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How to choose your financial advisor?

by Tavaga Invest

Are you saving enough to pay for your first car, your children’s higher education, your retirement, or even that long-awaited international vacation? Are the products you’ve chosen to invest your hard-earned money in appropriate for your financial objectives? Or are you saving too much because you’re afraid of having too little at the end of the road, at the expense of your current lifestyle? 

There appears to be no clear answer to these questions because there is no one-size-fits-all solution. A professional financial planner can help you answer all of these questions, as well as guide you through your finances while taking into account your unique circumstances and life goals.

However, finding the right professional is not as straightforward as it may appear. There are numerous types of advisors in the market, including financial planners, investment advisors, independent financial advisors, agents, and distributors. Your decision will be influenced by the range of services you require from a professional and the amount of money you are willing to spend.

Who are called SEBI Registered Investment Advisors?

A person or organization that provides investment advice to individuals who are registered with the Securities Exchange Board of India (SEBI) is called a Registered Investment Advisor (RIA).

RIAs provide financial planning assistance to their clients for a fee. They must offer investment advice in the client’s best interests. They consider the client’s current financial position and future goals before advising them about investments. All the RIAs have to pass certification exams conducted by SEBI.

Some people maintain a year-round relationship with their investment advisor, meeting with them a few times a year. Others may prefer to make most of their financial decisions on their own and only seek advice from a professional when they have a specific problem.

Tavaga is an RIA Robo-advisory platform that helps you invest in your dreams and life goals. Tavaga makes investing simple.

Who are called Certified Financial Planners in India?

In India, the designation of Certified Financial Planner is an internationally recognized accreditation in the field of financial planning and advisory services. To obtain this designation, one must meet all of the requirements set forth by the Financial Planning Standards Board in the United States. 

This is a Certification and not the same as SEBI Registration. However, SEBI considers individuals with CFP certification as those who have a broader idea in the field of Financial Planning.

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Who are called Financial Advisors in India?

Financial advisors are individuals who charge a fee to provide investors with investment, tax, insurance, and retirement planning advice. They provide a broader range of services than RIAs. Financial advisors include stockbrokers, insurance agents, mutual fund distributors, and, in some cases, bank Relationship Managers. These are neither SEBI Registered Investment Advisors nor Financial Planners. They do not have a fiduciary duty(obligations to offer investment advice in the client’s best interests), but they are expected to act in the best interests of their clients and make decisions that will benefit them. 

SEBI has allowed chartered accountants and mutual fund distributors to provide Investment advisory, only if that advice is incidental to their otherwise engagement.

Financial Advisor vs SEBI Registered Investment Advisors

You must have heard the terms financial advisor and investment advisor whenever you consider investing. People get confused about whom to approach for their financial management.

The Investment Adviser Regulations were created by SEBI to regulate the activities of people who call themselves investment advisors. Any individual or entity wishing to provide investment advisory services in India must first register with SEBI.

Even though both are advisory, there is a huge difference between them.

The SEBI RIAs have the required qualifications, certifications, and experience to ensure that customers receive quality advice. They also conduct risk profiling following the guidelines and check the suitability of investment advice. 

As a result, they declare all conflicts of interest as soon as they arise. Furthermore, to avoid conflicts of interest, the execution and investment advisory services are separated because of which there is more transparency in the investment advice process. 

Advantages of hiring SEBI RIA

With all of these facts and advantages in mind, it’s best to seek advice from a SEBI-registered investment advisor.

How to choose your Investment Advisor?

  1. Determine which aspect of your financial life requires assistance.

Decide which aspects of your financial life require assistance before speaking with an investment advisor. You should be prepared to explain your specific money management needs when you first meet with an advisor. 

Investment advisors do more than just give investment advice. The best investment advisor will be able to assist you in mapping a path for all of your financial requirements. 

People with relatively simple financial lives, such as young people without children or significant debt, may only require assistance with retirement planning. 

People with complex financial needs may require additional assistance. They may be attempting to establish college funds for their children or to pay off all the loans and resolve tax issues. 

Not all types of investment advisors provide the same set of services, determine which services you require and use that information to narrow down your search.

  1. Educate yourself on the various types of advisors

There are two types of Investment Advisors, fee-only and fee-based investment advisors. Although they sound similar, they are not interchangeable. 

Types of advisor

Fee-Based Investment Advisors 

Fee-based advisors are paid an annual fee that is proportional to the assets they manage. Their fee is based on a percentage of the assets they manage (AUM). For example, if you have given a fee-based financial advisor Rs 2 crore worth of assets to manage, he may charge an annual fee of 1% to 2% (Rs 2 lakh to Rs 3 lakh in this case) of the assets he is managing. 

The advisor’s fees may or may not be based on the performance of your portfolio. Even if your portfolio loses money, the advisor will charge you a fee.

One of the disadvantages of using a fee-based advisor is that the advisor may prioritize clients based on the size of their portfolio. This could make it difficult for your portfolio to get the attention it deserves. They might also invest in instruments that aren’t in your best interests, resulting in a conflict of interest.

Fee-Only Investment Advisors 

Investment advisors who work on a fee-only basis charge a flat fee for all transactions, whether the portfolio is worth Rs 5 lakh or Rs 5 crore. We can expect more uniformity in client service from fee-only financial advisors than from fee-based advisors. This is because the fee is the same for all customers.

Tavaga is a fee-only Investment advisory and collects fees based on subscription.

  • Certified Financial Planner

The CFP works with individuals and families for financial planning and helps them achieve their financial goals.

  • Financial Advisors

Financial advisors are individuals who charge a fee to provide investors with investment, tax, insurance, and retirement planning advice

  • Robo Advisors

Low-cost, automated investment advice is provided by Robo-advisors. They focus on helping people invest for short, medium, and long-term goals using pre-built diversified exchange-traded fund portfolios (ETFs). 

A Robo-advisor can help young tech-savvy people to manage retirement funds at a lesser cost than traditional investment advisors. People with complex financial needs should probably choose a hybrid of Robo advisory along with conventional financial advisors.

Robo-advisors provide wealth management services to the masses. Tavaga assists its clients in achieving their investment objectives at a reasonable cost, through customized advice and portfolio performance. 

Tavaga’s goal is to increase financial asset penetration by ensuring that all customers, regardless of economic status, have access to high-quality advice. The use of technology ensures that the services are cost-effective, with a focus on an investor’s willingness and ability to take risks, as well as their life goals.

  1. Select the Investment Advisor services you want

Investment advisors provide different services and may differ from person to person. The following are some of the important services provided by Investment Advisors:-

Services of RIA
  • Investment Advice- Investment advisors evaluate different investment options and ensure that your investment portfolio remains within your risk tolerance.
  • Budgeting- Investment advisors help in analyzing your spending habits. They can assist you in creating budgets so that you can effectively achieve your financial objectives. Read why budgeting is important by clicking here.
  • Retirement Planning- Financial advisors can assist you in accumulating funds for the long-term goal of retirement. Once you’ve retired or are about to retire, they can assist you in keeping your money safe. Read all about retirement planning by clicking here.
  • Estate Planning- If you want to leave a legacy, Investment advisors can help you transfer your wealth to the next generation, whether it’s family, friends, or charitable causes.
  • Loan Management- If you have debts like home loans, student loans, or car loans, investment advisors will work with you to chart a repayment plan.
  • Study Planning. Investment advisors can help you create a plan to save for your higher education or your children’s higher education.
  • Insurance Coverage. Investment advisors may examine your current policies to identify any gaps in coverage and, if necessary, recommend new policies based on your financial situation.
  • Tax planning. Tax planning entails devising strategies to reduce the amount of taxes you may owe. Click here to know about some of the tax-saving instruments.

It is necessary to make sure the financial advisor you choose provides the services you require.

  1. Figure out how much you can afford to pay your Investment advisor.

Investment advisors have a variety of fee structures, making their services more accessible to clients of all financial backgrounds.

  • Commission-only Advisors 

The income of a commission-based advisor is entirely dependent on the products they sell or the accounts they open. Financial instruments such as insurance and mutual funds are among the products available to commission-based advisors. They get paid the more transactions they complete or the more accounts they open. 

  • Fee-only and Fee-based Investment Advisors 

They may charge fees based on the total value of assets they manage for you (assets under management) or they may charge by plan, or on a subscription basis.

  1. Research about the Investment Advisors

SEBI has an upper limit of Rs 1.25 lakh for the annual fee that can be charged by the RIAs. RIAs can charge up to 2.5% AUA (assets under administration) based fee.

You should thoroughly research promising investment advisors because they come in different forms with a variety of specialities and services. You want to be sure that the person guiding and helping with your financial decisions is trustworthy and capable. 

There are a couple of ways to find good financial advisors. Good recommendations from friends, family, and peers. Alternatively, go online and look for financial advisors with good reviews.

Questions to Ask an Investment Advisor

questions to ask your financial advisor

The Bottom Line

Due to the ambiguity in the industry, you must exercise caution in selecting a financial advisor who will meet your financial needs. If you find the right financial advisor, they can assist you in achieving your financial objectives in the most effective manner. 

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Sushmitha December 29, 2022 - 3:14 pm

very informative blog.

Kritika Yadav January 4, 2023 - 11:40 am

The blog is an worthwhile resource that shall assist you in picking the right financial advisor for you. It sclears all our doubts.

Eli Richardson March 8, 2023 - 7:56 pm

It really helped when you described what to ask when speaking with an investment advisor. Not long ago, my dad mentioned he’d like to start investing in real estate but wants to hire an advisor to show him the steps to follow, and I believe your article will help him find one. Thanks for the advice on checking the financial planning services that an advisor offers.


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