this, he should spend sufficient time with you. Because every investor is not the same. And every investor has his goal. Hence investment planning should be different for each. One plan goes not fit all.

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