What to consider before hiring a financial advisor

Domain experts, financial advisors offer their services for a flat fee or may ask for a share of the revenue.

Investors often believe they can handle their finances on their own and don’t need outside help. This may be true for those with less exposure and a credible understanding of the issues surrounding the topic. It can also depend on the complexity of a person’s investment and having the right temperament. Most people need advice on these matters to mitigate risks and avoid costly mistakes. Therefore, they seek the help of a professional financial advisor or planner.

Domain experts, financial advisors offer their services for a flat fee or may request a portion of the proceeds from investment sales.

Organizations like the Association for Financial Planning and the National Association of Personal Financial Advisors help locate personal financial advisors in a particular area. But it’s up to you to check their background and other details before you hire them.

Here are five tips to keep in mind when choosing a personal financial advisor.

1. Credentials

Before hiring an advisor, it’s important to do some research and get to know the person and their level of expertise. Next, a financial planner must be registered with the Securities and Exchange Board of India (SEBI) and must be certified by the Financial Planning Standards Board.

2. Fee Structure

Good financial planners will charge decent rates. If they don’t, they would be relying on commissions and could be biased in their suggestions. Discuss the fee structure with your financial planner. The fee could range from Rs 10,000 to Rs 50,000 per year. For smaller portfolios, opt for a recurring fee structure instead of an annual lump-sum fee.

3. Experience

Try to find a financial planner who has managed assets through a few market cycles and has an idea of ​​how asset classes typically behave in different situations. A financial planner with at least five years of experience will be a safe bet for assessing risk and understanding the growth potential of a portfolio.

4. Meeting

You must meet the financial planner you are hiring, either in person or through a video link. See how comfortable you would feel with the person discussing his financial matters. But understand that all advisor-client relationships take time to evolve. Building a good relationship is something that will benefit you.

5. Reference check

Check with existing planner customers about their experience and whether they spend enough time understanding customer issues. Also check to see how helpful the advisor’s services have been to existing clients, whether their finances have improved or decreased.

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