Pointers to keep in mind before hiring a financial adviser
Financial advisers play a vital role in everyone’s financial life. He is the person who advises you on various financial aspects and sometimes in taxation and legal aspects as well. The financial advisers are omnipresent. They may be an insurance agent or a mutual fund distributor or even a stock broker, all of them call themselves as financial advisers. However, they don’t deal in all the aspects of your personal finance to call themselves as a financial adviser. Financial adviser is someone who guides you not only in insurance and investments but also, in other key areas of your personal finance. Below are a few things that you should check before hiring a financial adviser.
Qualifications
Does degree or certification matter? Not at all. However, a person with a certain certification in that particular field is supposed to have a deep knowledge. A person dealing into stocks advisory and being Chartered Financial Analyst (CFA) is ideal while, a person dealing in personal finance being a Certified Financial Planner (CFP) is a plus. These certifications are the highest qualifications in their respective fields. It is similar to doctors. Would you take medicine from a person who is not qualified as a doctor? Of course not! You would take it from a doctor and that too, who is an MD. The reason is that you don’t want to risk your life. Likewise, you also won’t be happy to risk your money.
Services
This is one of the most crucial things that you should ask from your financial adviser. The reason is that you would be deciding on hiring a financial adviser on the basis of services that he is going to provide. Their services should match your requirements. If you need any consultation on investments then, you would hire a financial adviser dealing into investment advisory. However, if you need any consultation on money management then, you would hire a financial adviser dealing in personal finance space.
Fees and charges
This is one of the basic things that you should understand before hiring a financial adviser. Fees and charges are that part of the entire process where the financial adviser should be charging reasonable for the services rendered and you too should be reasonable in your expectations. There must not be any hidden charges whatsoever. You should ask them for all the charges and fees well in advance before taking their service. This will ensure a smooth service experience.
Regulation
Regulation is something that make financial advisers a fiduciary. This means that they would be governed by a law. Presently, registered investment advisers (RIAs) are fiduciary as they are governed by Securities and Exchange Board of India (SEBI) and they are bound by SEBI RIA Regulations Act, 2013. On the other hand, IFAs are not directly governed by SEBI and they don’t need to register with SEBI to become an IFA. Regulation matters, as this helps you to take a decision in terms of trust.
Experience
You should ask your financial adviser for his past experience in dealing with the situation for which, you can demand him previous investment calls (buy and sell). This will help you to gauge how prudent he is in proving investment recommendations.