Investors often think that they can manage their finances on their own and do not need any outside help. This may be true for those with less exposure and a credible understanding of the issues related to 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 risk and avoid costly mistakes. Thus, they seek the help of a financial advisor or professional planner.
Experts in the field, financial advisers offer their services for a lump sum or may request a portion of the proceeds from investment sales.
Organizations such as the Association for Financial Planning and the National Association of Personal Financial Advisors help locate personal financial advisers 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.
Before hiring a counselor, it is important to do some research and learn about the person and their level of expertise in the matter. 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 fees. If they don’t, they would depend on commissions and could be biased in their suggestions. Discuss the fee structure with your financial planner. The fees could vary between Rs 10,000 and Rs 50,000 per year. For smaller portfolios, opt for a periodic fee structure rather than a flat annual fee.
Try to find a financial planner who has managed assets for a few market cycles and has a sense of how asset classes generally behave in different situations. A financial planner who has at least five years of experience will be a safe bet when it comes to assessing risk and understanding the growth potential of a portfolio.
You should meet the financial planner you are going to hire, either in person or via a video link. See how comfortable you would be with the person discussing your 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 checks
Check with the planner’s existing clients about their experience and if they are spending enough time understanding the client’s issues. Also check out how helpful the advisor’s services have been to existing clients – whether their finances have improved or declined.