4 Key Qualities for Choosing a Financial Advisor

RAHUL GEHLOT - Oct 11, 2018

Rohit is upset after loosing a big chunk of his investment, which he made on advice of his close friend and colleague Mukul, who is an engineer by profession. Now he is in catch 22 situation, Mukul himself is making losses and Rohit lost confidence in investing. This incident has made a lasting impact on Rohit and he became ultra conservative and is okay by keeping money in savings account or FD and loosing on to inflation. By diagnosing the situation you’ll understand that Rohit took advice from a person who is not expert of the subject and committing second mistake by not looking for suitable person to take help in the corrective action and changing his attitude towards investing.

 We always choose professionals for the advice from their field of expertise like Doctor for medical advice, Advocate for legal advice, CA for Taxation etc, but when it comes to personal financial advice most people have no idea of whom to seek advice- then as per referrals/suggestions from friends and colleagues people commit financial mistakes by wrong decision due to lack of awareness in the field of finance. Not only this, certain people consider themselves the master of subject and do not listen to professional from the field of investment banking. In this blog I would give you simple and useful parameters to choose a correct person who can guide you on your personal financial matter.

 The following parameters will help you in deciding the advisor, whether he/ she deserves your confidence and trust or not:-

1)    Qualification – Check what qualification your investment advisor possess in the field of personal finance & investment banking. Professionals like Certified Financial Planners (CFP), SEBI registered IA(Investment Advisor), CIEL(Centre for Investment Education & Learning) Certified, are some of the key qualification which is must in your financial advisor. Do not hesitate in asking such questions to people who come to you for selling advice or products, You can cross check this information on regulators website as to render advice such professionals are mandatory to get themselves registered with regulators (SEBI in india ). Registered professional are bound to follow working principles and ethics.

2)    Experience – Probe and dig deep to find out the experience of the professional and how successful they have been in helping people in achieving their financial goals. One key thing you should monitor that your advisor is focusing on selling a particular product or assessing your current financial situation and devising a plan which aims to achieve your financially freedom and then talks about proper asset allocation.

3)    Association /Professional Membership – Find the credibility of the Financial Advisor’s employer or the professional organisation he is associated with. Any organisation providing financial advisory services should preferably be SEBI registered and may have national/international associations. Keep distance from mere distributors who are just product sellers in India you may come across. Many people who are IRDA certified and sells insurance or AMFI certified and sells mutual funds, and claim themselves to be financial advisor. This difference is important to understand as you are going to handover your hard earned money in such hands.

4)    References – Always ask for some references of his clients. Asking references keeps the advisor on toes and doesn’t let him take you for granted. Also be ready to give reference if you are satisfied with his services.

Types of Other Financial Advisors 

Financial Advisors can be broadly segregated as Institutional and Independent. Each one of them has their own strengths and weaknesses. Let us accept this fact and learn to choose a financial advisor and get the right advice for the financial products we are buying.

 Institutional Financial Advisors: They are the one who are employed by Financial Products and Services Company. Most of them are MBAs or Graduates with AMFI and NCFM Certification. Their strength lies in the company name they are employed with. It gives a great level of comfort dealing with well-established company which is handling money of thousands of investors like you. The advisors undergo continuous training & have ready knowledge source for any kind of information you may ask them. But at the same time one should remember, your financial success at times depends on your financial advisor and not on the company he/she is associated with. Moreover, many banks and bigger institutions are mere distributors and not advisors.

 It may be noted that they may be driven by high sales target they get, which makes them spare minimal time on after-sales service/advice. Second, they are young professionals switching jobs from one company to another in pursuit of higher packages. There is a degree of comfort level which is built, which is lost once your advisor switches and you may have to deal with a new advisor. It is always beneficial for both the advisor and the client to have long-term relationship.

 Independent Financial Advisors: Independent Financial Advisers or IFAs are professionals who offer independent advice on financial matters to their clients and recommend suitable financial products from the whole of the market. IFAs can advice you on many matters including investment, retirement planning, insurance, protection and mortgages (or other loans). IFAs also advise on some tax and legal matters.

You should remember one thing that- Financial management is a serious affair and for money matters always seek or consult a professional financial advisor with relevant qualification, experience and reputation as per the above mentioned parameters.

 Happy Investing!!!

Team Investocafe
Written By

 Rahul Gehlot, (Chief Operating Officer at Investocafe and registered SEBI investment advisor)

To get in touch, write on rahul.gehlot@investocafe.com or reach through www.investocafe.com.

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